KARACHI: Pakistan’s oil sector has urged the federal government to intervene and suspend Fauji Oil Terminal & Distribution Company Limited’s (Fotco) unilateral imposition of flow-rate penalties on oil marketing companies (OMCs) and their import/export vessels, effective January 1, 2026.
In a letter to the Director-General Oil, Petroleum Division, the Oil Companies Advisory Council (OCAC) warned that Fotco’s action, implemented without any legal or contractual basis, constitutes disproportionate commercial leverage and could impose unsustainable financial burdens on OMCs. Industry margins have remained stagnant for over two years, leaving companies unable to absorb these penalties, particularly amid delays linked to Fotco’s pending construction of a separate terminal delivery line (TDL).
The OCAC highlighted potential risks, including vessels waiting at outer anchorages, cascading demurrage costs, port congestion, supply-chain disruptions, and possible product shortages. They noted that existing operational inefficiencies—such as repeated pigging operations using a single common pipeline for MS and HSD—already impose significant costs on OMCs. The proposed penalties would exacerbate these challenges rather than address the root cause.
The council also warned that unilateral penalties could discourage international suppliers or raise import costs due to higher risk premiums. They emphasized that meeting flow-rate requirements would require major capital investments in pipelines, pumps, and mechanical systems, which is impractical given decades-old facilities. A dedicated MS pipeline at Fotco, repeatedly promised since the 2021 tariff revision, remains unimplemented, representing the most systemic and cost-effective solution.
“Punitive and uncertain charges at Fotco will divert future cargoes to Karachi Port, reduce WOP throughput, and undermine national supply-chain and energy-security objectives,” the OCAC letter stated.
The council requested the Petroleum Division to coordinate with the Ministry of Maritime Affairs to direct Fotco to suspend the penalties, ensure no charges are imposed on OMCs, refineries, or vessels, and facilitate the implementation of the dedicated MS pipeline to resolve the underlying constraint.
Story by Tanveer Malik
