Criticality of fuel reserves

Pakistan's oil reserves have fallen below strategic levels due to lack of storage capacity; and, more disturbingly, it has been reported in a section of the media that there are a total of 51 pending applications from six oil marketing companies (OMCs) seeking to build upon their existing storage capacity. The bottleneck, according to reports, is the Ministry of Defense (MOD) and not the Ministry of Petroleum and Natural Resources as the latter has been requesting the MOD to issue the no-objection certificate (NOC) that is required prior to further processing of these applications. Ironically, though the MOD has also been urging those concerned to increase supplies to strengthen the country's strategic reserves.

Building oil related installations rightly requires MOD's NOC given that our oil reserves have security implications as was evident during the 1971 war when India blockaded our oil imports. It is therefore imperative to ascertain the reason behind the delay in granting NOC by the MOD and determine whether it is due diligence that is taking time (which appears unlikely as it would imply security concerns relating to all the 51 applications) or whether it can be attributed to bureaucratic red-tapism. There is no doubt that the need to enhance storage capacity is assuming critical importance and one would hope that the MOD conducts due diligence of all pending applications as soon as possible. Reports indicate that even if the Ministry grants the NOC today it would take one full year or more for the storage capacity to be built.

In addition, there is the issue of pipeline and port congestion that is compromising the government's capacity to maintain strategic oil reserves. In this context, it is relevant to note that Pak Arab Pipeline Company, a subsidiary of Pak Arab Refinery, has complained that "white oil pipeline system (WOP) was choked and the OMCs were using it as a storage system. WOP is a transportation and not a storage system." At the same time, port congestion has also been cited as a factor in the fall of strategic reserves, for example, on 12th October 2015 vessels were waiting for berths to offload their cargo. However, Oil Companies' Advisory Council managing director Fazil while dismissing these charges maintained that higher demand of petrol and diesel account for the fall in strategic reserves and space constraints are limited to a short period, no more than a day or two. Even if this is the case there is a need to strengthen our storage capacity as the country is heavily dependent on crude oil imports to not only sustain its productive capacity but also to keep the wheels of life moving.

It is unfortunate that delays in processing/final approval of critical policies/applications attributed to delays associated with the approving authority are commonplace in Pakistan. Take the case of the export package that was painstakingly formulated through consultations between all the stakeholders and it has still not been announced because the file is pending with the Prime Minister who, it has been reported, would announce the package but whose other responsibilities/engagements preclude prompt announcement and therefore implementation. Meanwhile, our exports continue to decline and have become a major source of concern to independent economists as foreign exchange earnings decline and reserves have to be shored up with borrowing.

To conclude, there is a need for the relevant ministries/departments to speed up the process of dealing with applications/policies and one would hope that instead of waiting for some time from the Prime Minister's understandably busy schedule, the relevant minister is empowered to make the announcement.