Diesel glut hits 650,000 tonnes, imports continue

KARACHI: Pakistan's high-speed diesel stockpiles have surged to a record 650,000 tonnes, and are expected to continue growing after Pakistan State Oil (PSO) imports an additional 100,000 tonnes by the end of this month, industry officials said on Wednesday.

They said that the daily consumption of HSD in the country has been hovering around 14,000 tonnes, despite the harvesting season and the demand hasn’t increased significantly due to the smuggling of Iranian diesel.

"Local refiners are feeling the impact of Iranian smuggled diesel, as well as the import of HSD by PSO (Pakistan State Oil)," an offcial said.

"PSO has already imported 100,000 tonnes this month."

"Although HSD demand is sluggish, the state-run oil marketing company is obligated to import HSD under its long-term contract with Kuwait Petroleum Corporation (KPC)," a source in the oil sector told The News.

The long-term contract was signed when refineries were meeting 60 percent of the local demand for HSD, and the rest was imported to meet domestic demand.

However, the scenario has changed significantly. Now, local demand is largely being catered to by Iranian diesel, and whatever is left is being met through imported HSD, leaving local refineries with huge stocks.

People in the refining sector said that Attock Refinery has already shut down its main unit due to the large stocks of HSD. Other refineries may follow suit if HSD is not lifted from their facilities.“We had to reprocess HSD to keep the refinery operational,” said a top official of a local refinery.

According to data gathered from the oil sector, the country currently has 650,000 tonnes of HSD, while the refining sector holds around 170,000 tonnes. The remaining stock is with oil marketing companies, with PSO having the largest share of HSD stocks.

Pak Arab Refinery has the largest HSD stock of 59,000 tonnes, followed by Cnergyico with 54,000 tonnes of HSD. Attock Refinery has 19,000 tonnes of stocks, and National Refinery and Pakistan Refinery have around 18,000 tonnes and 17,000 tonnes, respectively.

Industry officials said that the country currently has more than 45 days’ worth of HSD, which is significantly higher than the normal 20-day consumption. "This discrepancy is due to the fact that consumption is not being met through legal channels, and illegal supply of diesel from neighboring countries has significantly impacted the overall demand," they added.

"HSD stocks in the country have become a serious issue, as they not only affect the operations of the refining sector but may also dent investment." The sector had been planning to invest over five billion dollars in upgrading facilities.