By Staff Reporter
ISLAMABAD: The finance minister warned on Wednesday of mounting risks to the country’s oil supplies from the conflict involving the US, Israel and Iran, even as he insisted there was no emergency and ruled out immediate rationing.
Muhammad Aurangzeb told the Senate standing committee on finance that the government was urging fuel conservation as a precaution while stocks remained comfortable. “We are not going for rationing of fuel as there is no fuel shortage in the country, but things could become serious if the war drags on,” he said in response to committee chairman Saleem Mandviwala.
The remarks came as Pakistan formally asked Saudi Arabia to reroute crude supplies through the Red Sea port of Yanbu after the closure of the Strait of Hormuz disrupted one of the world’s most critical energy chokepoints. The narrow waterway, just 21 miles wide at its narrowest, links the Gulf to the Arabian Sea and carries the bulk of Pakistan’s energy imports.
The finance ministry will now convene daily meetings with relevant departments to track domestic fuel positions and volatile international prices. Stocks stand at 28 days’ cover for petrol and diesel, 10 days for crude oil, and 15 days for both liquefied petroleum gas and liquefied natural gas. Some cargoes remain stuck in Qatar, officials said, prompting a ramp-up in local gas-field production to bridge the gap.
State Bank of Pakistan governor Jamil Ahmad told the same committee that international oil prices could climb to $100 a barrel, adding fresh pressure to the external sector in an economy heavily dependent on energy imports. Foreign-exchange reserves, however, remain comfortable at more than $16bn and are on track to reach $18bn by June and around $20bn by December, he said. The buildup has come without additional borrowing: the central bank has purchased roughly $24bn from the market over the past three years, helping stabilise the rupee and strengthen buffers.
Contingency Measures
With the situation fluid, the government is preparing a package of contingency measures. A summary is heading to the Economic Coordination Committee for swift approval that would shift fortnightly petroleum price revisions to a weekly basis, compensate oil marketing companies for sharply higher insurance and import-premium costs, and introduce conservation steps including mandatory work-from-home where feasible. Pakistan State Oil has already issued two import tenders each for petrol and diesel routed outside the Strait of Hormuz.
Insurance costs per vessel have jumped from around $30,000 to $400,000, while freight rates have soared beyond $4m from $900,000 previously. Diesel imports, which rely heavily on long-term Kuwaiti supplies that must pass through the strait, are particularly exposed. More than 20% of global oil cargoes are reported stuck inside the waterway, tightening the market for vessels. The price gap facing oil companies has already widened to Rs45-50 per litre for diesel and Rs25-26 for petrol in the first week of the crisis.
Officials said the combined impact of higher freight, insurance and premiums could not be absorbed by oil marketing companies and refineries without compensation; otherwise they would have grounds to declare force majeure and halt imports. The shift to weekly pricing is intended to prevent a fiscal bulge on both companies and the government by passing true costs to consumers in real time.
Even before formal approval, the Oil and Gas Regulatory Authority has authorised companies to regulate supplies to retail outlets based on eight-month historical sales patterns to discourage hoarding. “To ensure the uninterrupted availability of petroleum products and to discourage hoarding during periods of extreme price volatility, oil marketing companies may temporarily regulate supplies to retail outlets based on their historical sales patterns,” OGRA said in a statement. “This measure is a standard supply management practice aimed at maintaining stability in the distribution system.”
The authority stressed there was “no shortage of petroleum products” and urged the public to ignore rumours and rely only on official channels. Current petrol and diesel inventories exceed 500,000 tonnes each – enough for 26 and 25 days respectively – among the highest levels in recent memory.
Finance Minister Aurangzeb chaired a separate meeting of a new cabinet committee tasked with monitoring petroleum prices and supply chains. Participants reviewed stock levels across crude, refined products, aviation fuel and LPG, alongside daily consumption patterns and global market developments including benchmark prices, freight, insurance and shipping dynamics. The committee noted LNG imports under long-term deals and cross-border LPG inflows were being closely watched.
Officials briefed the group on diplomatic efforts to diversify procurement through regional energy hubs, including potential arrangements via Red Sea and Gulf ports. The panel emphasised energy conservation and heightened vigilance against hoarding, diversion or smuggling, directing stronger coordination with provincial governments. Provincial chief secretaries will join Thursday’s meeting to finalise a national action plan.
Aurangzeb reiterated that ensuring uninterrupted petroleum availability remained the government’s top priority. The cabinet committee, he said, would continue daily monitoring and stand ready to implement coordinated measures to protect national energy security and market stability.
LNG Supplies
Separately, Pakistan’s largest gas distributor, Sui Northern Gas Pipelines, notified industrial customers – including fertiliser plants – that it would cut regasified LNG supplies from midnight Wednesday after its supplier, Pakistan State Oil, flagged disruptions linked to the conflict. Bloomberg reported that the shutdown of facilities such as Qatar’s Ras Laffan LNG export plant has caused the most extensive disruption to global energy trade since Russia’s 2022 invasion of Ukraine.
Analysts warned of longer-term pain. Masanori Odaka of Rystad Energy said the situation “could be serious” if five or more LNG shipments were affected. “Current spot prices are well beyond what Pakistan is likely willing to pay,” he said. “So I will say the alternatives to sourcing LNG cargoes are limited.” Evan Tan of ICIS noted that any shortfall in April and May could stretch to two or three cargoes – too large to cover with domestic production or coal alone.
Some analysts saw a short-term silver lining. Samiullah Tariq, head of research at Pakistan Kuwait Investment, said switching to cheaper imported coal instead of expensive Qatar contracts “could be a blessing in disguise”. Petroleum Minister Ali Pervaiz Malik raised the Yanbu routing request directly with Saudi Ambassador Nawaf bin Said Al-Malki on Wednesday. The ambassador reaffirmed Riyadh’s support and said the kingdom stood ready to help meet any emergency needs.
Copyright © 2021 Independent Pakistan | All rights reserved
