GHQ stresses need for sufficient safe POL strategic reserves


By Ahmad Jawad

Army knows the strategic needs of oil reserves, but Civil democratic Govt is as incompetent as always to realise dynamics of survival in case of crisis.

The GHQ, mindful of a national strategic oil storage policy, has warned in plain words that new oil depots at Machikay, Sheikhupura, are feared to become easy target for not only hostile enemy air action, but also for sabotage by anti-state elements. This has come to the fore from official correspondence between the Ministry of Defence (MoD), Ministry of Petroleum and Natural Resources (MoPNR) and Oil and Gas Regulatory Authority (Ogra).

The MoD has instead asked the authorities concerned in MoPNR to develop the infrastructure for fuel storage atother locations across the country including along with the intended routes of Pak-China Economic Corridor (CPEC).

Most of the oil marketing companies (OMCs) have built up their commercial storage facilities within the same location due to which the said area can become lucrative target of not only enemy air action, but also for sabotage by anti-state elements, says the observation of Ministry of Defence.

It also mentions that the oil marketing companies are also inclined to develop their new oil storages at Machikay, making the site more vulnerable, because of close proximity with Indian border, just 55 kilometres away.

The MoD also highlighted its viewpoint saying the dispersal of strategic assets and the safety and security of nearby population is fundamental. In the official interaction Ogra has endorsed the observations of MoD saying they are realistic as many oil marketing companies have their oil depots at Machikay, creating a vulnerable POL cluster. However, on the other hand, it is also a fact that OMCs prefer to build their oil storages at Machikay to avail diesel easily through pipeline head of Mehmoodkot-Faisalabad-Machikay (MFM) pipeline. The Ministry of Defence also suggests that other locations should also be included in IFEM (Internal Freight Equalisation Margin) model or incentives may be given to other perspective investors or new OMCs to build the storages at other locations.

The MoPNR is of the view that Machikay has been developed in to a major POL installations area dues to MFP pipeline head as well as being in close proximity of major POL demand areas such as Lahore and its outskirts which are the incentives for few OMCs to develop their storages at Machikay. The ministry also mentions that apart from Machikay, there are 21 other depots built on IFEM model spread across the country. However, the ministry acknowledges the fact that MFM pipeline head at Machikay is of the highest strategic value as compared to OMCs installations as it carries the product from PARCO (Pak-Arab Refinery) to Machikay for up country oil consumption.

However, MoPNR knowing the fact that Pakistan still owns no policy on strategic fuel stocks has sent a summary to Ministry of Finance seeking the approval of financing for building strategic stock by PSO for armed forces across the country.

Earlier, The News printed the story n its edition of June 9, 2016, based on official input of OCAC (oil companies’ advisory council) to GHQ revealing that Pakistan still has no national strategic oil stock policy in the country even after the lapse of 69 years.

According to the documents shared with GHQ strategic reserves are permanently held in case of war. The said fuel stocks also provide safeguard against the internal impediments such as flood and disasters, refineries’ outages, truckers strike or occasional pipeline break downs, the strategic reserves are used in the country.

The strategic fuel reserves are separate from the commercial stocks but these can be utilised by oil industry in times of need. However, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi says that the existing commercial stocks will be available as strategic stock in case of war like situation. He said that the strategic fuel build-up requires strong economic muscle. To a question the minister said that all oil marketing companies are required to build their stock for 21 days, but Ogra being the regulator has miserably failed to get the commercial stock maintained for 21 days as has been mentioned in the licence of OMCs. Currently under the rules, all the oil marketing companies need to maintain commercial fuel storages up to 21 days, but they are managing commercial for up to 11 – 13 days maximum which is very alarming development in the given scenario.

Globally the strategic reserves vary as per government policy. EU member states maintain stocks for 90 days, Netherlands also 90 days while UK keeps stocks for 67.5 days of net consumption where the OMCs manage strategic storage.

However, responsibility and ownership for maintaining strategic stocks rests with the governments, with the industry cooperating in the implementation of the policy. In all the International Models, the cost of strategic storage is recovered as a charge or levy passed on to the end-consumer on all inland sales.

Pakistan badly needs to upgrade oil stocks capacity up to 45 days at least. The Forces are already in the intensive fight with deadliest spate of terrorism under the Zarb-e-Azab operation in various pockets of the country, a senior official said while quoting the recommendation of Forces.

In its correspondence Ogra has also asked the MoPNR to thrash out the plan for increasing the fuel storage capacity of the country. The relevant officials in the ministry also confirmed the development saying the ministry has started shaping up the plan to increase the country fuel storage capacity to 45 days.