Islamabad: This situation is quite concerning, especially with the ongoing struggles faced by Pakistan’s oil refineries.
It seems like multiple issues are contributing to the crisis, from supply chain disruptions to regulatory challenges and external factors like smuggling.
There is a break down of the main points:
1. Sub-optimal Capacity Utilization:
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The oil refineries are operating below full capacity, which is directly impacting the supply of critical products like jet fuel (JP-8) for defense organizations.
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This is a significant concern, particularly for national defense, which relies on these supplies for operational readiness.
2. Underperformance in Supply Commitments:
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Only Attock Refinery Limited (ARL) has been able to meet 85% of its commitments, while others like Parco and Pakistan Refinery Limited have fallen short (70% and 52%, respectively).
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Some refineries like National Refinery, Byco, and Enar have barely met 25-44% of their contracted quantities. The overall supply stands at just 58% of what was promised for the first nine months of the fiscal year.
3. Crude Oil Supply Issues:
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ARL, which relies on indigenous crude, is facing severe challenges due to the depletion of reserves in the northern oilfields.
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It’s requesting the government to reallocate some crude from southern oilfields, but the request has not been acted upon since 2022.
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Additionally, SNGPL’s forced gas curtailment to accommodate imported LNG has caused production setbacks, and there are issues with condensate supplies being disrupted due to strikes and lawlessness in certain regions.
4. Smuggling and Imported Products:
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The influx of smuggled petroleum products is a significant threat to local refineries.
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As per the sources, this smuggling is cutting into the refineries’ capacity utilization and sales, which makes it harder for local businesses to compete.
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There’s also the issue of certain oil marketing companies being permitted to import refined products freely.
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This, according to the sources, has led to oversupply of products like diesel, creating storage issues at Parco and negatively impacting the production of jet fuel.
5. Ogra’s Role:
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The Oil and Gas Regulatory Authority (Ogra) seems to be under pressure from both the defense sector (for fulfilling its fuel commitments) and the refineries, which blame lenient regulations for the free import of finished products.
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Refineries argue this has led to their reduced output capacity, with some even being forced to shut down units due to low demand and financial losses.
It looks like a combination of poor policy decisions, logistical challenges, and external factors (like smuggling and fluctuating supply from local fields) is severely affecting the country’s oil refining capacity.
Also Read: Petrol Dealers Call Off Strike Following Successful Talks with Government
Refineries are being squeezed from multiple sides: their own supply issues, smuggling, and competition from imports. Story by AHmed Mukhtar.
