Diesel stocks have risen to a historic high of 46 days of consumption, threatening the closure of the country’s largest refinery Pak-Arab Refinery Limited (PARCO).
The government has deliberately relaxed control over oil smuggling due to a lack of dollars for petroleum imports. This strategy has resulted in an Iranian oil oversupply in Pakistani markets, as domestic demand for diesel and petrol has fallen by half, reported Express Tribune.
The government is not only losing Rs. 1 billion per day in revenue, but the situation is also threatening the survival of the oil industry.
A spokesperson for PARCO told ProPakistani that on Wednesday night – April 5, 2023, Pak-Arab Refinery Ltd. temporarily shut down its refinery operations for five days as part of its scheduled maintenance work. The refinery will resume its operations by April 11, 2023. The scheduled maintenance will not affect the supply of both Diesel and Gasoline (petrol).
Oil industry stakeholders expressed concern about excessive Iranian oil smuggling and other issues during a recent meeting with Minister of State (Petroleum) Musadik Malik. The oil company reps attended the meeting, where they complained about several challenges and protested the government’s inability to address those issues.
They raised concerns about the delayed recovery of exchange rate losses, artificial control over oil pricing, freight issues, and restrictions on Letters of Credit (LCs) for legal oil imports.
The meeting was also informed that the oil industry had been barred from opening LCs, while oil smuggling continued apace, endangering the operations of local refineries. Moreover, petroleum stocks at Parco had accumulated to unsustainable levels due to oil marketing companies’ (OMCs) unwillingness to procure the required quantities of diesel and petrol.
Parco representatives informed the state minister that the refinery’s output had dropped to 75 percent due to OMCs failing to lift stocks. They feared that if the situation worsened, the refinery would be forced to close.
Previously, oil refineries had shut down due to oversupply after power producers refused to buy stocks. The same situation has now emerged in the case of diesel and petrol, whose stocks are increasing despite no market demand even during the current crop harvesting season. Instead, consumers are turning to smuggled oil.
Industry players said at the meeting that domestic oil industry sales have also slowed while the country has 670,000 tons of high-speed diesel on hand which is enough to meet consumer demand for 46 days.
In the case of petrol, the country has 550,000 tons on hand, which will last for 26 days. Oil industry officials warned the government that demand had fallen and urged facilitation to avoid a shutdown in the coming weeks.
