Refineries warn OGRA over petroleum smuggling impact on refinery operations

ISLAMABAD: Pakistan’s refineries have warned the Oil and Gas Regulatory Authority (OGRA) that rising cross-border inflows of petroleum products are undermining local refinery operations, reducing demand for domestic fuel, and threatening the stability of the country’s petroleum supply chain.

The concerns were formally raised in a letter dated 19 May 2026 addressed to the Chairman of the Oil and Gas Regulatory Authority, titled “Serious Threat of Petroleum Smuggling to Refinery Operations.”

Refineries, referring to a meeting convened by OGRA over the weekend to discuss low upliftment from local refineries, said in the letter, “We refer to the meeting convened by OGRA over the weekend to deliberate upon the issue of low upliftment from local refineries.”

They added, “During the discussion, the refineries collectively highlighted that, rather than curtailing refinery production, all possible measures may be considered to address the increasing cross-border inflow of petroleum products, which appears to be impacting the demand for locally refined products.”

The refineries further warned, “There are growing concerns that, if left unaddressed, such inflows may increase further and potentially reach levels observed in previous years, thereby adversely affecting refinery throughput, operational sustainability, and the overall domestic supply chain.”

In the letter, the refineries requested regulatory action, stating, “In view of the above, we request OGRA to kindly highlight the potential adverse implications of such unregulated cross-border product inflows on refinery operations and to consider recommending appropriate enforcement and monitoring measures to safeguard the integrity of the domestic petroleum supply chain.”

Refineries stressed that stronger enforcement and monitoring is needed to prevent further disruption to domestic supply chains and protect refinery viability in the long term.

A refinery CEO told Profit that it is estimated that around 5,000 tons per day of High-Speed Diesel (HSD) is being smuggled into Pakistan against a total national demand of approximately 22,000 tons per day, accounting for nearly 23 percent of the country’s HSD consumption.

He said, “It is estimated that around 5,000 tons per day of High-Speed Diesel (HSD) is being smuggled into Pakistan against the total national demand of approximately 22,000 tons per day. This constitutes nearly 23% of the country’s HSD demand.”

The government is reportedly losing about Rs80 per litre in petroleum levy and customs duties, translating into an estimated revenue loss of around Rs475 million per day.

He stated, “The Government is reportedly losing approximately Rs. 80 per litre in terms of petroleum levy and customs duties, translating into an estimated revenue loss of around Rs. 475 million per day.”

Referring to developments in Balochistan, he said, “In this regard most surprising was a statement of Baluchistan government published in the national media during the first week of April 2026 to allow sale of smuggled Iranian diesel at Rs. 280 per litre within Balochistan.”

He added, “I had then pointed out that once such sales are permitted officially in Balochistan, it would be practically impossible to confine the product to the province alone.”

Rejecting arguments that smuggling should be tolerated for foreign exchange savings, he said, “Another argument being advanced by certain quarters — that smuggling should be tolerated in order to save foreign exchange — is entirely irrational.”

He further noted, “Smuggling transactions are conducted in hard currency through unofficial channels, and it is difficult to understand how any illegal activity can be justified on such grounds.”

Warning about policy implications, he said, “What is even more alarming is the consideration being given to asking refineries to reduce diesel production instead of taking effective anti-smuggling measures. Such an approach would send extremely negative signals to the refining sector.”

He concluded, “One fails to understand how refineries can be expected to invest billions of dollars in refinery upgradation and capacity enhancement under these circumstances, particularly when their existing production cannot be sold due to the unchecked inflow of smuggled products.”

It is pertinent to mention here that country’s refineries have urged the Oil and Gas Regulatory Authority (OGRA) to take immediate steps to curb the smuggling of petroleum products, and warned that the illegal inflow is significantly undermining their performance and threatening the domestic supply chain.