Raziuddin Razi
Pakistani customers faced yet another crisis in June 2020; perhaps a sequel of January 2015. Petrol was not available at the petrol pumps while the poor ran from pillar to post. Shortage of petrol in our contemporary times, where we have tools such as real-time monitoring and estimations, seems like fiction, but unfortunately it was not unreal. Also, this sort of fuel shortage to happen in the times of history, when the prices were below the rock bottom, is also unprecedented. The system may have rotted so much that DG Oil had imposed a ban on imports of petrol when (on April 29, 2020) in the international market it was FOB $56.305 per Metric Ton ($56.305 per MT /8.548 Barrels per MT = $ 6.59 per Barrels or $ 6.59/158.984 liters per barrel i.e. $ 0.0414 per liter. Converted in Pakistani currency its amounts to at PKR 161.63/$ would be $0.0414 x 161.63 = PKR 6.696/liter.)
Pakistan Oil Marketing Companies (OMCs) missed the boat. When (24 March to 12-May) rest of the world was stocking up crude oil, petrol, diesel and furnace oil, our people in power corridors were totally out of synch with the ground realities. China stocked up 73 million barrels of crude oil, India 27 million barrels of oil but we had ban, although Pakistan had empty tanks. Only ZOT/PSO could have held 8.5 million liters of petrol. Pak OMC could have purchased at even Rs 7/liter.
Irony is not when anyone miscalculates because perhaps, we don’t have the skills or make an honest mistake; irony is when we don’t have the moral courage to accept the truth. DG Oil Office should have accepted its mistake and higher ups should have moved ahead with new strategy and fill the voids of slackness or may be deceit. It is amazing to note that Oil and Gas Regulatory Authority (OGRA) deleted data from November 2019 to May 2020 from its website to avoid forensic, but the data is retrievable. It needs to be known to the public, public representatives and judiciary that on whose behest was crucial data removed from the website. Visit http://www.ogra.org.pk/detail-computation-ex-depot-sale-price
The international situation was such that the experts in oil and gas knew what is coming in next few months, but the experts were plainly ‘left-out’, while the all-knowing DMGs were in the saddle. With the tug of war situation between Saudi Arabia and Russia on cutting oil prices and activities of OPEC, it became evident that the world is in for rock bottom oil prices. Then in December 2019 COVID-19 surfaced. The experts were able to predict in January 2020 that there will be a massive pressure on supply and demand and its necessary to prepare for it. Pakistan is going to be no different. The oil and gas publications read that countries are out there to bargain prices. DG Oil held a few meetings with OCAC in which the matter of stocking up was discussed, only to a ban on March 25, 2020. DG Oil was not ready to accept the reality of life since he had not experience about this. DG Oil position is always held by technical professionals with loaded experience and who has worked in DG Oil office or Policy Wing for decades not months.
DG Oil’s office is at the top in rules of business, when it comes to supervising and controlling oil supply, demand and production on a daily basis. It receives information on a daily basis and communicates with companies daily. It makes make all the decisions. DG Oil office work is not very complex. Simple math is required to calculate supply and demand. If the experts had been consulted and product review meetings held, chaired by DG Oil – who would listen like the predecessors, then such fiasco could have been easily avoided, rather country would have benefitted with low prices. Moreover, Energy Review Group meetings had not taken for 20 years, another sad story.
Previously, DG Oil used to be a homegrown officer who would rise from the bottom and know the workings of each operation. But since the new DG Oil is inexperienced, he was unable to make a timely decision due to which the entire country is suffering. The Minister of Energy and SAPM Petroleum must accept their fault that it was with their approval that an inexperience DG Oil was appointed. In fact, the previous DG Oil was also an inexperienced person installed only on the basis on nepotism, merely for perks on retirement. Government needs to appoint the right man for the right job. It was a mistake to appoint DG Oil with no experience. Rules of business allows the DG to take major decisions. He had made the decision of banning oil on March 25.
This isn’t a win or lose situation for anyone other than the country because of its impact on our economy. In this whole scenario from March to June 2020, Pakistan State Oil (PSO) is the main beneficiary. It gained profits and market share. Other companies have lost market share. For OMC market share is the most important matter they thrive on. DG Oil needs to publish all letters to and from OCAC, OGRA and OMCs. It needs to make public all the minutes of the Product Review meetings. It needs to publish weekly marketing share from January to June, 2020.
International sellers had become aware that Pakistan has banned petrol imports; therefore, they had removed Pakistan from list of suppliers. Importing petrol is not as simple as going to the market and purchasing. Due to ban, the contracts were breached, ships were returned and delayed. The ban meant Pakistan is out of the market for 4 to 5 months.
The Parliament also needs to look at the situation of furnace oil. Karachi is suffering from load shedding because PSO did not purchase Furnace Oil at the correct time and the Cabinet delayed its decision. A question arises that why Cabinet has to micro-manage furnace oil imports. The load shedding in Karachi is only and only due to delay by PSO and Cabinet.
The situation is similar in DGPC (Petroleum Concession) and a debacle is bound to happen there, as well which will affect indigenous production of oil and gas. Instead of a professional technocrat the Government has appointed a DMG as DG PC. Previous DGPC, Mr. Imran, who delayed some files, which was not a matter of corruption, was removed on a conspiracy theory that delay meant making money.. It is strongly urged that DG Oil, DG Gas, DG PC, DG LG should all immediately be appointed with relevant expertise otherwise, PM Khan may face another embarrassment.
The Energy Task force, chaired by Mr. Nadeem Babar should create a future plan and revise rules of business. Another Committee has been created under Shehzad Qasim, which will not able to find anything new other than the ban as the only cause. Therefore, we must realize that nothing will come out of such investigations. Only a futuristic plan will be beneficial for the country. We should create a 12th Five Year Plan and a vision instead of having unnecessary discussions, investigations and wasting Cabinet’s time.
Mr. Raziuddin Razi is CEO of Razi Energy Company (Pvt) Ltd & Director Petroleum Institute of Pakistan
