Pakistan refineries seek clarity from ​OGRA​ on diesel upliftment, warn of supply risks

Pakistani refineries said no clear direction has been provided by the Oil and Gas Regulatory Authority (OGRA) regarding the upliftment of high-speed diesel (HSD) by oil marketing companies (OMCs). As a result, diesel sales arrangements for the current month, as well as for the upcoming month, continue to remain uncertain, which complicates supply planning by local refineries. The refineries urged the introduction of a weekly price mechanism.

In a letter by all refineries — PARCO, Attock Refinery, National Refinery, Pak Refinery and Cnergyico — addressed to the chairman of OGRA, they said that in the absence of clear regulatory directions on product upliftment, refineries continue to face structural constraints in aligning production, inventories and dispatches, particularly during periods of downward pricing trends.

This situation affects the orderly functioning of the market and undermines effective supply planning across the value chain.

Moreover, where refinery supply obligations are enforced uniformly across pricing cycles, it is equally important that the associated regulatory framework operates consistently across market conditions.

If upliftment mechanisms remain constrained during downward pricing cycles, it would be appropriate to also review mandatory refinery supply obligations during upward pricing trends, so as to avoid policy asymmetry and ensure balanced market outcomes.

'De-link jet fuel from HSD imports'

With regard to jet fuel imports, refineries are of the considered view that jet fuel should not be linked with, or commingled with, HSD import cargoes in situations where there is no actual requirement for HSD imports, and that the matter should be discussed separately.

Jet fuel is a distinct product with an independent and niche market and should therefore be imported separately on the basis of its own demand and supply requirements, the letter said.

Commingling of jet fuel with HSD cargoes, where HSD imports are not otherwise required due to a massive glut situation, should be avoided, as it exacerbates existing upliftment constraints and further complicates product offtake. Under the current downward pricing trend, such an approach would materially intensify inventory pressures and undermine effective supply planning, without serving any underlying supply necessity.

Refineries also drew attention to an emerging distortion in jet fuel pricing. When jet fuel cargoes are not imported, domestic jet fuel prices are significantly lower. This divergence is adversely impacting refinery economics, making Jet A-1 production unviable, given that refineries are already incurring heavy losses on furnace oil exports.

Accordingly, in order to address the issues highlighted above in a holistic manner, refineries have recommended that:

• Clear regulatory direction be issued on HSD upliftment and sales arrangements for the current and upcoming months to enable orderly supply planning by refineries and OMCs.
• The linkage and commingling of jet fuel with HSD import cargoes be avoided in situations where there is no actual requirement for HSD imports in the country.
• Jet fuel pricing be aligned with international market benchmarks and import parity price (IPP), and the existing pricing formula be reviewed and revised to reflect prevailing market dynamics.
• A weekly pricing mechanism be considered to better reflect international price movements, reduce pricing lags, and support efficient supply planning across the downstream sector.

Despite numerous meetings, consultations and extensive exchanges of communication on this matter, OGRA has regrettably failed to make any meaningful progress on this critical issue, the letter said.