ARL cuts output to 33% as smuggling bites

ARL cuts output to 33% as smuggling bites

Attock Refinery Limited (ARL) has become the first victim of smuggled petroleum products as the refinery on Monday shut down its main distillation unit, reducing its capacity to just 33%, due to a backlog of unsold diesel stocks.

Oil industry sources warned that other refineries may also close their units if uncontrolled smuggling of petroleum products is not stopped.

The smuggling of oil into Pakistan continues unabated and this oil is now available all over the country.

Industry officials said that smuggling and proposed price deregulation without consulting all stakeholders could put refinery upgrade plans in jeopardy. To upgrade, they are expected to bring in an investment of $5-6 billion based on the recent approval of the new policy.

All refineries including Pakistan Refinery Limited (PRL), Pak Arab Refinery (Parco), ARL, Cnergyico PK and National Refinery Limited (NRL), in a joint letter written to the Oil and Gas Regulatory Authority (Ogra) chairman on Monday , expressed deep concern over the deregulation of petroleum products.

Ogra has suggested that oil marketing companies (OMCs) should be allowed to source their supplies efficiently either domestically or abroad, contradicting the principles laid down in Pakistan Oil (Refining, Blending, Transport, Storage and Marketing) Rule 35(g) The 2016 regulation, which mandates the right of first refusal for products from local refineries, they said.

“It is disappointing to observe Ogra’s advocacy for corresponding changes in the Pakistan Petroleum (Refining, Blending, Transport, Storage and Marketing) Rules 2016 to accommodate the above-mentioned recommendations,” they said, stressing that refineries are critical assets for the country’s strategic interests. , and its sustainability and continuity is essential for Pakistan’s economic prosperity and development.

“Local refineries serve as the backbone of industrial development and are closely related to the country’s defense and energy security needs. Over-reliance on imported fuels not only poses risks to the energy supply chain but also carries potential adverse consequences.”

Following a comprehensive effort from all stakeholders, the cabinet has approved the Pakistan Oil Refining Policy for Upgrading Existing Refineries/Brownfield 2023.

The planned upgrade, with an investment of $5-6 billion, aims to produce cleaner, environmentally friendly fuel that meets Euro-V specifications, while increasing local production of high-speed diesel (HSD) and motor spirit (petrol), thus reducing dependence on imported fuel and save foreign exchange.

“It would be unfortunate if these planned upgrading projects were abandoned because of irrational proposals because the deregulation of the domestic freight equalization margin (IFEM) would also affect the adjustment of customs duties paid by refineries on crude oil imports, putting the importation of factories filtering at a lower level. significant weakness,” they said.

The refining sector, which is already struggling due to the inflow of low-grade products being smuggled into the market, will face further setbacks if the proposal is adopted.

“Given the complexity and critical nature of the deregulation of petroleum products in the country, it is important that local refineries, as key stakeholders, are consulted and involved in the decision-making process before moving forward,” they said, adding that the refining sector needs pragmatic measures and support , rather than a proposal that could potentially lead to permanent closure.

Now, Ogra is in the process of signing agreements with refineries to upgrade their plants. However, smuggling of petroleum products has threatened their operations and ARL has become its first victim.

Although the prime minister and the military establishment have vowed to stop smuggling, the situation has worsened for refineries whose sales have declined and they have been forced to close.