Govt to meet oil industry after OCAC flags losses

The federal government has convened a meeting with chief executive officers (CEOs) of oil refineries and oil marketing companies (OMCs) today (Tuesday) following concerns raised by the Oil Companies Advisory Council (OCAC) over what it termed as unsustainable policy-induced losses facing Pakistan’s downstream petroleum sector.

 

Federal Minister for Petroleum Ali Pervaiz Malik will chair the meeting, according to an official communication issued by the Ministry of Energy (Petroleum Division). The development comes after the OCAC, representing oil refineries and OMCs, wrote to the petroleum minister seeking urgent intervention to address what it described as an “imminent collapse” of the downstream petroleum sector due to continued unilateral pricing decisions and mounting financial pressures.

 

In its letter, the OCAC claimed that the latest reduction in petroleum prices, implemented through a revised pricing formula, had exposed the industry to losses amounting to approximately Rs104 billion. The council said the losses were linked to existing inventories of around 505,000 metric tonnes of motor spirit (petrol) and 655,000 metric tonnes of high-speed diesel held by companies.

 

The industry body maintained that the losses had resulted from government pricing decisions rather than operational inefficiencies or market competition. It argued that repeated interventions without consultation were eroding working capital, liquidity and investor confidence.

 

The OCAC stated that refineries and OMCs had continued to support national energy security during recent periods of elevated international oil prices and supply uncertainties by maintaining strategic fuel stocks and ensuring uninterrupted supplies nationwide. Industry participants also highlighted their contribution towards reducing the Price Differential Claim (PDC) burden and supporting fuel supplies for essential sectors.

 

The council further noted that OMC margins had not been revised since September 2023, despite rising inflation, rising operational expenses and growing compliance requirements. It also pointed to outstanding PDC claims of approximately Rs66.7 billion, which it said were adding to liquidity challenges faced by the sector. Similar concerns regarding outstanding claims and policy uncertainty have been raised by industry representatives in recent weeks.

 

Expressing concern over the impact on foreign investment, the OCAC warned that continued policy uncertainty could accelerate investor withdrawal and threaten the financial viability of weaker market participants. The council stressed that long-term investments in storage, logistics and retail infrastructure were made on the basis of regulatory consistency and policy stability.

 

The industry has urged the government to establish a transparent and consultative pricing framework, introduce safeguards against abrupt erosion of inventory value, and take measures to restore investor confidence in the downstream petroleum sector.

 

The meeting is expected to discuss industry concerns and explore policy measures to ensure the sustainability of Pakistan’s petroleum supply chain while maintaining energy security and uninterrupted fuel availability.

Source: The International News Pakistan