ISLAMABAD: The country’s oil supplies are facing serious disruption due to pipeline and port congestion, forcing oil companies to go against standard operating procedures amid acute storage constraints.

Consequently, stocks of the two main petroleum products — motor gasoline and high-speed diesel — are short of the mandatory strategic levels, at a time when the country’s borders are in a state of heightened tension, sources told Dawn.

Sources said the Ministry of Defence had repeatedly called on the quarters concerned to increase supplies for strategic reserves. But both the government and the oil industry have repeatedly asked the ministry to speed up clearance of requests for construction of additional storage capacity.

A total of 51 applications from six oil marketing companies (OMCs) who want to build storage depots in various parts of the country have been pending with the ministry. “If all the no-objection certificates (NOCs) are issued today, it will take at least a year to clear the storage capacity backlog. This is a very serious issue in terms of energy security,” a former petroleum secretary told Dawn.

A government official said the petroleum ministry had been asking the defence ministry to formulate a time-bound mechanism for granting the NOCs to marketing companies to build new storage facilities.

Blame put on high demand, lack of storage capacity and port congestion

The issue has repeatedly emerged in the monthly product review meetings (PRMs) between representatives of the Ministry of Petroleum and Natural Resources, oil refineries and the OMCs.

“There is no product shortage anywhere in the country, but stocks of petrol and high-speed diesel are short of the mandatory 20-day requirement,” a government official said, adding that petrol was short by about 257,000 tonnes, while the high-speed diesel shortfall was about 315,000 tonnes.

Complaints

The official said the petroleum ministry’s director general oil had been requesting the refineries and the OMCs to increase inventory levels. In addition, the Pak-Arab Pipeline Company (Papco) — a subsidiary of the Pak-Arab Refinery (Parco) — has been regularly complaining that the OMCs are misusing oil pipelines for storage.

Papco and Parco complained that the “white oil pipeline (WOP) system was choked and the OMCs were using it as storage system. The WOP system is a transportation system and not a storage system”. Papco explained that quantities well in excess of expected sales were loaded into the pipeline system and not being taken out by the OMCs.

Consequently, it is becoming difficult for the authorities to ensure smooth berthing for incoming oil ships. The Oil Companies Advisory Council (Ocac) — on behalf of the refineries and the OMCs — has been demanding the supply of regular data about stocks in the pipeline system so that member companies could be persuaded to withdraw their products quickly.

For example, officials said, at least three petrol-bearing vessels could not avail their Sept 24/Sept 29 ‘laydays cancelling’ — or laycan for short — due to jetty constraints.

A laycan is the window during which the ship owner must tender notice of readiness to the charterer that the ship has arrived at the port of loading and is ready to load for berthing. This is usually expressed as two dates.

In addition, seven vessels carrying high-speed diesel missed their Sept 5/Sept 28 laycan due to ullage issues, such as evaporation or loss during transportation.

At one point in October, 12 to 15 vessels were waiting for berths off the port due to congestion.

But Ocac managing director Dr Ilyas Fazil said that port and pipeline congestions were “not of an extraordinary nature. These are normal occurrences”. He said that laycan dates could be advanced or delayed, depending on the prevailing circumstances and claimed that proper SOPs were followed while transporting products through the WOP.

He said that when diesel vessels berthed at the Fauji Oil Terminal Company (FOTCO), the WOP management was consulted. In case of space constraints, product injection into the pipeline was delayed for a day or two.

Justifying the shortfall of fuel reserves from strategic levels, he claimed that the demand for both petrol and high-speed diesel was currently on the rise.

He said the issue of increasing storage capacity pertained to the Oil and Gas Regulatory Authority, adding that PSO and Hascol had recently increased their storage capacities.

Published in Dawn November 21st, 2016