Special editorial feature

‘Deregulation would bring in supply chain efficiencies.’

- Syed Zawar Haider, CEO, Oil Companies Advisory Council (OCAC)

July 2020

How would you describe the rise in petroleum products sales in Pakistan over the last few months?
Downstream Petroleum sector (Refineries and Oil Marketing Companies–OMCs) have experienced a high fluctuation in demand in the last 4 to 5 months wherein the demand for Motor Fuels (Petrol and Diesel) has experienced a steep decline with the start of COVID-19 lockdowns from March ‘20 to April ‘20 which was followed by a surge in demand in the month of June ‘20, resulting in shortages of petroleum products. Focusing on Petrol, the demand has grown from 439,000 MT in April to 663,000 MT in May (increase of 51% vs. April ‘20) while the anticipated demand for June was 750,000 MT (increase of 71% vs April ‘20). It is important to mention that average demand of Petrol from Jul ‘19 – May ‘20 (11 months) was around 600,000 MT and specifically in the month of June ‘19, it was 614,000 MT, which provides a perspective in terms of the increase in demand for Petrol.

What measures have the OMCs taken to meet this demand?
Pakistan is a net importer of Petroleum products, especially Petrol (70% to 80%) and Diesel (40% to 50%), therefore to address the demand surge for the month of June 2020 and onwards, all OMCs are actively working with the Ministry of Energy – Petroleum Division, to import additional quantities of Motor Fuels; however it is important to appreciate the challenges due to increasing trend in International prices vs. prevailing prices in Pakistan causing huge financial loss to the Downstream Petroleum Sector.

How are the OMCs performing their role as good corporate citizens?
As a responsible Corporate Citizen of Pakistan, the Downstream Petroleum Sector is fully committed to serving the nation by supplying petroleum products in the country. All companies are working tirelessly round the clock to improve the stock situation of petrol at a huge financial loss of around Rs. 25 billion in the month of June ‘20 alone to their respective organizations. It needs to be appreciated that these extraordinary efforts have been deployed in arranging supplies to keep the wheels of the economy moving under difficult conditions in pre- and post-COVID-19 lockdowns. It may also be noted that the Downstream Petroleum Sector is heavily regulated and monitored by the Ministry of Energy – Petroleum Division (MEPD) and the Oil & Gas Regulatory Authority (OGRA), whereby decisions and import approvals of MEPD directly impact the delicate supply chain of the country.

Are the OMCs bearing extra financial impact in arranging smooth POL supplies for the market?
Yes, it is pertinent to mention here, that the prevailing OMCs’ margin is only Rs 2.81 per litre, while the financial loss incurred by OMCs was estimated at around Rs 25 per litre in June ‘20 alone.

‘The unpredictability of prices of petroleum products in the international market has a direct impact which should be factored in while reviewing any supply chain situation.’

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