OGRA cancels two diesel cargoes to protect local refineries

ISLAMABAD: The Oil and Gas Regulatory Authority (OGRA) decided, on Wednesday, to cancel two diesel cargoes for Pakistan State Oil (PSO) and one for the GO company. The move is aimed at safeguarding the operations of local refineries, Express Tribune reported on Thursday.

PSO was instructed to halt its imports scheduled for October and November, while GO was directed to cancel its October consignment.

Stock market gets a boost by hopes of policy rate reduction, IMF approval

The decision was announced following a meeting in Islamabad, where representatives from refineries and oil marketing companies gathered to address the country’s diesel (HSD) reserves and refinery operations. The OGRA spokesperson confirmed that the gathering assessed the pressing issues affecting refineries and reviewed strategies to stabilise the situation on an emergency footing.

As part of the broader plan, OGRA has also postponed September diesel shipments for major importing oil companies, with three more cargoes slated for October now either rescheduled or likely to be cancelled.

The possibility of cancelling December shipments is also under consideration. Diesel that has already arrived will be held in bonded storage until the end of September, ensuring it does not enter the market prematurely.

The move came in response to concerns raised by the country’s four key oil refineries, which issued a letter to the Secretary of the Ministry of Energy (Petroleum Division). The refineries warned that Pakistan’s high-speed diesel (HSD) stocks had surged to 770,000 metric tonnes as of August 30, 2024—equivalent to a 50-day supply at current demand levels. They cautioned that further imports could severely disrupt the nation’s supply chain.

Exports surge 14 pc as IMF uncertainty looms

For the past two years, refineries have been raising the alarm over challenges in offloading their HSD stocks, with oil marketing companies failing to uplift locally produced diesel. The refineries’ letter criticised OGRA for consistently allowing HSD imports, arguing that these actions put pressure on foreign exchange reserves and risk refinery shutdowns. The letter also highlighted that this violates Rule 35(g) of the OGRA rules, which governs the licensing of new oil marketing companies.

The letter further emphasised that the difficulties in selling their diesel threaten planned refinery upgrades, as increased production post-upgrade would not be feasible without adequate off-take. “If left unchecked, this situation could collapse the country’s entire supply chain and jeopardise crucial investments in the refining sector,” the letter had said.