ARL cuts production to 33% as contraband stings

Islamabad:

Attock Refinery Limited (ARL) became the first victim of smuggled petroleum products as the refinery on Monday shut down its main distillation unit, reducing its productivity to only 33%, due to the accumulation of unsold diesel stocks.

Oil industry sources have warned that other refineries are also likely to shut their units if rampant oil smuggling is not stopped.

Oil smuggling in Pakistan has continued unabated and this oil is now available all over the country.

Industry officials said smuggling and proposals to liberalize prices without consulting all stakeholders could jeopardize refinery plant upgrade plans. The upgrade was expected to bring in $5-6 billion in investment following the recent approval of a new policy.

All refineries, including Pakistan Refinery Limited (PRL), Pak Arab Refinery (Parco), ARL, Cnergyico PK and National Refinery Limited (NRL), in a joint letter sent to the Chairman Oil and Gas Regulatory Authority (Ogra) on Monday, expressed deep concern over the deregulation of petroleum products.

Ogra proposed to allow oil marketing companies (OMCs) to effectively source their supplies either locally or internationally, contrary to the well-established principle laid down in Article 35(g) of the Pakistan Petroleum (Refining, Blending, Transport, storage and Marketing) Rules of 2016, which mandates the first right to lift products from local refineries, they said.

“It is disheartening to observe Ogra’s advocacy of corresponding changes in the Pakistan Petroleum (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016 to accommodate the above recommendation,” they said, stressing that the refineries were critical assets for the strategic interests of the country. and their sustainability and continuity were critical to Pakistan’s prosperity and economic growth.

“Local refineries serve as the backbone of industrial development and are intricately linked to the country’s defense and energy security needs. Over-reliance on imported fuels not only poses risks to the energy supply chain, but also has the potential for catastrophic consequences.”

After extensive efforts by all stakeholders, the Cabinet had approved the Pakistan Oil Refining Policy for Upgradation of Existing Refineries/Brownfield 2023.

The planned upgrades, with an investment of $5-6 billion, aim to produce cleaner, environmentally friendly fuels and meet Euro-V specifications, while increasing local production of high-speed diesel (HSD) and motor alcohol (petrol). thus reducing dependence on imported fuel and saving foreign exchange.

“It would be unfortunate if these planned upgrading projects were abandoned due to unreasonable recommendations, as the deregulation of the Inland Freight Equalization Margin (IFEM) will also affect the adjustment of duties paid by refiners on crude oil imports, putting import refiners at a significant disadvantage “, they said.

The refining industry, already struggling due to the influx of substandard smuggled products into the market, will face a further setback if the recommendations are adopted.

“Given the complexity and critical nature of deregulation of petroleum products in the country, it is imperative that local refineries, as key stakeholders, are consulted and involved in the decision-making process before proceeding,” they said, adding that the refining sector requires pragmatic and supportive measures, rather than recommendations that could potentially lead to permanent closure.

These days Ogra is in the process of signing agreements with refineries to upgrade their plants. However, petroleum smuggling threatened their operations and ARL became its first victim.

Although the prime minister and the military establishment have pledged to stop smuggling, the situation has worsened for refineries whose sales have fallen and are being forced to close.

Published in The Express Tribune, April 23^rd2024.

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