Petroleum supply hit as refineries face crisis

ISLAMABAD: The sub-optimal capacity utilisation of oil refineries has started affecting the supply of critical petroleum products, including jet fuel, at important installations.

Sources at the Oil and Gas Regulatory Authority (Ogra) told Dawn that an important defence organisation had asked the regulator to ensure that its regulated entities, particularly local refineries, honour their commitments to supply JP-8 fuel.

The sources said that none of the six oil refineries had provided their committed quantities to defence organisations in the first nine months (July-March) of the current fiscal year.

Based on the complaint, the government and Ogra have now pushed all refineries to ensure their committed supplies.

Defence organisation wants jet fuel commitments fulfilled

However, the refineries have responded that Ogra’s lenient view towards importing finished petroleum products like petrol and diesel by a couple of selected oil marketing companies was taking a toll on their capacity utilisation, and they were pushed to close their refining units.

Data showed that Rawalpindi-based Attock Refinery Limited (ARL) had supplied about 85pc of its committed quantities of JP-8 to defence organisations in the nine months under review. This was followed by 70pc of committed quantities by Parco and 52pc by Pakistan Refinery Limited.

The remaining three refineries — National Refinery, Byco and Enar — have supplied 25.5pc, 25pc and 44pc of their contracted supplies, respectively. All put together, the combined supplies by six refineries reached just 58pc against their contracted quantities for July-March.

Sources said the ARL had reported that it was the only refinery that supplied about 85pc of its contracted volumes during the current financial year and had promised to do more on a “best-effort basis”, given technical reasons.

The refinery, which relies entirely on indigenous crude, highlighted that depletion of reserves in northern oilfields had hampered output. It has requested the government to reallocate 5,000 barrels per day of crude oil from southern oilfields, which are currently being exported — a request ARL says it has pursued since 2022 but in vain.

Moreover, the refinery was also facing serious challenges in abrupt and frequent curtailment in local crude production due to forced gas curtailment by the SNGPL to accommodate imported LNG. Furthermore, condensate supplies from certain Khyber Pakhtunkhwa fields were often disrupted due to frequent strikes and the law and order situation.

As if that was not enough, the free influx of smuggled petroleum products in the country also posed a serious existential threat to the oil refining industry. “The local refineries, including the ARL, have been constantly complaining about falling capacity utilisation and sales, due to the unabated influx of smuggled petroleum products in the country,” it said.

The sources said that Parco had also complained to the government that its diesel stocks were touching historic levels and its storage facilities were full due to lower purchases by oil marketing companies, which had been freely allowed by the regulator to import refined products. As a result, the production of jet fuels was adversely affected.

Published in Dawn, April 18th, 2025