Ogra Directs Oil Firms to Maintain 20-Day Fuel Stocks Amid Regional Tensions

In response to escalating tensions in the Gulf, stemming from the recent Israeli attack on Iran, the Oil and Gas Regulatory Authority (Ogra) of Pakistan has mandated that all oil marketing companies (OMCs) maintain a minimum of 20 days' worth of fuel stocks. This directive comes as a precautionary measure to ensure the uninterrupted supply of petroleum products during a potentially volatile period. According to Ogra, compliance with this regulation is critical for safeguarding national energy security and maintaining market stability.

Ogra's announcement highlights the necessity for vigilance among OMCs, particularly in light of current geopolitical uncertainties. The authority reminded the 19 registered OMCs in Pakistan, including major players like Pakistan State Oil (PSO) and the Saudi joint venture GO, to adhere to the stock requirements established under Rule 37 of the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules 2016. Notably, only PSO and GO are currently fulfilling this obligation, raising concerns about the preparedness of other firms amidst heightened risks.

The national consumption of petrol and diesel is projected to reach approximately 1.5 million tonnes each in June, with similar trends expected into July. An Ogra spokesperson confirmed that the country possesses sufficient petroleum stocks to meet immediate demand; however, the authority stressed the importance of maintaining the required stock levels to prepare for unforeseen disruptions.

In response to the ongoing crisis, Prime Minister Shehbaz Sharif has established a high-level committee aimed at monitoring fuel prices and supply chains. This committee, chaired by the finance minister, includes representatives from critical federal ministries and regulatory bodies, as well as energy sector experts. The first meeting of this committee has already taken place, with further discussions anticipated in the coming week.

To bolster reserves, the Petroleum Division has proposed utilizing storage facilities at several inactive power plants, which can accommodate up to one million tonnes of furnace oil. Industry insiders from the Oil Companies Advisory Committee (OCAC) have indicated that alternative arrangements are being explored to secure oil supplies should the conflict between Iran and Israel escalate. These arrangements may involve rerouting oil imports from Saudi Arabia and the United Arab Emirates (UAE) if the strategically significant Strait of Hormuz is closed. This waterway currently facilitates over 20% of global crude oil shipments, and any disruptions could have far-reaching implications for global oil markets, including Pakistan’s.

The Institute of Cost and Management Accountants of Pakistan (ICMAP) recently published a report assessing the potential economic fallout from the Iran-Israel conflict. The report commended the government's proactive measures while cautioning that the crisis's indirect economic impacts are already reverberating through global energy and trade markets. Given Pakistan's reliance on imported fuel, ICMAP highlighted the significant risks posed by potential disruptions in the Strait of Hormuz, predicting that oil prices could surge to between $100 and $130 per barrel. Such an increase would substantially elevate Pakistan’s energy import bill, raise power generation costs, and accelerate inflation, particularly affecting diesel prices, which could rise by over 30%.

To mitigate these risks, ICMAP has recommended increasing strategic petroleum reserves to at least 90 days of national demand, with financing options including sovereign sukuk to enhance energy security. Furthermore, the institute suggested diversifying oil procurement strategies and implementing Shariah-compliant oil price hedging instruments to manage exposure to international price fluctuations. Additionally, it urged the government to reverse recent taxes on solar panel imports and expedite the rollout of the 10,000MW Solar Initiative to promote clean energy and long-term energy resilience.

In conclusion, as tensions in the Middle East continue to evolve, the importance of strategic planning and preparedness within Pakistan's oil sector is paramount. The government's measures, including the establishment of a dedicated committee and the push for increased fuel stockpiles, reflect an understanding of the precarious nature of global energy markets and the need for proactive strategies to safeguard the nation's energy security.