ISLAMABAD: Even as more and more petrol pumps dried up on Friday, three government departments gave their own explanations for the breakdown of fuel supply to parts of the country. However, none of the accounts presented by the petroleum minister, the chief of the Oil and Gas Regulatory Authority (Ogra) and the finance secretary, seemed to offer cause for optimism and from all accounts, the crisis is likely to persist for at least another week.

Petroleum Minister Shahid Khaqan Abbasi told a press briefing that, “The petrol crisis was limited to Northern Punjab and Khyber Pakhtunkhwa,” adding that there was no shortage of high-speed diesel.

Also read: Petrol shortage continues for third consecutive day

He said that the ministry had made arrangements with the power ministry to ensure the supply of a total of 12,500 tons of high-sulphur furnace oil, low-sulphur fuel and diesel, per day, until Jan 31 to offset the fuel shortage. However, he did not disclose the position of furnace oil stocks, despite repeated questions. Under normal circumstances, power projects can consume about 29,000 tons of fuel per day to utilise the full capacity of thermal power stations.

Ogra chief says oil companies deliberately understocked to avoid losses; petroleum minister blames increased demand for cheap petrol; finance secretary blames circular debt

Separately, Ogra chairman Saeed Ahmed Khan said the regulator was not responsible for the supply and demand situation of oil products, which he said fell under the jurisdiction of the federal government.

It is normally the petroleum ministry’s responsibility to ensure adequate supply and demand and the ministry holds monthly product review meetings to oil companies and refineries to review stock position and plan accordingly if further supplies are needed.

Mr Khan said the petrol demand had increased by about 23 per cent over the last few days, adding that that oil marketing companies were bound under the law to keep at least 20 days stock in storage. “All marketing companies have been issued notices to explain their failure to maintain the mandatory level of stocks,” he said, adding the Ogra would hear their viewpoint before imposing penalties for violation of licence rules. All oil marketing companies had failed to maintain the mandatory level of oil stocks, he said.

The petroleum minister had listed a number of reasons for the petrol shortage. He said that petrol sales saw an unprecedented increase in January this year as demand surged to 15,000 tons per day, compared to 12,000 tons in December 2014.

He said that consumers had avoided filling their vehicles in the last few days of the December, in anticipation of a substantial price cut. This resulted in 40,000 tons in sales on the first day of January, which was unprecedented. The non-availability of CNG in Punjab and the sudden closure of the Pak-Arab Refinery Limited for five days contributed to the shortage as reserve stocks evaporated. He also confirmed that a petrol shipment had been delayed for a week.

The minister claimed there was no problem with the supply planning and that against a requirement of 380,000 tons, about 140,000 tons were to come from refineries and the remaining 244,000 tons would be imported. He said the government had planned to import 274,000 tons but the demand suddenly exceeded forecasts by about 75,000 tons.

Mr Abbasi said that an oil shipment had been sent to Lahore where the crisis was acute. He said it would take five to eight days to completely overcome the crisis. He said that 168,000 tons of fuel was in the supply chain and would reach consumers soon. He also admitted that oil marketing companies had kept stocks at a minimum to avoid inventory losses, despite the legal requirement of maintaining a 20-day reserve in all circumstances.

Circular debt

Separately, Finance Secretary Dr Waqar Masood Khan told the Senate Standing Committee on Finance and Petroleum that the oil supply chain had broken down due to large amounts of money that were held up in lieu of circular debt accumulated by the power sector.

He said that Pakistan State Oil (PSO) needed Rs27 billion to line up oil imports and the Ministry of Finance had already disbursed Rs17 billion while arrangements were being made to bridge the deficit. He said that a shipment of about 50,000 tons of petrol was being offloaded at Karachi Port, which would take five to six days to reach upcountry areas.

He was of the opinion that the power sector was the real problem, where recoveries were not improving and system losses were increasing.

Published in Dawn, January 17th, 2015

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