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Who is the Boss of OGRA?

by AMG
August 31, 2024
in Energy
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Who is the Boss of OGRA?
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ISLAMABAD: The country’s refineries and oil industry have accused the Oil and Gas Regulatory Authority (OGRA) of creating an unfair competition by allowing unnecessary import of HSD in the country which is negatively impacting the industry.


According to oil industry, OGRA’s repeated decisions to permit additional HSD imports amidst already high HSD stocks, citing the upcoming turnaround of Pakistan’s largest refinery and the agricultural season as justification, is utterly unfounded and irresponsible. If OGRA’s assertions held any merit, refineries should currently be operating at optimal throughput and not resorting to renting additional storages.

Refinery maintenance turnarounds are meticulously planned, with stock levels strategically calculated for supplies during the shutdown period. This planning has been thoroughly coordinated with OGRA through multiple meetings, and no credible justification was identified for approving additional HSD imports, especially when the country already holds over 45 days of HSD stocks. Furthermore, since April 2024, refineries are renting additional storage facilities for HSD, further increasing their financial burdens.

A quick review of the facts indicates that the average monthly HSD sales, including seasonal demand, in FY 2023-24 have been 520,000 tons . OGRA’s claim that lower sales are solely due to price trends is baseless. Sales have consistently declined since 2023 due to low economic activity and unabated cross border movement, with no significant increase in HSD demand outside the agricultural season. Even during the April-June 2024 agricultural season, monthly average sales reached 551,000 tons, with no need for additional imports beyond those supplied by PSO, as refineries could meet the country’s demands by supplying 400,000 HSD per month.

The influx of HSD from cross-border sources has already undermined the local demand, and without controlling this influx, the rationale for further imports is weak and detrimental to local refineries. These concerns have been consistently raised in Product Review Meetings and recorded by OGRA in the Minutes of Meeting effective April 2024 through July 2024, stating that the country is facing high stocks position, low sales and it is important to accommodate local refineries, facing ullage constraints, through rationalization of imports.

Oil industry is of the view that additional HSD import approvals for a specific OMC were granted in June (15,000 tons ), July (15,000 tons ), August (40,000 tons and product has already been discharged. Further import approvals for 38,000 tons HSD were granted for September 2024. The cargo arrived on August 30, 2024, and is pending discharge. The September import laycan was known to the regulator at the time of the PRM. In the absence of Minutes of Meeting specifying the timing for this cargo to be made available during the agricultural season, any such claims are unjustified.

OGRA’s repeated advice for refineries to compete on commercial terms with the International Market effectively means yielding to unjustified commercial conditions imposed by the specific OMC. PSO imports HSD under a long-term G-2-G contract and cancels cargoes to support refineries in the wake of rampant smuggling and depressed sales; similarly, imports by other OMCs should be outrightly discouraged. It also goes to prove that linking unjustified additional imports with any refinery shutdown is unreasonable. OGRA’s statement of keeping flexibility in allowing additional imports applies only to Motor Gasoline, not HSD.

While OGRA holds the ultimate responsibility for granting import approvals, such decisions should prioritize the national oil supply chain’s integrity. Excessive imports are resulting in unfair market practices, including substantial discounting without any consumer benefit.

Prioritizing unnecessary imports over refinery upliftment exerts undue pressure on Pakistan’s foreign exchange reserves, especially given the current economic challenges. The oil industry, including refineries, expresses deep concern and dissatisfaction with the current situation, which fosters unfair competition and negatively impacts the industry. The industry urges OGRA to intervene promptly and decisively to resolve this critical issue.

Tags: ogra

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