KARACHI: Pakistan’s refining sector has warned of possible shutdowns or reduced operations if oil marketing companies (OMCs) continue to avoid uplifting committed quantities of petroleum products from local refineries.
In a joint letter addressed to Federal Minister for Petroleum Ali Pervaiz Malik, the country’s five refineries said OMCs were increasingly refraining from agreed upliftment due to speculative behaviour. According to the refineries, OMCs tend to delay or avoid lifting products when prices are on a downward trend, while seeking to maximise gains during periods of rising prices.
“This practice undermines PRM commitments, distorts market discipline and places an undue burden on local refineries,” the letter stated.
As a consequence, refineries are left with limited options — either cutting throughput or shutting down operations altogether. Both scenarios, the sector warned, would harm national interests by increasing reliance on imports, raising foreign exchange outflows, underutilising domestic refining infrastructure and reducing government revenues through taxes and levies.
The refineries said they were also being pressured to offer forward pricing to OMCs, exposing them to significant price risk and squeezing already thin refining margins. Given the severity of the situation, some refineries have been forced to adopt forward pricing to avoid shutdowns, while others may still have to reduce throughput.
The sector cautioned that if forward pricing becomes an industry-wide practice, it would have serious implications for the financial sustainability of refineries. It stressed that any benefit arising from forward pricing is not passed on to consumers but retained by OMCs and their dealer networks, effectively transferring risk disproportionately to refineries.
According to the letter, the issue has largely stemmed from excess product imports and the failure to enforce priority upliftment of locally refined products. Despite repeated representations, the Oil and Gas Regulatory Authority (Ogra) has not enforced local upliftment priority under Rule 35(g) of the Ogra Rules 2016.
The refineries said Ogra, in a letter dated December 12, 2025, conveyed that Rule 35(g) applies only to new licence holders and does not guarantee offtake under the Refinery Upgradation Policy or the Petroleum Policy 1997. The sector rejected this interpretation in a response dated December 19, 2025, arguing that it contradicts the intent of the Ogra Rules 2016 and the Pakistan Petroleum (Refining, Blending and Marketing) Rules 1971, which prioritise local refinery output over imports.
Seeking the petroleum minister’s intervention, the refineries urged the government to ensure priority upliftment of local products whenever sufficient domestic supplies are available. They warned that refinery investments are capital-intensive and premised on assured domestic offtake, adding that continued displacement by imports would undermine project viability and discourage future investment.
The refineries also proposed introducing a weekly pricing mechanism to better align domestic prices with international market movements, reduce pricing lags and improve supply planning across the downstream oil sector.
Story by Tanveer Malik
