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Plan for oil stocks to avert shortage

 fuel petrol shortageISLAMABAD: Drawing a lesson from last month’s fuel shortages, the government has decided to import about two million tons of petroleum products in about 45 days and has asked private marketing companies to maintain at least 20 days of oil inventory to ward off another fuel crisis ahead of winter and Haj.

Sources told Dawn that the government was striving to build adequate inventories of almost all petroleum products to cover 20 to 21 days of domestic oil requirements.

“The main focus of our effort is to ensure sufficient stocks of jet fuel to meet increased flight requirements because of Haj season, but we cannot afford to be caught off guard also on diesel and petrol,” a government official said.

He said the government had made arrangements to import 300,000 tons of diesel, petrol and jet fuel this month and another 350,000 tons in November.

This will be in addition to imports of about 500,000 to 600,000 tons of furnace oil a month to meet increased demand of the power sector because of expected reduction in hydropower generation.

The official said that at a recent meeting presided over by Petroleum Minister Syed Naveed Qamar, the private sector companies had been warned about their low stocks in violation of their licensing requirements.

They were asked to build their stocks by October 31 to meet at least 21 days of consumption requirement on the basis of their respective market share and previous sales.

Ogra was advised to physically verify the stock position of oil marketing companies (OMCs) to see if they were meeting their licensing conditions and to ensure that shortage of petroleum products did not occur again.

Pakistan normally consumes about 900,000 tons of furnace oil per month, of which about 300,000 tons are provided by local refineries.

The remaining 600,000 tons are imported mostly by state-run Pakistan State Oil to meet power sector requirements that substantially go up in extreme winter because of low hydropower production and also in extreme summer because of higher electricity demand.

The official said the government had received reports that shortages of petroleum products last month were partly caused by some political parties which took advantage of transportation problems and closure of Parco refinery in the aftermath of floods to embarrass the PPP government, although sufficient stocks were available at major depots and urban centres in the country, including Punjab.

He said the arrangements had been made to maintain vigilance on political front as well as to ensure sufficient stocks of all products.

He said the government had also started work to rehabilitate damaged oil installations.

The oil and gas sector suffered a cumulative loss of about Rs13.5 billion after floods. This included Rs2 billion loss to Parco, Rs3 billion to PSO and Rs3 billion to Oil and Gas Development Company Limited.

Pakistan consumes over 25 million metric tons of petroleum products each year. This includes about 1.8 million metric tons of petrol (motor spirit), about 8.5 million metric tons of high speed diesel and more than 13 million metric tons of furnace oil. Jet fuel requirements also hover around 1.2 million tons a year.

An official said the government was also considering a PSO request to ban diesel export to Afghanistan. The PSO claimed that the export was causing about Rs1.5 billion loss because of misuse of export facility at the cost of Pakistan’s foreign exchange that it paid for diesel import.

The official said that more than 10,000 metric tons of diesel was going to Afghanistan per month at a price which was about Rs20 per litre higher in Pakistan.

“Diesel is a deficit product in Pakistan and is imported at the cost of foreign exchange. It does not make economic sense to import it and then lose out on revenue in export,” he said.

He said the diesel exported to Afghanistan was sold back in Pakistan, after charging the government a rebate on taxes and private companies and bulk purchasers were earning huge profits in the domestic market.

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