ISLAMABAD - Islamabad Policy Institute (IPI) on Wednesday called for a new and complete ‘downstream petroleum policy’ saying the current one was outdated and must address all four segments of the Downstream Oil Sector, not just refining.
IPI, a think tank specializing in energy security issues, welcomed the government’s plans for introducing a new policy on refining sector and incentivizing new refineries and upgradation of old ones.
However, it said that the rest of the sector was being ignored despite its significant role in the fuel supply chain.
It must be realized that the oil marketing, storage, transportation, refining are the four wheels of the same vehicle that must work in tandem to ensure petroleum supplies to the Pakistani consumer as well as to the Armed Forces. An impact on any one of them has a direct impact on the other three.
Pakistan imports 70% of its petrol needs and 50% of its HSD requirement. The remaining domestic requirement is catered for by the five existing refineries of the country. In terms of sheer volume (of investment as well as tonnage), the downstream sector comprising marketing, storage, and transportation has a bigger share in the petroleum industry than the refining sector.
“Our current Downstream Petroleum Policy is not suited to the sector’s current dynamics,” IPI Distinguished Fellow on Energy Sector Dr Ilyas Fazil said at a discussion hosted by the think tank on petroleum policy.
The expert said Downstream Sector was subjected to the outdated 1997 Petroleum Policy despite the sector undergoing a sea-change in its dynamics since the introduction of the policy some 24 years ago.
“Whilst in 1997, there were five refineries and there are the same five now, the story with regard to oil marketing is a real eye opener: as against a handful (three to be exact) the present OMCs number 66 (35 allowed marketing and the remainder in various stages of license approvals),” he stated.
“The Downstream Petroleum Policy in its present form falls way short vis-à-vis ground realities and challenges. All revisions in Petroleum Policy since 1997 have addressed the Upstream Sector (exploration and production) only, while totally ignoring the Midstream/Downstream Sector,” he added.
Dr Fazil suggested that a new policy on Downstream Sector should attract private sector investment; be practical, viable and sustainable; address the short, medium and long-term challenges; ‘sweat’ existing assets to their fullest; strengthen the regulatory framework; ensure consistency of policy; contain a road map to deregulation; and have a plan for product specification improvements.
The expert also proposed that the new policy should have policy guidelines and framework to be in place for the energy mix on a long-term horizon; provide for annual revision of OMC margins on the basis of CPI/inflation; provide a level playing field for all players; revise criteria for new and existing OMCs; and introduce Anti-Adulteration Law.
Dr Fazil recalled that a draft of the Downstream Petroleum Policy was finalized in ‘2017 with inputs from all stakeholders, but no progress was made thereafter. “Inputs from ALL stakeholders not just the Refineries must be sought even now,” he emphasized.
“The MOE-PD is, therefore, once again requested to finalize all the procedural work related to Petroleum Policy 2021 based on the Document already prepared and to take it to the relevant Authority for implementation, after consulting all stakeholders and not just the refineries,” he further said.