ISLAMABAD, Dec 18: Pakistan’s strategic diesel stocks meant for security requirements have mostly been consumed due to ‘stress situation’ in the general consumer market, prompting the authorities to make urgent purchases at extra costs.

Sources told Dawn on Tuesday that due to oil shortages, the state-owned Pakistan State Oil (PSO) had been forced to exhaust the strategic stocks that had been paid for in advance to provide emergency cover to the armed forces. They said that about 93,000 tons of diesel are required to be maintained at different locations over the normal storage to cover at least 21 days of defence requirements.

Sources in the Oil Companies Advisory Committee (OCAC) said the total diesel stocks on Dec 17 stood at 129,000 tons, enough for six days’ requirement of the consumer market at an average rate of 22,300 tons a day. This included 64,300 tons with the oil marketing companies (OMCs), 32,000 tons with refineries and 38,000 tons in the pipeline system. The country’s current domestic production stands at around 8,300 tons.

“Distress contracts (an oil industry jargon for emergency purchases) are always 10-12 per cent costlier than normal purchases through tenders,” said a source and added that it would take a few months to raise the stocks to the desired level.

Diesel stocks peaked at 207,000 tons on Dec 11, enough for nine days’ requirement of the consumer market. The country had the capacity to store 900,000 tons of diesel that could cover more than 39 days of consumption, OCAC sources said. The total oil stocks with all the OMCs stood at less than 65,000 tons on Monday, which could ensure diesel supplies to the consumer market for three days. This meant that 93,000 tons for which advance payments had been made were no longer in stock.

The sources said that the Ministry of Defence had separately taken up the issue with the federal government. Besides advance payments, the armed forces were also required to pay handling charges on account of ‘evaporation losses’ presumed to take place at storage facilities.

The total stocks of kerosene, high-speed diesel and light-diesel oil on Dec 17 were enough for four, six and two days, respectively. On Tuesday, a small shipment carrying about 45,000 tons of diesel imported by the PSO landed in Karachi, which would increase diesel stocks to meet seven days’ requirement.

Director-General Oil G. A. Sabri said the arrangement to maintain strategic reserves was between the Ministry of Defence and the OMCs after deregulation of the oil sector and the Ministry of Petroleum could not comment on it.

A PSO source said he could not comment on the overall stock position because it was the domain of the OCAC, but claimed that enough stocks were available within the system. The source confirmed that the PSO was “in stress situation” due to low inventories but claimed that the company had never been “in a dry-out situation”.

He blamed the stress situation on repair works being carried out in refineries. Also, most PSO clients had resorted to panic buying and hoarding against the backdrop of an expected price increase and reduced draft facilities at Port Qasim. He informed that another ship carrying about 45,000 tons of diesel would arrive after two days.

The sources said the shortage was because of cash-flow problems being faced by the OMCs and refineries due to non-payment of price differential claims by the government. As a result, the government was on the defensive and lenient in forcing the companies to maintain sufficient stocks as required under petroleum rules. Smaller marketing companies were facing a virtual blockade of oil supplies from refineries due to their insufficient paying capacity.

Meanwhile, an official statement said a delegation of new OMCs comprising Admore, Askar Oil, Overseas Oil Trading Company and Hoscombe met Minister for Petroleum Ahsanullah Khan to apprise him of their difficulties, including cash-flow problems, exhaustion of borrowing limits and refineries not supplying products.

The oil minister, said the statement, told the delegation that the issue of petroleum differential claims was a legacy of the previous government and the caretaker government was looking into it and some relief would be provided through budgetary resources.

The sources said the furnace oil stocks had improved slightly to 30 days owing to enhanced supplies ensured by power producers led by Wapda because of an expected decline in hydropower generation due to canal closures.