KARACHI: Pakistan lifted a month-long moratorium on Friday, allowing the import of petroleum products following a spike in demand for the commodities due to the ongoing wheat harvesting season which began in the third week of March.
“To cater to the rising demand of petroleum products in the country, smooth operation of the refineries is required and, therefore, the refinery may import crude oil as per their requirements,” the Ministry of Energy (MoE) said in a letter sent to the Oil Companies Advisory Council (OCAC) on Friday.
As an additional measure, the ministry has also allowed oil marketing companies to import petrol and high-speed diesel to meet the demand.
“High demand for motor gasoline and high-speed diesel has been witnessed since April 1, 2020, which is due to the progressing harvesting season across the country,” excerpts from the statement read.
Several refineries, which were closed down due to a significant drop in petroleum demand due to the ongoing COVID-19 lockdown, resumed operations on April 23.
“The high stocks have started reducing because the diesel demand has increased due to harvesting,” Aftab Hussain, member of the Pakistan Refinery’s board of directors, told Arab News.
Currently, the stock left with the refineries consists of oil which was imported on higher prices, before the fall in prices in the global market in March.
The refiners expect that the consumer price for May would be lower and they would suffer losses.
“As such we don’t see any improvement for refineries on their (profit) margins,” Hussain added.
Pakistan is expected to benefit from the low oil price regime with a reduced import bill which has already witnessed a drastic decline of 39 percent from February leading up to March.
“The prices are at their lower side, and the import will not have a substantial impact on the bill,” Samiullah Tariq, Director Research at Arif Habib Limited, told Arab News on Sunday.
“Pakistan can secure future supplies by hedging the product at the current low prices. Even if we buy about 50 percent of our requirements through future contracts it would be beneficial for Pakistan,” he added.
However, experts say the country is not in a position to take advantage of any long-term benefits of the lower price regime in the absence of strategic storage capacity.
“I have been consistently pressing for the need of strategic reserves in the public sector that could have been utilized in the situation, such as the present one. The stocks would have allowed the government to purchase at lower prices and release to the refineries when prices in the global market go up,” Dr. Nazar Abbas Zaidi, former Secretary of OCAC told Arab News.
Pakistan has a storage capacity of up 21 days requirement in the private sector “that could be utilized for the commercial sector as well,” Dr. Zaidi said adding the “strategic storage to accommodate 1.3 million barrels could be easily built within two years”.
Pakistan imports 70 percent of its crude oil from Saudi Arabia while the rest is sourced from Abu Dhabi, UAE.
The South Asian country, which suffers from a massive balance of payment crisis, has imported $14.4 billion worth of oil mainly from Saudi Arabia and UAE in the last fiscal year.
The imports during the July-March period of the current fiscal year has witnessed a decline of 16 percent to $8.9 billion when compared to the same period last year.