OCAC seeks emergency CIF import permission amid Gulf shipping turmoil

ISLAMABAD: As the country faces potential oil supply disruptions due to the escalating conflict in the Middle East, the Oil Companies Advisory Council (OCAC) has sought temporary approval for CIF-based imports with war-risk premium allowance for crude oil, refined petroleum products, base oil, and allied materials.
In a letter to State Bank of Pakistan (SBP) Governor Jameel Ahmad, OCAC Secretary General Dr Syed Nazir Abbas Zaidi stated that the rapidly evolving geopolitical situation in the Middle East has made international oil and shipping markets extremely volatile. Freight rates, insurance costs, and vessel availability have been severely affected.
According to the OCAC, marine insurers have either withdrawn or sharply increased war-risk coverage for ships operating in the Persian Gulf and the Strait of Hormuz due to the ongoing Iran-Israel-US conflict. Freight rates for vessels operating in the Gulf region have reportedly increased nearly fourfold, while war-risk insurance premiums for Gulf voyages have surged dramatically, making tanker chartering extremely difficult and costly.
The prevailing market conditions have significantly reduced the willingness of shipowners, insurers, and suppliers to undertake cargo movements in the region.
Under the current regulatory framework, importing refineries and oil marketing companies (OMCs) are required to import petroleum products on a C&F (Cost and Freight) basis, under which the supplier arranges and pays for freight up to the destination port, while the buyer is responsible for arranging and bearing the cost of product insurance, including any war-risk coverage.
However, under the prevailing circumstances, obtaining adequate marine and war-risk insurance cover has become extremely difficult. OCAC noted that this challenge was recently reflected in the Pakistan State Oil (PSO) spot tender floated on the Gallop platform on a C&F basis, where no bids were received for MS, HSD, and JP-1 cargoes.
In view of the constraints in arranging insurance under C&F terms, OCAC has proposed that imports be temporarily allowed on a CIF (Cost, Insurance and Freight) basis.
According to the SBP Foreign Exchange Manual (Chapter 13 – Imports), approval for CIF imports is normally granted on a case-by-case basis. However, given the exceptional circumstances and the potential risk to national fuel supply, OCAC has requested that a temporary general allowance be granted for petroleum cargoes — including crude oil, refined petroleum products, base oil, and allied materials — for a period of up to two months.
Under CIF arrangements, the supplier is responsible for arranging freight as well as marine/product insurance, including war-risk coverage, as part of delivering the cargo to the destination port. This would enable suppliers to secure appropriate insurance coverage and facilitate cargo movements under the prevailing market conditions.
OCAC emphasized that ensuring uninterrupted fuel supplies ahead of the upcoming agricultural season is critical for safeguarding national energy security. Therefore, it requested the SBP to issue early approval and advisory instructions to commercial banks to allow CIF imports of petroleum cargoes on a temporary basis so that refineries and OMCs can proceed with booking and securing the required shipments.
The council stated that such facilitation would enable the oil industry to secure cargoes effectively and ensure timely and uninterrupted fuel availability across the country.
In a separate letter to the chairman of the Oil and Gas Regulatory Authority (OGRA), OCAC also highlighted operational challenges currently being faced by petroleum retail outlets across various parts of the country due to a sudden surge in fuel demand.
According to OCAC, member OMCs have observed an unusual increase in retail fuel offtake in recent days, primarily driven by panic buying amid prevailing regional uncertainties. In several locations, sales volumes have nearly doubled compared to normal demand levels.
Although OMCs have significantly increased dispatches and are making continuous efforts to replenish retail outlets, the abnormal demand has led to temporary stock depletion at some stations pending tanker deliveries.
OCAC noted that in some districts, local administrations have started sealing retail outlets that temporarily run out of fuel. While acknowledging the authorities’ intent to ensure availability and prevent malpractice, the council said sealing outlets facing genuine stockouts under extraordinary demand conditions is counterproductive and could further disrupt the supply chain.
Such actions delay the resumption of sales after replenishment, create operational complications for OMCs, and may inadvertently intensify public anxiety and panic buying.
OCAC has therefore requested OGRA to advise provincial and local administrations to refrain from sealing retail fuel stations solely due to temporary stock depletion when replenishment is already in process.
“Timely regulatory guidance will help ensure the smooth functioning of the retail supply network and uninterrupted availability of petroleum products to consumers. Our member companies remain fully committed to maintaining uninterrupted fuel supply across the country,” said the OCAC Secretary General.