ISLAMABAD  - The Ministry of Petroleum and Natural Resources while setting aside the recommendations of Oil and Gas Regulatory Authority (Ogra) is all out to reopen those six abandoned oil depots, which were earlier closed due to alleged dumping of petroleum products (POL).

Official sources at petroleum ministry told TheNation on the condition of anonymity that Oil and Gas Regulatory Authority (Ogra) has declined to endorse the plea of petroleum ministry, seeking re-opening of those six abandoned POL depots under IFEM (inland freight equalisation margin) located in different parts of the country.

They said Ogra’s opposition on the above said matter is also because of OMC’s failing to establish required storage despite repeated warnings by the concerned departments and taking no concrete step towards fulfilling due responsibilities with regard to maintain uninterrupted POL supplies in the country. However, a final decision in this regard is likely to be taken by the ECC.

“Re-opening of those oil depots under IFEM is not an easy job since it has become a controversial matter due to the alleged dumping of POL products and misuse of IFEM as well,” said an official source at petroleum ministry.

Interestingly, the Ministry of Petroleum and Natural Resources in a summary sent to the federal cabinet’s ECC sought approval to reopening of the abandoned oil depots. The ministry was of the stand that because of undue delay by the oil marketing companies (OMCs) in developing petroleum products (POL) depots and a 21-per cent increase in the demand of petrol during last two years has raised the need to reopen the abandoned one depot under IFEM. Petrol demand has risen mainly due to reduced availability of natural gas to CNG filling stations and use of petrol in generators.

The six abounded oil depots almost set to re-open are Daulatpur (Sindh), Khuzdar (Balochistan), Sangi (Sindh), Habibabad (located near Okara in Punjab), Kundian (Mianwali-Punjab) and Sereai Naurang (located near Bannu district in Khyber Pakhtunkhwa).

Daulatpur depot has a 7,550-tonne capacity of storage of POL products where high speed diesel (HSD) can be stored by 6,600 tonnes, motor spirit (MS) by 950 tonnes. Khuzdar depot has a total of 2,040-tonne reserve capacity where HSD and kerosene can be stored by 1,600 tonnes and 380 tonnes, respectively.

With a total 6,095-tonne oil storage capacity, Sangi depot can store HSD (4,450 tonnes), MS (465 tonnes), kerosene (1,000 tonnes) and LDO (180 tonnes).

The fourth proposed oil depot, Habibabad, can store a total of 7,485 tonnes of POL products, including HSD (3,765 tonnes), MS (205 tonnes), kerosene (1,660 tonnes), LDO (1,855 tonnes).

Kundian depot has a capacity of 1,866 tonnes and can store HSD (701 tonnes), MS (94 tonnes) and kerosene (663 tonnes).

Sereai Naurang oil depot has a capacity of 1,261 tonnes. It can store HSD (343 tonnes), MS (247 tonnes) and kerosene (671 tonnes).

Earlier, Ogra in its response to the petroleum ministry’s plea seeking resumption of POL supplies at six oil depots has asked proper study pertaining to POL demands/ supply and its financial impact etc needs to be carried out, rather adding on OMC’s (oil marketing companies) proposed depots.

According to Ogra letter already dispatched to the ministry of petroleum & natural resources (MPNR) on August 16, 2013, “It is proposed that an independent, POL demand/ supply cost and benefit analysis study should be carried out by MPNR/ federal government to determine the optimum numbers of depots/ storages, before policy decision to open new depots under IFEM (inland freight equalisation margin) is taken.”

Besides, Ogra also proposed that PSO’s proposed 1,961MT Mogas storage capacity under review, in addition to IFEM based depots, is insufficient to meet country’s demand of Mogas. PSO  may, therefore, be directed to increase Mogas capacity at existing storages. The other OMCs may also be directed to expedite establishment of storages to ensure smooth supply of Mogas and high-speed diesel (HSD).

According to Petroleum Ministry’s summary dispatched to the ECC, “It is proposed that six abandoned oil depots may be re-opened under the IFEM. All OMCs will be entitled to avail the IFEM from these locations as and when they develop their depots at these locations.”

“In the meantime, PSO will supply products to the OMCs who have no storage at these areas/ localities on commercial basis and mutually agreed terms and conditions for two years to avoid dry-out of retail outlets already developed by these OMCs. Ogra will monitor the movement of products as per their Rules.”

Seeking the ECC’s nod, the petroleum ministry also advocated that by opening of the six depots, 26,000 tonnes of storage capacity would be available in the system with PSO and Shell Pakistan Limited. Other OMCs have to develop their own depots at the said locations to maintain stocks, it said.

“This will lead to increases availability of POL products and Petrol/ High Speed Diesel days cover will also improve. Also, shortage of petrol will be overcome.

As per Oil Company Advisory Committee (OCAC), the cost impact on the IFEM is Re0.10 per litre on HSD and Re0.04 per litre on petrol on IFEM depots, which is meagre amount with reference to existing IFEM rates,” the ministry said.

Official sources also told that at present, POL requirement in the country is about 21 million tonnes. And, Ogra has introduced physical verification system at various locations to curb dumping, etc because of severe shortage in the Central/ Southern Punjab during 2010 floods. Four depots located at Faqirabad, Kotla Jam, Sahiwal and Shershah were restored with the approval of the ECC.