OGRA plans inland freight audit of oil marketing companies, refineries across Pakistan

Pakistan’s Oil & Gas Regulatory Authority (OGRA) plans to conduct a comprehensive audit of the Inland Freight Equalization Margin (IFEM) for the financial year 2023-24.

OGRA will scrutinize the operations of major oil marketing companies (OMCs) and refineries across Pakistan, according to an official document.

This audit is intended to optimize transportation costs for Pakistani consumers and ensure transparent and fair recovery of costs through IFEM.

The primary objective of the audit is to ensure that the surplus or deficit in the freight pool is accurately determined based on the net volume of equalized products purchased from various supply sources.

This approach aligns with the mechanism used by OMCs for inter-company settlement of cost differentials, which is also based on net volume purchases.

The audit will ensure that the primary transportation cost is determined by applying an average cost per liter to the net volume purchased, excluding costs incurred on the movement of closing inventory.

The audit will confirm that extra margins recovered by OMCs on local purchases of Motor Gasoline (Mogas) and High-Speed Diesel (HSD) are passed back to consumers through IFEM.

Additionally, the audit will check that losses incurred by OMCs on mogas and HSD pipeline movements are computed based on actual data and recovered through IFEM.

The audit will verify that the premium on HSD imported by OMCs is fully recovered through IFEM. It will also ensure that net volume purchased by OMCs excludes any subsequently exported volumes, and relevant costs are not included in the surplus/deficit determination.

It is mandatory for the OMCs to meet local demand by first utilizing the product available locally. The remaining deficit volume would then be moved from the nearest source.

The audit will verify that all primary and special area secondary freight payments have been made after verification of physical reporting data and tracker reports.

It will also review adjustments and deductions made by OGRA during the year and reflect them in the surplus/deficit statement. The audit will compare monthly sales reports with physically reported products for each OMC.

It will ensure that export transportation costs from deficit supply envelopes are borne by export customers, not the freight pool.