KARACHI, June 18: The Pakistan State Oil, having a market share of 70 per cent, has sounded a note of caution to the government on reduced level of oil products’ stocks as a result of low throughput being maintained by the local refineries.

The Oil Companies Advisory Committee, however, has been frequently rejecting the possibility of shortage of oil products, especially petrol and diesel. Besides, the committee has also been claiming that refineries are currently running at normal capacity.

However, petroleum dealers have reported 50 per cent cut in supplies of petrol and diesel from the oil marketing companies (OMCs).The PSO informed the petroleum ministry in the second week of this month that it had been making all efforts to avoid any fuel shortage. Besides, international tenders have been issued for petrol and diesel imports to meet the demand and supply gap as well as to maintain the stocks at the desired level.

However, the low supply of products to the PSO from the local refineries has been frustrating the company’s efforts. If the current imbalance continues it will become extremely difficult for the PSO to meet the market demand and it may result in an imminent dry up situation.

The PSO has asked the ministry to issue directives to the local refineries to ensure unrestricted supply of all the products to the PSO by increasing their throughput level beyond 100 per cent to meet country’s strategic needs.

The state-run OMC has also asked the ministry to issue directions to other OMCs to maintain optimum supply in the market in line with the growth in demand.

During May 2008, the overall diesel market surged by 14.6 per cent but the PSO’s growth was 26.3 per cent over the corresponding month of the last year, which is far greater than the industry growth. This is because of the fact that other OMCs are restricting the product availability in the market and are maintaining their supplies to a limited level. The sales of Shell Pakistan dropped by 16 per cent in May over the same period last year.

The PSO informed the petroleum ministry that Shell Pakistan and Chevron Pakistan were abruptly deferring the diesel cargoes after the allocation of laycans (window available for product discharge) from the OCAC and deficit planning in the products review meeting.

In May Chevron cancelled one diesel cargo scheduled for delivery period of May 25-27 and recently Shell cancelled diesel cargo scheduled for June 15-17 delivery. This has put additional burden on PSO to meet the market demand in respect of other OMCs.

It is a general impression that other OMCs are restricting availability of products in the market due to huge Price Differential Claim (PDC) obligation, while PSO is meeting all the requirements of different market segments to maintain the overall supply chain in the country. This results in severe additional burden on PSO.

The PSO thinks that its efforts to maintain the demand and supply gap has been hampered by the local refineries by restricting the availability of the products to the state-run company.

In May production of petrol by Parco was only 54,000 tons as compared to their usual production level of more than 65,000 tons per month. Due to this a shortage of product was witnessed in respective markets.

The ministry was further informed that even the availability of other products was also tight and markets had witnessed severe shortage of kerosene in the southern region due to negligible supply of product by the refineries, affecting socio economic activities.

“Currently, the overall stocks of all the products are at a critical level and the company is operating on a day-to-day availability of products,” PSO said.

Another key factor contributing to the recent growth in the diesel demand in the country is the higher subsidy of Rs37.07 per litre. This may be encouraging sizable quantity of diesel being smuggled to the neighboring countries, which needs to be checked by the relevant authorities, the PSO added.