The domestic production of high-speed diesel (HSD) and petrol could potentially go up by 60 per cent and 48pc, respectively, leading to a significant foreign exchange saving provided the local refineries operated at optimum capacity.
The oil import bill, particularly of refined petroleum products, has been the largest chunk of about 83pc increase in imports in the first five months (July to November) of the current fiscal year, causing unrest among the government’s ranks, as money and share markets nosedived with the start of this month.
Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin earlier this month reported that the biggest additional burden of $508 million, out of the total increase of $1.4bn in the November import bill, was on account of the petroleum group mainly because of higher prices.
He conceded that there were fault lines in the government policy, as local refineries operated at low capacity and refined products were being imported. “This should not have been happening. This is a fault line,” he said at a news conference.
The local refineries had been facing operational challenges because of lower furnace oil off-take by power producers despite their extremely low storages than contractually required and large import quantities of both petrol and diesel by oil marketing companies (OMCs). Strangely though, the Federal Board of Revenue’s customs policy member, Saeed Jadoon, told a parliamentary panel last week that imports of petroleum products were inelastic and could not be controlled.
Data collected from industry sources suggest that all the five local refineries are operating at sub-optimal capacity. The five refineries could together produce about 274,000 tonnes of petrol per month with optimum capacity utilisation but were operating about 170,000 tonnes per month, almost 60pc lower than capacity.
As such, refineries can produce about 3.3m tonnes of petrol per year but their cumulative production is estimated at about 2.05m, a deficit of 1.25m tonnes that has to be met through additional imports.
Likewise, the local refineries are producing a total of about 330,000 tonnes HSD per month, almost 48pc (or 160,000 tonnes) lower than their total monthly capacity of about 490,000 tonnes. Stretched over the year, the estimated local production works out to be 3.96m tonnes, about 1.92m tonnes lower than the optimum capacity of about 5.9m tonnes. The combined deficit production of petrol and HSD comes in at about 3.2m tonnes with an estimated cost of over $1.8bn per year.
