Petroleum sector needs positive signals: Hammad
ISLAMABAD: Minister for Energy, Hammad Azhar has raised his voice for the under-stress petroleum sector, saying the sector needs confidence and positive signals, well-informed sources told Business Recorder.
He shared these views with respect to the ongoing investigation of the FIA against the Oil Marketing Companies (OMCs) at a recent meeting of Cabinet Committee on Energy (CCoE) headed by Minister for Planning, Development and Special Initiatives, Asad Umar. The OMCs are facing action by the Federal Investigation Agency (FIA) for the petroleum crisis in 2020.
The CCoE was briefed by the FIA on the status update of inquiry/investigation report on the petroleum crisis.
FIA team stated that the action on the part of the Government led to a positive impact. Major oil companies like the M/s Shell and PSO have witnessed major growth in their sales. However, due to the stay orders sought by the OMCs, penal actions are still pending.
The Minister for Energy, Hammad Azhar, aware of petroleum companies’ woes and supply side problems, stated that there is a need to give positive signal and confidence to the sector.
“FIA should make an effort to ensure investor confidence,” he said. The FIA assured full cooperation in that regard.
CCoE noted the position presented by the FIA and directed the Ministry of Interior/FIA to present the report to the Federal Cabinet for consideration; and directed OGRA to submit report on the decision of CCoE of July 1, 2021 in the next meeting of CCoE for consideration. OGRA was advised to present the progress on its action items to the Federal Cabinet within 30 days.
The CCoE had directed Oil and Gas Regulatory Authority (OGRA) to cancel provisional licences of nearly three dozen OMCs for failing to meet the prescribed conditions.
Presently, a total of 66 OMCs are operating under licence, with top 8 OMCs holding 92% of the market share.
The sources said, nearly 36 OMCs that acquired licences but did not build storages as per the agreements and allegedly are trading only in Iranian diesel, are being issued final notice for closure.
However, those OMC which gave commitments to build infrastructure but showed very little progress have been given one year deadline to complete their infrastructure, otherwise their licences will also be scraped, the sources added.
In March this year, the Cabinet directed Petroleum Division to immediately initiate action against the aberrant OMCs and fuel stations as well as embark upon the necessary administrative and legal reforms, in light of the recommendations of the Petroleum Commission’s report.
The Cabinet took the following decisions: (i) necessary action against OMCs and fuel stations be initiated by the relevant entities; (ii) requisite administrative measures be taken; and (iii) legal reforms / amendments in laws/ rules/ procedures be initiated and placed before the CCLC.
The Inquiry Commission, headed by Additional Director General Abubakar Khudabakhsh, in its report maintained that MoEPD-OGRA have the power to inspect minimum stocks of 20 days by OMCs. The decision on import embargo was controversial.
The Commission which conducted the inquiry on the petrol crisis in 2020 had recommended that controversial holding of PRMs, non-observance of import quotas by OMCs, inaction on deficient stocks of OMCs, intrusive involvement of OCAC and non-lifting of local refined products by OMCs from refineries. And suggested punitive/departmental action should be taken against the delinquent officers/ officials. It further recommended formulation of new oil rules. Reliable data collection and analysis mechanism as well as appointment of professional and qualified individuals was recommended.
The Inquiry Commission contended that unlawful operations of private storage companies, unlawful joint ventures and hospitalities among OMCs, non-adherence to import and local quota allocated to OMCs in Product Review Meetings (PRMs) are some of the reasons for the petrol crisis. The Commission stated that silence of OGRA on specifying minimum stocks on development of strategic storage, illegal provisional marketing licences to OMCs were also key factors behind the crisis. The Commission had recommended punitive/ department action against officials/ officers and termination of some officials. A few officials of OGRA and Petroleum Division dealing with oil sector have already been arrested.
The Commission had observed violation of licencing conditions, maneuvering of vessels berthing at ports and non-maintenance of 20 days stocks by the OMCs as other contributory factors to the crisis.
The Committee proved that OMCs are involved in underutilizing the import quota, importing petrol in excess of storage capacity, importing petrol despite no retail outlets, disregard for safety protocols, and unlawful interrelated interest of Vitol with different OMCs. The Commission recommended recovery of monetary liabilities, equitable distribution of loss borne by PSO among delinquent OMCs, revitalization of the role of DCs to inspect the stock of OMCs and cancellation of provisional marketing licences and development of strategic storage.
The Commission has also recommended that all illegal outlets be closed, in addition to punitive action against retail outlets selling smuggled or adulterated products.
Other recommendations of the Commission were as follows: (i) maintenance of oil piers; (ii) halting of unlawful usage of storage through MoEPD; (iii) construction of pipeline from Keamari to FOTCO, Port Qasim; (iv) elimination of the role of OCAC in berthing, PRMs, IFEMs, data collection and determination of import quotas of OMCs; (iv) compulsory testing of both refined and crude oil; (v) advanced testing methods; (vi) fuel marketing methods for quantification smuggled refined products; (vi) Shell model to be implemented in transportation; (vii) digitization of OMCs, retail outlets and linkage with MoWPD; and (viii) automated gauging system.—MUSHTAQ GHUMMAN
