March diesel imports may diminish refinery efficiency and foreign reserves, oil industry warns

ISLAMABAD: The excessive importation of high-speed diesel (HSD) in March, despite a lack of demand, is poised to adversely affect oil refineries, as the nation currently holds sufficient stocks to last over 34 days.

According to sources the Oil and Gas Regulatory Authority (OGRA) sanctioned the import of 120,000 metric tonnes of HSD for March, despite the existing adequate reserves, reported The Express Tribune.

Officials from the oil sector indicate that February proved to be a challenging month for refineries regarding product demand and distribution, and the outlook for March remains bleak due to declining prices and anticipated low demand, as oil marketing companies (OMCs) seek to mitigate inventory losses.

Nonetheless, OGRA officials contend that the impending agricultural season might engender unforeseen demand in March, prompting them to prepare accordingly.

The oil industry additionally posits that OGRA has consistently favoured maintaining surplus fuel within the country over risking even the slightest chance of a fuel shortage, which may have influenced the decision to permit the importation of high-speed diesel.

Sources state that refinery production in February reached 401,000 metric tonnes, while the nation’s sales totalled 428,000 metric tonnes.

By the close of February, the stock of high-speed diesel stood at 520,000 metric tonnes.

As of March 1, with a monthly sales rate of 428,000 metric tonnes, the stock of 520,000 metric tonnes signifies that the country possesses more than 34 days’ worth of reserves.

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Officials from the oil industry assert that domestic refineries consistently produce over 400,000 metric tonnes of diesel monthly, already nearing demand fulfillment.

Discussing the March import of 120,000 metric tonnes of diesel, industry representatives argue that inventory levels are already adequate; with over a month’s supply on hand and consistent refinery output, there exists no imminent risk of shortage. They further note that March typically experiences lower demand as economic activities wane during Ramazan, forecasting sales to be around 450,000 metric tonnes.

Permitting imports while refineries maintain sufficient output could compel them to curtail production, resulting in unnecessary foreign exchange outflows.

Given the current pressure on the rupee, unwarranted imports of petroleum products exacerbate strain on foreign exchange reserves.

Considering the existing stock, stable refinery production, and anticipated diminished demand in March, oil industry officials assert that there lacks a compelling rationale for sanctioning 120,000 metric tonnes of imports.

This decision appears unwarranted from a supply security standpoint and may detrimentally affect refinery utilisation and foreign exchange reserves.

Oil industry officials urged the authorities to adopt a more judicious approach to import approvals, and stressed on local production to alleviate external dependencies.