COMMENT: Petroleum products’ price hike —Sheikh Muhammad Iqbal - Monday, May 02, 2011

Source :\05\02\story_2-5-2011_pg3_4

The prices of light sweet crude oils namely Brent, West Texas Intermediate, Ninian crude oil are quoted, whereas neither these crudes are imported nor are refined in any of the refineries of Pakistan

The recent rise in petroleum products prices is quite unjustifiable and is contrary to facts and speaks volumes of ignorance of the government of Pakistan. Even the prime minister states that he has no idea how to reduce petroleum prices in the wake of rise of crude oil and petroleum products prices worldwide.

The entire parliament including the concerned ministry and its appointed stewards have totally failed to suggest ways and means to reduce the prices of petroleum products. This speaks volumes about their ignorance and incompetence. Those who are not in power are frequently seen in the print and electronic media calling for mid-term elections or intervention of non-democratic forces. This has greatly disturbed the common masses.

Agitations/strikes have further disturbed the economy of Pakistan. It is high time for each and every educated professional citizen of Pakistan to suggest ways and means to streamline the economy and provide relief to the ordinary citizens of Pakistan rather than provoking them to agitate thereby providing ample grounds to non-democratic elements to make their way to the corridors of power.

Fuel prices are fundamentally responsible for exorbitant and unbearable rise in prices of all commodities, transport, etc. In this context, I suggest the following for the immediate consideration of the government.

The prices of light sweet crude oils namely Brent, West Texas Intermediate, Ninian crude oil are quoted, whereas neither these crudes are imported nor are refined in any of the refineries of Pakistan. The price of light sweet crudes is considered as a benchmark for fixation of other heavy/light sour crude oils that are imported by Pakistan.

Pakistan imports heavy/light Arabian crude from Saudi Arabia and crudes from the Gulf states and Iran. Large quantities of crude oils used by Pakistani refineries are also available from Malaysia, Indonesia, Nigeria and other countries. A comparative analysis of the crude properties such as its viscosity, specific gravity, yield, sulphur, carbon and other contents including its calorific value is to be made by the stewards appointed by the government. The government should review such analytical reports each month and obtain crude oils from the cheapest source.

The number of rig counts for oil exploration is not a measure of performance and success. The rigs having no oil are termed as ‘dry hole’. Even if oil is found in small proportions and considered uneconomical, such a hole is also termed as ‘dry hole’. Extracting oil from such a rig causes loss of millions of rupees in operations cost, the burden of which is once again passed on to the end users. The stewards actually do not pump carbon dioxides in oil wells thus optimum productivity of oil is lost.

Some three years back the government declared that crude obtained in Pakistan was 3.2 million tons. Do we have enough capacity for its use/storage? If not, then why hundreds of rigs are excavated each year. Probe should me made regarding the quantity of crude loaded from the bunkering ports, the quantity of crude discharged at ports in Pakistan and the wharfage charges by the port authorities, and finally the quantity of crude received at the refineries. Startling facts of corruption and theft shall be revealed. The government must take appropriate steps to streamline affairs.

The government must ensure that all its refineries operate on their optimum refining capacity of 12.6 million tons. A number of petroleum products are obtained in the refinery, namely gasoline, diesel, kerosene, lube base oils, asphalt, aromatic compounds, jet fuel, furnace oil, spurious oils, wax, liquefied petroleum gas, etc. The government recently stated that the refineries do not provide the details of petroleum products to the Oil and Gas Regulatory Authority (OGRA) that fixes the price of gasoline, diesel and kerosene oil. In the absence of output quantities of petroleum products from our refineries, it is strange how the authority fixes prices of these products that actually affect the people of Pakistan.

The prices for gasoline, diesel and kerosene must be fixed in accordance with the provision of OGRA Ordinance.

The government policy of awarding ‘first right of refusal’ and ‘exclusive right of transportation of crude to refineries’ to Pakistan National Shipping Corporation (PNSC) is a clear violation of the OGRA Ordinance and that of Competition Commission of Pakistan. This policy must be withdrawn and oil imports must be made through open tenders, which shall reduce cost of transportation through sea lanes thereby reducing the price of gasoline, diesel, kerosene and other products by at least 3-4 rupees per litre.

Furthermore, private entrepreneurs will invest in shipping, the national fleet will increase, creating more job opportunities and reduce our dependence on foreign flag ships to cater to our seaborne trade, thus savings of millions of dollars in foreign exchange.

In a number of Pakistani refineries, a major portion of virgin crude is directly led to the furnace oil chamber. It is imperative to install hydro crackers and catalytic/thermal crackers to obtain a further yield of 32-35 percent of diesel and 20-22 percent further yield of petrol. In the second case, a further yield of 32-35 percent of petrol and 20-22 percent further yield of diesel. Hence the price of gasoline, diesel and kerosene will be reduced by some Rs 28 per liter. Our present dependence on import of diesel, costing Pakistan millions of dollars, shall be reduced.

The practice of charging ‘deem duty’ on our own production of diesel is criminal and must be stopped to provide relief to the people of Pakistan.

The crude obtained in Pakistan can only be processed/refined at Attock Refinery Ltd. After certain modification and balancing, modernising and replacement, other refineries shall also be able to process/refine crude obtained from Pakistan, thereby reducing our imports bill. Hopefully, in future enough crude can be obtained from Pakistani wells if care, efficiency and honesty are exercised in excavation. This will totally reduce our bills for import of crude. The cost of petroleum products in such a case shall be reduced by at least 60-70 percent.

Global warming and climate caused due to emission of greenhouse gases can held responsible for disasters, havocs and natural calamities.

The world has decided to reduce emission of greenhouse gases mainly caused by the use of fossil fuels. The world has resorted to alternative energy sources to face the challenges of energy crisis. The developed part of the world has decided to adopt Euro-IV standards for petroleum products. Even India has managed to implement Euro-IV, which stipulates that the petroleum products should contain a maximum of 50 ppm of sulphur and reduced proportion of other greenhouse gases. The prices of such petroleum products have increased. In Pakistan the petroleum products contain 1000-2000 ppm of sulphur. This is criminal.

Successive governments of Pakistan have received trillions of dollars through petroleum development levy and petroleum levy since the 1950s without any appreciable development in petroleum products. Where are these huge amounts and what developments have been made? Pakistan must obtain Euro IV standards of petroleum products.

The writer is the secretary general of Pakistan Merchant Navy officers’ Association and can be reached at

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