Refineries claim Rs 47 billion losses

Aftab Ahmed

Islamabad: With claims of Rs 47 billion losses, refineries want the government to revise downstream petroleum policy, bailout package, and fortnightly pricing to avoid the severity of shortages of petroleum products in the future.

The total inventory losses of the refining sector in Pakistan due to COVID 19 in March & April 2020 alone stand at about Rs 34 Billion. The combined financial losses of four refineries in the country stand at Rs.47 billion for the last two financial years i.e. 2018-2019 and 2019-2020 (July 2019 to March 2020).

On top of it, the refineries for the month of June 2020 alone are losing about Rs. 17 per liter on sale and production of each liter of Motor gasoline, yet providing the same only in National interests, Chief Executive Officer (CEO) Attock Refinery Limited Adil Khattak said in a statement.

Due to these reasons, the refineries are forced to operate at low throughput. All these facts have been brought into the knowledge of GOP and urgent support of the government has been sought to ensure the sustainability of refinery operations. It must be noted that refineries should be enabled to run at 100% capacity to reduce reliance on imports.

Three out of the country’s five refineries were forced to shut down in March/April 2020 due to the low demand for petroleum products in the country for which the government in good faith temporarily put a ban on imports as OMCs had sufficient stocks. This was primarily done to ensure that OMCs increase their off-takes from the local refineries so that operations of refineries are maintained at adequate levels. This ban on imports was subsequently lifted.

Instead of a blame game approach, he said that there is a dire need to review and analyze underlying reasons for present shortages of petrol in the country and look for a long term sustainable solution which includes revision of Downstream Petroleum Policy- the last one having being issued in 1997, fortnightly pricing, bailout package for the refineries and creating a conducive business environment in the country otherwise similar situation could arise with more severity in future.

He further said that the overall share of ARL in-country motor gasoline supplies is less than 5% and has a marginal impact on the country level. ARL is located in the North of the country is the only refinery processing 100% indigenous crude and has been playing a proactive role and supporting government efforts by providing non-stop fuel supplies to the OMCs.

The strategic importance of ARL has been proven time and again by its ability to augment the country’s defense by providing an uninterrupted supply of refined petroleum products to the armed forces during the critical time of war and any other incident affecting the petroleum supply chain.

He said that the business environment of the country during the last two years has remained very challenging and disturbing for Oil Refining Sector in Pakistan. Taking cognizance of the financial difficulties of the local refineries, the Ministry of Energy (Petroleum Division) has formed a Refinery Working Group to work out different plans for mitigating refinery losses and formulate a comprehensive policy framework for future Refinery Expansion & Up-gradation. Unfortunately, due to the COVID-19 pandemic, progress got delayed.

The spread of COVID-19 has a meltdown effect on the refinery sector in Pakistan in the shape of reduced sales & steep decline of petroleum product prices due to lockdowns resulting in huge inventory losses, he added.

It also needs to be understood that all refineries have to keep certain levels of operational stocks to avoid any unplanned shutdown situation of its main & downstream units and the same is the case with ARL which does maintain certain levels of stocks to provide regular and uninterrupted supplies and the same should not be termed as hoarding, he added.