Ogra finds fault with handling of oil crisis

Amid controversies swirling around petroleum crisis and pricing, the Oil and Gas Regulatory Authority (Ogra) has found fault with official handling of the demand and supply mechanism, leading to countrywide shortages, hoarding and black marketing of oil by market players.

In a detailed report submitted to the federal cabinet, Ogra also challenged the position of the Ministry of Energy Petroleum Division (MEPD) that as the regulator it was responsible for ensuring 20-day stock at all times. The regulator quoted a series of rules and laws to claim that maintenance of stock and smooth supply throughout the country was the responsibility of the petroleum division and the director general oil under the MEPD.

The regulator has also attached a number of its communications to the MEPD, warning and highlighting the build-up to the supply crisis and how chronologically the office of directorate general oil (DGOil) had been changing various decisions. The report also contains an updated status on implementation of the cabinet decisions on June 9 in which Ogra had reported penalties imposed on nine oil marketing companies (OMCs) for violation of rules.

The report said the petroleum secretary was on March 20 clearly showed petrol stocks for 15 days and diesel for 43 days with an advice for "instant decision making regarding demand/supply". On March 25, the MEPD asked all OMCs and refineries "to cancel their planned imports". The very next day (March 26), the MEPD moved a summary which was approved on Mar ch 27 by the Cabinet Commi ttee on Energy (CCoE) to rationalise oil imports, closure of three Karachi-based refineries and curtailing production to 60-70 per cent of local crude by Parco and Attock refineries.

This was done without Ogra's participation or comment. Based on the CCoE decision, operation of three refineries was stopped while imports were already banned, thereby curtailing the country's supply sources.

On April 4, the MEPD reported to Ogra that OMCs were not uplifting products from Attock, Pakistan and Parco refineries which should be asked to "maintain 20-day mandatory stocks of HSD [high speed diesel] to meet the demand during harvesting season". On April 6, all OMCs were asked to uplift product from refineries and build the required stocks. The same day, all refineries were asked to operate at 60-70pc throughput to meet higher demand, particularly of diesel as imports were already banned.