Pakistan oil firms seek emergency import relief over shipping crisis

Pakistan’s oil industry has urged the central bank to grant temporary regulatory relief to ensure uninterrupted fuel supplies, warning that geopolitical tensions in the Middle East have severely disrupted global oil shipping markets.

In a letter dated March 9 to State Bank of Pakistan (SBP) Governor Jameel Ahmad, the Oil Companies Advisory Council (OCAC), which represents major oil marketing companies and refineries, requested permission to temporarily import petroleum cargoes on a Cost, Insurance and Freight (CIF) basis instead of the currently required Cost and Freight (C&F) arrangement.

The industry body said the rapidly evolving confrontation involving Iran, Israel and the United States has made global oil and shipping markets highly volatile, sharply increasing freight rates and insurance costs while reducing the availability of vessels operating in the Persian Gulf.

According to OCAC, marine insurers have either withdrawn or significantly increased war-risk coverage for ships sailing through the Persian Gulf and the Strait of Hormuz, one of the world’s most critical oil transit routes. Freight rates for tankers operating in the region have surged nearly fourfold amid the rising security risks.

Under Pakistan’s current regulatory framework, refineries and oil marketing companies must import petroleum products on a C&F basis, in which suppliers arrange shipping while Pakistani buyers are responsible for securing marine and war-risk insurance.

OCAC said the present market conditions have made obtaining such insurance increasingly difficult, creating hurdles in procuring petroleum cargoes.

What led to the urgency?

The problem surfaced recently when a spot tender issued by Pakistan State Oil (PSO) for petrol, high-speed diesel and jet fuel failed to attract any bids. The tender, floated through the Gallop trading platform on a C&F basis, reflected growing reluctance among international suppliers to participate under the prevailing shipping and insurance risks.

To address the situation, the industry has proposed temporarily allowing imports on a CIF basis, under which suppliers would arrange both freight and insurance, including war-risk coverage.

OCAC said international suppliers are better positioned to secure insurance coverage and manage shipping risks during periods of geopolitical uncertainty.

The council has requested the SBP to grant a two-month general permission for CIF imports covering crude oil, refined petroleum products, base oil and related materials.

The request comes as Pakistan’s energy supply chain faces increased pressure, particularly ahead of the upcoming agricultural season when diesel demand typically rises.

OCAC warned that continued difficulties in arranging tanker shipments and insurance coverage could disrupt cargo bookings and threaten domestic fuel availability if the current situation in the Gulf persists.