ISLAMABAD: Pakistan State Oil (PSO) is facing increased financial difficulties due to operational hurdles in its supply chain, compounded by a significant drop in demand for liquefied natural gas (LNG) within the country, as reported by The News on Friday. Despite having a long-term contract with Qatar for LNG purchases, PSO is dealing with overstock issues because the power sector has drastically reduced its LNG consumption.
“Earlier, the power sector was off-taking two LNG cargoes a month, but now the demand has plummeted,” PSO Managing Director (MD) Syed Taha informed the National Assembly’s Standing Committee on Energy (Power Division) in a meeting presided by MNA Syed Mustafa Mehmood. “We have a supply agreement with Qatar, but the power sector, which initially consumed 600 million cubic feet of LNG, has significantly reduced that quantity,” he added, highlighting the operational challenges this has created for PSO.
MNA Syed Naveed Qamar emphasized that the current situation is unsustainable, urging the power sector and PSO to urgently reach an agreement to address the inconsistency.
The committee also discussed the issue of substandard fuel in the country. Representatives from the Oil and Gas Regulatory Authority (OGRA), PSO, and the Hydrocarbon Development Institute of Pakistan (HDIP) briefed the committee on fuel standards. “Fuel and diesel standards are set by the DG Oil Office,” explained Director General (Oil) Imran Ahmad, noting that the regulatory authority ensures compliance with these standards.
“Imported fuel in Pakistan is Euro-4 and Euro-5 compliant, while locally refined products meet only Euro-2 standards at the minimum,” stated Ahmad. MNA Qamar questioned if local refineries had upgraded their facilities after receiving financial incentives from the government. “The refineries have been benefiting from a 3% guaranteed return and a 7.5% deemed duty,” Ahmad noted.
OGRA Chairman Masroor Khan acknowledged this, stating: “It’s true that the refineries received financial incentives, but what have they done to upgrade their products?” He informed the committee that the five local refineries had until October 22 to sign an ‘upgrade agreement’ to meet international standards. Khan emphasized that without upgrading, these refineries have no future and must meet Euro-5 fuel standards. “We cannot allow the public to suffer due to the refineries’ failure to improve,” echoed committee chairman Mustafa Mehmood.
Mehmood accused the local refineries of producing substandard fuel contributing to health issues like cancer and asthma. “These refineries are not even meeting the Euro-2 fuel standard,” he said, questioning why the government had not increased their refining margins to encourage upgrades. He suggested allowing refineries to compete in a free market.
Petroleum Secretary Momin Agha emphasized the strategic necessity of national refining capacity, noting that local refineries produce 45-50% of the country’s diesel, petrol, and jet fuel, and export $150 to $200 million worth of fuel annually.
The chairman also highlighted that local refineries had failed to reduce manganese levels in petrol and sulfur content in diesel, posing serious health risks to the population. The committee members raised the issue of deregulating petroleum products. OGRA Chairman Masroor Khan stated that while deregulation is possible and under consideration, it requires careful deliberation by the government due to potential regional price variations.
Earlier, the chairman expressed anger over the absence of heads of exploration and production companies, including OGDCL, PPL, and Mari, from the meeting. Petroleum Secretary Momin Agha confirmed that the officials were attending a crucial meeting in London. Mahmood remarked, “The committee should have been informed. We could have rescheduled the meeting.” He also questioned the absence of Petroleum Minister Musadik Malik, to which the secretary responded that the minister was attending the Russian Energy Week. “We will issue summons if future foreign trips are made without notifying the committee,” Mahmood warned, stressing that overseas travel is typically planned well in advance.
The financial strain on PSO due to decreased LNG demand, coupled with the challenges in upgrading local refineries, highlights the urgent need for coordinated efforts to stabilize the country’s energy sector.
