Karachi: Pakistan State Oil (PSO) has strongly opposed the unilateral imposition of flow-rate penalties by Fauji Terminal and Distribution Company Limited (Fotco) on the import and export of oil cargoes, stating it will not accept the proposed charges.
In a letter addressed to Fotco’s chief operating officer, PSO said that, in line with the oil industry’s collective stance, it categorically rejects draft agreements and penalties that lack any “logical, contractual, legal or regulatory basis”. As the largest throughputter at Fotco, PSO warned that the proposed measures would place an unfair financial burden on oil marketing companies (OMCs), storage terminals and vessels.
PSO referred to Fotco’s decision to impose Pre-Loading/Discharge Agreements (PLDA), Pipeline Transfer Agreements (PLTA) and flow-rate penalties, noting that the move has faced strong opposition from the industry. This position, it added, has been formally conveyed by the Oil Companies Advisory Council (OCAC) to both Fotco and the Petroleum Division.
The company argued that Fotco has no legal authority to impose such penalties and said reduced jetty efficiency stems largely from port infrastructure constraints, including the lack of all-season night navigation, Fotco’s own operational inefficiencies and its reliance on a single common pipeline for discharging motor gasoline (Mogas) and high-speed diesel (HSD).
PSO pointed out that Fotco has yet to construct a dedicated Mogas pipeline, despite commitments made during the 2021 tariff revision. The existing single-pipeline system, it said, has already caused significant losses for OMCs due to product contamination, quality issues, sampling delays and the high cost of line pigging, which OMCs are forced to bear.
“In an environment where OMCs are already incurring heavy demurrage due to port constraints and Fotco’s inefficiencies, penalising them for not achieving an average flow rate of 2,500 tonnes per hour is unjustifiable and commercially unsustainable,” PSO said.
The company also termed Fotco’s expectation of regularly discharging a 50,000-tonne cargo within 20 hours as unrealistic, given historical vessel occupancy times and a standard 48-hour laycan window. It added that imposing penalties thereafter appeared to be an attempt to create a permanent additional revenue stream rather than a genuine performance incentive.
Fotco, however, has defended the proposed penalties, saying they are aimed at improving efficiency and reducing costs across the national oil supply chain. In a recent statement, the terminal operator said objections from OCAC misrepresented the rationale behind the measures and ignored data-backed causes of congestion, including sub-optimal vessel pumping rates and storage terminal limitations.
PSO warned that under the proposed formula, over 90 per cent of cargoes calling at Fotco would face significant penalties in US dollars. Such measures, it said, could deter international suppliers and shipping lines, increase premiums and ultimately lead to higher fuel prices for consumers.
As the issue is currently under review by the relevant ministries, PSO urged Fotco to withhold implementation of the proposed agreements and penalties and instead engage in structured consultations with industry stakeholders to address operational bottlenecks.
“PSO reserves the right to pursue legal and regulatory remedies should Fotco proceed with this unilateral action,” the company said, warning that continued escalation could disrupt the country’s fuel supply chain.
Story by Tanveer Malik
