Oil and Gas Regulatory Authority (OGRA) has failed to ensure the development of 20 days oil storage by Oil Marketing Companies (OMCs) according to their respective sales volume in that particular area as overall only a six-day oil stock is available with OMCs and there is no strategic oil storage to handle the situation in case of any emergency.
Official sources, on the condition of anonymity, told that the OMCs have so far not developed the 20 days mandatory oil storages and Ogra could not take mentionable action against those OMCs which were allegedly found to be violating the government policy regarding maintaining oil stocks. They said that on average, OMCs keep only a six-day oil stock in their respective storages, instead of 20 days mandatory oil stocks. “Ogra has failed to ensure the implementation of the government policy under Section 21 of the OGRA Ordinance, regarding mandatory oil stocks for OMCs as well as strategic oil reserves, to effectively handle the situation in case of any emergency in the country,” sources said.
As per the law, all the OMCs are bound to have fuel stocks for 20 days. But, on average OMCs have only six days’ oil stocks and Ogra did not take stringent measures against those OMCs which have not developed strategic oil reserves, one of the reasons behind a nationwide petrol crisis about two years ago. Similarly, Ogra has granted 21 fresh licences in just six/seven months to OMCs, apparently for the development of oil storages, while only 20 licenses had been issued over the past 70 years. The authority has given Rs3 million as a rebate to each of the new 21 OMC licensees. Out of these 21 new OMCs, Oleum Petroleum (Pvt) Ltd is owned by an influential of Barri Imaam, while ACCEL Petroleum (Pvt) Limited is owned by Ahmed Saeed, the brother of Saeed Mehdi, Chairmann SNGPL and former boss of OGRA’s current Chairperson Uzma Adil Khan, while Best Petroleum (Pvt) Ltd is owned by an Additional Director of FIA, Lahore. Existing OMCs like PSO, Shell, Total, Askar-1, Hascol etc are being provided with preferential treatment in this regard.
The sources also said that currently, under the rules, all the oil marketing companies need to maintain the fuel commercial storages up to 20 days, but they are managing commercial for up to 10-11 days maximum, which is a very alarming development, given the current scenario. In the wake of the circular debt and inventory losses that are perpetually being incurred because of continuous tumbling of oil prices in the market, oil marketing companies are unable to maintain the existing storage of 20 days, sources added.
Though strategic oil stocks are permanently held for non-commercial reasons and they are used to provide a safeguard against external blockades and in times of war, however, even after a lapse of 69 years since its emergence, there is still no policy on strategic fuel storages in the country. And, it is believed that existing commercial storages are considered to be used as strategic stocks in war-like situations as well. Fuel stocks also safeguard against the internal impediments such as floods and disasters. And in case of oil industry disruptions because of refineries’ outages, planned annual shutdowns and pipeline repairs/breakdowns, the strategic reserves are used in the country. Also, the strategic fuel reserves are separate from the commercial stocks but these can be utilised by the oil industry in times of need. OGRA has absolutely failed to develop such strategic oil storages in the country.
They said that according to government’s policy, Ogra is the custodian and is responsible for the maintenance of 20 days oil storage by OMCs as per its respective sales volume in that particular area. To get the regulatory authority’s point of view in detail, Ogra spokesman Imran Ghaznavi was contacted on 28th March 2017 and subsequently sent questions regarding oil storages and the grant of 21 new licenses to OMCs under Oil Rules, 2016. However, there was no response from OGRA spokesman until the filing of this report as he did not bother to respond and kept saying,”Collecting information from relevant department. Will forward as soon as I get it. “
It is worth mentioning that the EU (European Union) member states are required to hold stocks above 90 days average net daily imports or 61 days of average daily inland consumption in order to mitigate a supply crisis. Germany maintains 90 days through a federal body with refineries, OMCs, and the government as members. Also, Netherlands has 90 days stock that is maintained through an independent non-profit body. And the UK has 67.5 days of net consumption where the OMCs manage strategic storage. However, responsibility and ownership for maintaining strategic stocks resides with the government and the industry cooperating in the implementation of the policy. Besides, in all the international models, the cost of strategic storage is recovered as a charge or levy passed on to the end-consumer on all inland sales.
