• Oil firms assured of import premium-based pricing to minimise losses
• OMCs warn repeated revisions discouraging foreign investment
ISLAMABAD: The Petroleum Division of the Ministry of Energy on Tuesday assured angered executives of oil-marketing companies (OMCs) and refineries that upcoming price adjustments would be based on actual import premiums, while the weekly pricing mechanism would continue to minimise losses caused by recent policy changes.
At a hurriedly called meeting, Petroleum Minister Ali Pervaiz Malik and Secretary Hamed Yaqoob Shaikh told CEOs of several OMCs and refineries that there would be no further changes to the weekly pricing mechanism in the near future.
They added that upcoming petrol pricing would be based on a $15.85 per barrel import premium of the latest cargo arranged by state-run Pakistan State Oil (PSO), which suffered the most under recent pricing changes.
Diesel pricing would continue to be benchmarked on PSO’s import premium from Kuwait Petroleum — around $5-6 per barrel, an official told Dawn.
Asif Iqbal, chairman of the Oil Companies Advisory Council (OCAC), an umbrella body of over three dozen companies, complained to the government side that frequent changes to the pricing formula — seven times for diesel and four times for petrol in the past three months — had shattered the oil industry. He said the latest price change had wiped out the profitability of the past year in a single day, warning that foreign investment could not be expected under such conditions, according to official sources.
Cynergico Petroleum’s Amir Abbassciy said refineries were bearing the brunt due to abundant availability of smuggled high-speed diesel (HSD) in the market and demanded complete deregulation of pricing along with effective action against smuggling. He supported OCAC’s view that further foreign investment in the sector would be difficult.
Wafi Energy CEO Zubair Shaikh said his UAE-based principals were shocked to learn that their subsidiary had suffered losses in a single price change greater than profits earned over more than a year. He warned that Wafi’s major foreign investors may consider exiting and said he would not be able to help retain them.
Another executive complained that the Oil and Gas Regulatory Authority (Ogra) had been withholding over Rs66 billion in price differential claims (PDCs) arising from government decisions rather than operational issues, creating working capital challenges at a time when banks were also imposing higher foreign exchange charges than SBP rates.
The majority of industry representatives demanded that the pre-war pricing mechanism be restored, warning that the formula used in the June 19 pricing could erase profitability and even impact working capital.
Refinery representatives also protested the government’s decision to seek surrender of 2.5pc deemed duty, originally allocated for upgrade, despite contracts for upgrade not having been signed.
The petroleum minister told CEOs that the seven-day pricing mechanism would not be changed now. He said the prime minister had constituted a committee on petroleum pricing and that industry input would be considered during the consultative process. He added that complete pricing deregulation could not be implemented abruptly and would require a gradual shift, possibly from weekly to daily pricing.
