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ARTICLE: The government has decided to upgrade the standard of petrol sold in Pakistan from Euro-II to a higher quality Euro-V. All oil marketing companies (OMCs) operating in the country have been ordered to supply only Euro-V grade fuel. The shift from Euro II to Euro V petrol came into effect from August, whereas the diesel standard will be enforced from January 2021. After this, import of petroleum products below Euro-V specifications will not be allowed by any OMC.

The upgrade from Euro-II to Euro-V standards was necessary because Euro V fuel has considerably less sulfur content and produces lower emissions. This would ultimately reduce the negative impact on the environment. It is worth noting that Pakistan has already been trailing behind the rest of the world by at least twenty years in terms of adapting up-to-date emission standards since Euro-II has long been deemed an obsolete fuel standard. Today many markets have opted for Euro-VI and it is high time for Pakistan to do something to catch up with the rest of the world.

Pakistan meets 30% of its annual fuel requirement through domestic refineries and imports around 70% of its remaining fuel needs. According to the Oil Ministry's Petroleum Division, mixing of imported and locally produced grades by the refineries and OMCs may also be allowed as it would improve overall specifications and compliance of the product.

Hi-Octane 97 Euro V is now available at fuel stations in Pakistan. It is a fuel standard that helps in reducing harmful vehicle emissions, which further minimizes the impact on the environment, thus benefitting the ecosystem while improving engine performance.

RON means Research Octane Number. At most retail gasoline stations, three octane grades are on sale, 87 (regular), 89 (premium), and 91-93 (hi-octane). The higher the octane number, the more resistant the gasoline mixture is to engine knocking. This enables greater engine efficiency and higher performance.

The fact that Pakistan is trailing behind in terms of octane grades available in the country and is reflected in former Prime Minister Shahid Khaqan Abbasi's views which he expressed when he was the Petroleum Minister during the Nawaz Sharif government. He stated that Pakistan was using the lowest standard of fuels (RON 87) and there was an urgent need to improve the quality of the petroleum products being produced by the local refineries as well as the products that are imported by the OMCs.

The role played by smuggled sub-standard Iranian fuel has also depleted the standards of POL products sold in Pakistan. The government has been facing a considerable revenue leakage annually from illegal trading of petroleum products through the Pakistan-Iran border. This trade is increasing due to the US sanctions on Iran and high petroleum prices in Pakistan.

All this has negative implications on the national exchequer besides affecting the environment as well as performance of vehicles. This happens because no checks had been placed until now on the quality of fuel available. The smuggled fuel creates billions of losses for the country. It has also been concluded that fuel smuggling from Iran is one of the important factors that weakens Pakistan's standing with FATF.

It is necessary therefore to provide quality petroleum products (minimum Euro IV/V) to the Pakistani consumer. Recent developments in the Pakistani petroleum sector have led to leading OMCs and refineries to take steps in order to provide consumers with fuel that is at par with international quality and standards by the way of import arrangements from oil exporting companies like ADNOC (Abu Dhabi National Oil Co.) and Saudi Aramco, etc.

Despite this, the government has to contend with important factors that create problems such as deteriorating urban air quality, fuel smuggling, etc. Vehicle emission is also a serious public health and environmental issue in the country, particularly in urban areas. Vehicle emissions tend to be more concentrated in big cities like Karachi, Lahore, Peshawar, Quetta and Islamabad/Rawalpindi, where the number of vehicles is increasing at a rapid pace. Despite the fact that millions of vehicles are running on CNG, the rest are using gasoline and diesel. These include motorbikes, buses and trucks, etc.

The emission of air pollutants is directly related to fuel consumption. As stated, Pakistan's consumption of petroleum products is growing at an enormous rate. While almost half of this is consumed by the transport sector, other sectors include power, agriculture, domestic and government.

Currently, Pakistan has six refineries. They are contributing significantly towards meeting the country's petroleum needs by refining indigenous as well as imported crude oil.

Pakistan's oil sector is currently facing the challenge of sustained energy supplies which is of critical importance to a developing nation like Pakistan. The country's growth trajectory should be fully backed by a road map that ensures sustained supply of petroleum and related products so that the wheels of the economy keep turning and the projected growth targets are achieved.

The country's future development requires that policy-makers pay due attention to the setting up of deep-conversion refineries. They must take due cognizance of de-bottlenecking at existing ports. A network of cross-country pipelines must also be developed which must be geared to handle dual fuels. Matching oil depots and storages should be a part of such a network.

The development of Pakistan's oil sector in the coming years should be on a two-pronged basis: ensuring high octane grades in the fuel supplied and evolution of a viable fuel distribution system.

Copyright Business Recorder, 2020