Refineries and OMCs Push Back Against Ogra’s HSD Import Approval
Ogra’s Decision Leads to Major Stockpiling at Refineries
Dr. Musadik Malik, the Minister for Petroleum, shared these updates with the media, noting that an investment deal for the Reko Diq project is nearing completion. The government is also set to make a decision on constructing a new greenfield refinery, projected to cost over $10 billion, which will manufacture petroleum products and petrochemicals on a 50:50 basis.
As reported by Dawn, Dr. Malik mentioned he was unaware of the high-speed diesel shortage crisis that has nearly shut down the country’s refineries and led Pakistan State Oil (PSO) to cancel long-term import contracts. This problem emerged due to special import orders issued to a specific market player, resulting in a foreign exchange loss.
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Dr. Malik committed to investigating the issue and providing updates to the media soon.
He also pointed out that existing regulations for LNG imports, including its restricted supply and pricing for the power sector, have caused numerous difficulties. Although four LNG-based power projects are efficient, they have remained idle due to the separate LNG pricing system.
The minister explained that wellhead gas is priced at roughly Rs 570-580 per unit, pipeline quality gas at about Rs 1,600 per unit, and LNG at around Rs 3,500 per unit. The proposed blended price for these sources would be about Rs 1,700-1,800 per unit, which could benefit all economic sectors, with potential subsidies for residential areas.
Dr. Malik assured that the new pricing plan would be finalized within a few months to ensure equitable pricing across all sectors.
Regarding winter supply concerns, he confirmed that Pakistan is importing about 1,000 million cubic feet of LNG daily and guaranteed there would be no supply issues. He also ruled out any increase in gas prices.
On the topic of the Iran-Pakistan gas pipeline project, Dr. Malik refrained from discussing its progress or Iran’s threats of international arbitration due to Pakistan’s delays in infrastructure development. He dismissed rumors of potential $18 billion penalties as baseless.
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The minister noted ongoing efforts to attract significant investments from Saudi Arabia, China, and other countries for the new refinery. He also mentioned that studies are in progress to determine whether the refinery should focus on crude-to-petroleum, crude-to-petrochemicals, or a combination of both on a 50:50 basis. He promised to expedite efforts once the report is completed.
Additionally, Dr. Malik discussed the potential for solar power projects, both grid and rooftop, and is preparing a report on shifting from natural gas to electricity for space and water heating.
The oil industry, including refineries and oil marketing companies (OMCs), has been voicing strong objections for several months against the Oil and Gas Regulatory Authority’s (Ogra) decision to allow a particular oil company to import large volumes of high-speed diesel (HSD). This decision has resulted in significant stockpiling at local refineries.
Currently, four power projects with a combined capacity of 5,200 MW generate electricity at Rs 20-24 per unit when using LNG. However, if they used natural gas, their production costs could drop to Rs 8-10 per unit.
By implementing a blended price for LNG and natural gas, these plants could produce electricity at around Rs 14-15 per unit, offering substantial cost relief.
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