Ogra to meet oil marketing companies amid unresolved sector disputes

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) is set to hold a meeting with the chief executives of oil marketing companies on July 8 in a move seen by the downstream petroleum sector as a possible opening to address a series of unresolved regulatory and financial disputes.

The meeting will be the first such engagement under Ogra’s new leadership and comes after repeated representations by the Oil Companies Advisory Council (OCAC), which has written to the regulator on multiple occasions over issues including delayed payments, insufficient marketing margins and repeated changes to the petroleum pricing mechanism.

Invitations issued on July 3 were sent to more than 30 oil marketing companies, including Pakistan State Oil, Attock Petroleum, Hascol, Parco, Gunvor, Cnergyico and Puma Energy, along with a number of smaller firms. Participants have also been asked to submit their outstanding issues in writing, indicating a more structured round of discussions.

Industry concerns

For oil marketing companies, the meeting is being viewed as more than a routine consultation, with industry representatives saying it could provide an opportunity to take up structural problems affecting the commercial viability of the downstream petroleum business.

One of the main concerns is the backlog of price differential claims, with unpaid amounts now said to be above Rs66 billion. Companies maintain that delayed settlement of these claims has locked up working capital and put pressure on cash flows at a time when operating expenses are increasing.

The industry is also pushing for a return to a purchase-based mechanism for verifying price differential claims instead of the current sales-based system, which it says has slowed down settlements and added to the pile-up of unpaid claims.

Another longstanding issue is marketing margins. OMC margins have remained unchanged since September 2023 despite higher financing costs, compliance-related expenses and the cost of maintaining mandatory strategic fuel stocks. Companies have also cited investment of more than Rs1 billion in digitalisation initiatives, saying the present margin structure does not allow recovery of those costs.

Pricing changes and financial impact

Frequent changes to the petroleum pricing formula have added to the pressure on the industry. Between March and late June this year, the pricing method for petrol was revised four times, while the formula for high-speed diesel was changed seven times, according to industry estimates.

A pricing adjustment made on June 20 changed the value of inventories held by oil marketing companies and refineries by around Rs104 billion, exposing firms to gains or losses stemming from regulatory decisions rather than commercial choices.

Industry representatives say the matter now goes beyond commercial considerations and is tied to the long-term sustainability of Pakistan’s downstream petroleum sector. They argue that prolonged regulatory uncertainty, delayed reimbursements and unchanged margins are undermining investor confidence and increasing financial pressure on companies tasked with maintaining strategic fuel stocks and ensuring uninterrupted supply across the country.

While expectations from the July 8 meeting remain cautious, sector participants told the publication they hope it will lead to a more responsive regulatory approach and help advance progress on pending claims, margins and pricing reforms.