Attock Refinery warns of shutdown due to low product lifting by OMCs

The Attock Refinery Limited (ARL), the only refinery in the north of Pakistan, has warned the government of its possible shutdown due to low product lifting by the oil marketing companies (OMCs) due to which the refinery is bleeding about Rs700 million per month.

In separate letters to the petroleum minister and the Ogra chairman, ARL CEO Adil Khattak said that OMCs had been importing more petrol and diesel instead of lifting their allocated quotas from ARL, causing high stocks of these products at the refinery.

He revealed the sales figures for the last four months which showed that only 38% of petrol and 47% of diesel sold by OMCs in ARL’s sales envelope was lifted from ARL and the rest was brought in from local or imported sources.

According to ARL’s CEO, this practice violated the rules that favored local refinery production over imports and led to foreign exchange loss and higher inland freight equalisation margins, which increased the prices for consumers.

ARL processes 100% of indigenous crude oil from the Khyber Pakhtunkhwa and Potohar regions.

He said that ARL was facing serious challenges in disposing of its petrol and diesel production for the past few months and the situation had reached an alarming point where ARL would be forced to shut down if no corrective measures were taken.

Khattak explained that the shutdown would be inevitable to manage high stocks of petrol and diesel, which would be most unfortunate. He added that the closure of ARL could also affect the oil fields in the region, which could face penalties from the oil producers.

He cited data provided by the Oil Companies Advisory Council (OCAC) that clearly indicated that product from other sources was moved by OMCs in ARL’s supply envelope, thus impacting the country’s inland freight equalization margin and consumers. He said that this also meant that locally produced product from ARL was not prioritised.

He urged the government to direct the OMCs to ensure prioritising of local product lifting over imports and other sources like smuggling in ARL’s supply envelope so that the refinery could operate at optimum throughput.

He also reminded the government that the Economic Coordination Committee (ECC) had approved six months ago the allocation of 5,000 barrels per day of condensate crude oil from the Nashpa field to ARL, which was currently being exported, but this had not been implemented so far.

He demanded the federal government’s intervention to enable ARL to operate at its optimum capacity, which would not only save foreign exchange by reducing imports but also stop embezzlement and overcharging of inland freight equalization margins.

He suggested that the least Ogra could do was to carry out an audit of OMCs’ supplies in ARL’s supply area to identify defaulting OMCs who were bringing in imported products instead of uplifting products from ARL, thus causing not only loss of foreign exchange but also indulging in misappropriation of inland freight equalization margins.