Port constraints: petroleum crisis in the making?

Port constraints: petroleum crisis in the making?

ISLAMABAD: The country’s downstream petroleum industry has indicated another petroleum crisis in pockets of upcountry provinces due to port constraints, sources close to SAPM on Power and Petroleum Tabish Gauhar told Business Recorder.

The industry has also accused Federal Investigation Agency (FIA) and Auditor General of Pakistan of carrying out harassment under the garb of the petrol crisis of June 2020.

The sources said Oil Companies Advisory Council (OCAC), in a letter to SAPM on Power and Petroleum, contended that the downstream petroleum industry (mainly consisting of refineries, pipeline company, and Oil Marketing Companies who have made significant investments in infrastructure related to oil storages, refining, transportation and retail outlets all across Pakistan) continually keeps the wheels of country and its economy running with a significant role in tax collection (Sales Tax, Petroleum Development Levy etc.) running into billions of rupees. Besides, it is also a responsible employer for tens of thousands of Pakistani citizens.

The industry is currently passing through a difficult phase owing to some major issues namely financial losses due to inadequate OMC margins (PIDE study & structural changes long overdue, lower gross refining margins, higher Turnover Tax and its application on sales revenue, port constraints, demurrages not recoverable through pricing, old Downstream Petroleum Policy (1997) and slow pace of deregulation, etc.

The OCAC also drew attention of SAPM to some specific issues which the downstream petroleum industry is currently facing and are adversely affecting the “petroleum products supply chain in the country which does not augur well in weeks and months ahead.”

The Council claims that countrywide Mogas stock as on August 2, 2021 (start of the month) was only for 9 days while it was only 6 days each in Punjab and KPK as Fauji Oil Terminal & Distribution Company Limited (FOTCO) was only able to discharge 12 vessels (60%) of petroleum products against a plan of 20 in the month of July 2021.

“Port constraints have been a major issue which has been highlighted time and again by the industry in the past for its early redressal,” the sources quoted OCAC as saying in the letter. It also wrote letters in December 2020 and July 2021 on this issue.

Furthermore, preferential berthing at FOTCO has also impacted on the supply chain matters of private importing OMCs which hold around 55% market share of retail products.

The current demand of Mogas for August 2021 is projected at around 850,000 MT which is much higher than average demand of around 700,000 MT/ month for 2020-21. The single jetty at FOTCO at Port Qasim is highly congested where 27 vessels (Mogas, 8, HSD, 7, LSFO, 2, condensate, 1) are planned for discharge in August 2021 while it can only offload maximum of 15 vessels under best operating conditions. In addition, 29 vessels (Mogas, 14) are also planned for discharge at KPT in the month of August 2021.

OCAC argued that it is not possible to build up stocks of Mogas in view of rising demand for some time due to port constraints.

OMCs have planned/committed funds in imports but bourgeoning demurrages are eroding OMCs’ margins as vessels are queuing up at the outer anchorages.

OCAC further noted that due to current scenario market may have pockets of dry-outs in some parts of upcountry provinces for which downstream petroleum industry cannot be held responsible.

“The whole downstream petroleum industry is facing harassment, unnecessary new and old data enquiries (not relevant to June 2020 petrol shortages) and investigations by FIA, and Auditor General of Pakistan emanating from June 2020 petrol crisis. The actual reason of that shortage was a combination of factors including the uncertain world of Covid-19 pandemic,” said, Syed Sawar Haider. However, continuing investigations are vitiating the conducive business environment affecting all stakeholders. (Business Recorder)

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