By SKM
April 25, 2025
ISLAMABAD: The Petroleum division has decided to resolve the issues creating hurdles in the provision of crude oil of 5000 barrels per day from the southern oilfield to Attock Refinery Limited. However, the Petroleum Division, to this effect, sent a summary to the ECC which could not take up this item in its Tuesday meeting. Now ECC will take up this issue in its next meeting.
As per the summary, the government is likely to set Attock Refinery Limited’s freight charges at Rs 1,490 per barrel for transportation of condensate (crude oil) from Naimat field in Sindh to ARL, Rawalpindi.
Attock Refinery Limited (ARL) earlier asked to ensure the availability of crude oil 5000 barrels per day (BPD) from Nimat field, a southern oilfield of United Energy Pakistan (UEP) which is already allocated to it and approved by ECC in February 2024 for more production of high speed diesel (HSD) and Jet fuel (JP-18) to cater to needs of Armed Forces.
DG Oil on behalf of the Federal government wrote a letter on April 23 directing the refineries to produce more high speed diesel for troops’ mobilization and JP-18 for Pakistan Air Force. In response to the DG oil letter dated April 23, 2025, the ARL management drew the attention of the decision-makers in its letter written on Friday (April 25, 2025) to DG Oil asking for approval of freight rates of crude oil 5000 barrels per day (BPD) from Nimat field to refinery at the earliest so that ARL could maintain the optimum production of HSD and JP-18.
ARL management says as per the letter that the crude oil production from Northern oilfields of the country has plummeted significantly and has reached a level of around 39000 BPD prompting the management to operate the refinery at a lower throughput against the installed capacity to refine crude oil of 53,400 BPD.
The letter reveals that ARL approached the Petroleum Division in May 2022 asking for allocation of crude oil of 5000 BPD of UEP Nimat Field currently being exported which was approved by ECC in February 2024 including its freight reimbursement through country IFEM ( Inland Freight Equalization Margin) being more beneficial to the national freight economics. However, this decision could not be implemented due to delay in its approval.
ARL again submitted the revised freight rate for the movement of southern crude oil in September 2024 as per PPRA rules and is still waiting for its approval. In view of the acute shortage of crude oil in our region and considering the margining security situation, it is all the more important that the revised freight rates for already allocated volumes of southern crude oil for processing at ARL is approved on urgent basis enabling the management to operate refinery at optimum level to cater for enhanced requirements of JP-8 and HSD.
According to the Petroleum Division, the freight rate was acquired by ARL by inviting bids from the leading transporters whereby National Logistic Cell (NLC) remained as the most competitive meaning offering 1,143.95 per barrel transport of crude oil to ARL from United Energy Limited’s Naimat Facility in Sindh. The decisions were conveyed to Oil and Gas Regulatory Authority (OGRA) and ARL for implementation. However, ARL has now conveyed that NLC declined to validate the offered rate of Rs. 1,143.95 per barrel due to massive changes in the market dynamics and thus proposed a new rate i.e., Rs 3,000 per barrel. Consequently, the second lowest bidder i.e., M/s Rawal Logistics was offered to match the approved rate, however, they also expressed their inability to comply and proposed Rs. 1,700 per barrel.
Resultantly ARL was advised to carry out fresh competitive bidding. Result of the fresh bidding, whereby M/s Pakistan Tankers Company remained most competitive and quoted freight rate of Rs. 1,490 per barrel based on the HSD prices effective from August 16, 2024 subject to increase/ decrease by 3.5 percent with the fluctuation of diesel price by 10 percent.
The comparison shared with the Petroleum Division indicates that there will be a net freight cost saving of around Rs 110.97 million per month obtained on account of reduction of transportation cost of petroleum products.
In view of the forgoing, the previous ECC decision may be revised (i) 5,000 BPD condensate may be reallocated to ARL from UEPL’s Naimat Facility ;(ii) freight charges of the above condensate supplies will be Rs 1,490 per barrel, which may be increased or decreased by 3.5 % in case of 10 % increase or decrease in the ex-depot sale price of HSD effective from August 16, 2024 ; and (iii) out of the above freight charges, the applicable transportation charges/rate being paid by UEPL for transportation of condensate from Naimat Facility to the nearest refinery will be deducted to arrive at net freight which will be paid to ARL through the IFEM mechanism by OGRA. Ends
