Oil refineries concerned over Ogra’s proposals of oil pricing deregulation

Refineries say plan would not only their upgradation plans but would also result in their permanent closure

ISLAMABAD  -  Showing serious concern over the Oil and Gas Regulatory Authority’s propos­als of oil pricing deregulation without taking stakeholders on board, the oil refineries have said that it would not only jeopardize refineries’ upgradation plans, which were expected to bring in $5-6 billion investment, but would also result in their permanent closure.

Pointing towards recommendation of Ogra to Ministry of Energy (Pe­troleum Division) on deregulation of petroleum products prices, the letter jointly written by the CEOs and MDs of five oil refineries to chairman Ogra said that upon review of presentation, we have noticed with deep concern OGRA’s recommendation to Petroleum Division that to provide level playing field to OMCs for negotiating ex-refin­ery price, the first upliftment priority principle of local products will have to be reviewed/disbanded. The letter available with The Nation is written by Pak-Arab Refinery Limited (PARCO), Attock Refinery Limited (ARL), Nation­al Refinery Limited (NRL), Pakistan Refinery Limited (PRL) and Cynergy­ico Pk Limited.

Moreover, OGRA has also recom­mended that OMCs should be given the choice to efficiently source their sup­plies locally or from the international market in complete negation of the laid down principle i.e. (Rule 35(g) of Paki­stan Oil (Refining, Blending, Transpor­tation, Storage and Marketing) Rules 2016 (OGRA Rules) which requires first upliftment right of product from the local refineries. It is disappointing to note that OGRA is suggesting corre­sponding changes in Pakistan Oil (Refin­ing, Blending, Transportation, Storage and Marketing) Rules 2016 to cater for above recommendation. 

“You would appreciate that refiner­ies in Pakistan are strategic assets of our country and their sustainability & continuity is essential for the prosper­ity and economic development of Paki­stan,” the letter said. Local refineries are the backbone of industrial develop­ment and are intrinsically connected to defense and energy security needs of the country. Any blind reliance on com­pletely imported fuels will not only in­crease risk to the country’s energy sup­ply chain but has the potential to result in disastrous consequences. 

“As you are aware that after hectic efforts of all stakeholders, Pakistan Oil Refining Policy for Upgradation of Ex­isting/ Brownfield Refineries, 2023 was approved by Federal Cabinet. The refineries upgradation will bring in in­vestment of $5—6 billion which would not only result in cleaner environment friendly fuels of Euro-V specifications but would also result in savings of pre­cious foreign exchange by substantial increase in local production of HSD and MS. Hence, it would be most unfortu­nate if the planned upgradation projects are abandoned by the refineries due to these irrational recommendations. The deregulation of IFEM will also impact adjustment of custom duty paid by the refineries on import of crude oil, subse­quently the importing refineries will be at huge disadvantageous position,” ac­cording to the letter.

It added the refining sector which is already struggling to operate at opti­mum levels due to the menace of smug­gled inferior products in the country, would further get a major setback from the above proposal, if implemented. “You would kindly appreciate that de­regulation of petroleum products in the country is a complex/critical issue, and local refineries being major stake­holders must be involved and consulted before moving forward. The refining sector requires OGRA support through pragmatic and supportive measures rather than suggesting ways that if im­plemented would result in their perma­nent closure,” said the letter.

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