KARACHI: Pakistan State Oil (PSO) has opposed the unilateral imposition of flow-rate penalties by Fauji Terminal and Distribution Company Limited (FOTCO) on the import and export of oil cargoes, declaring that it will not accept the proposed charges.
“In line with the industry’s collective position, PSO, as the major stakeholder and largest throughputter at Fotco, categorically refuses to accept draft agreements and penalties that are devoid of any logical, contractual, legal or regulatory basis,” the company said in a letter to Fotco’s chief operating officer on Wednesday.
PSO said the proposed measures would impose an inequitable financial burden due to what it described as unjustified expectations by Fotco from vessels and receiving storage terminals.
Referring to Fotco’s unilateral decision to impose Pre-Loading/Discharge Agreements (PLDA), Pipeline Transfer Agreements (PLTA) and flow-rate penalties on oil marketing companies (OMCs), owned and private storage terminals, as well as import and export vessels, PSO noted that the move had met firm and repeated opposition from the oil industry. This position, it added, had been formally conveyed by the Oil Companies Advisory Council (OCAC) in its correspondence with Fotco and the Ministry of Energy’s Petroleum Division.
The company said that Fotco had no legal authority to impose such penalties, adding that compromised jetty efficiency was primarily due to port infrastructure limitations. These included the absence of an all-season, unrestricted night navigation facility, FOTCO’s own operational inefficiencies, and its continued reliance on a single common pipeline for discharging motor gasoline (Mogas) and high-speed diesel (HSD) cargoes.
PSO said Fotco had failed to construct and commission a dedicated Mogas pipeline, despite commitments made at the time of the tariff revision in 2021.According to the company, the single-pipeline operation was already causing significant losses and additional costs for OMCs due to product contamination, quality issues, sampling delays and the high cost of line pigging, which OMCs were compelled to pay to Fotco and its subcontractors.
“In a situation where OMCs are already incurring heavy demurrage due to port constraints and Fotco’s inefficiencies, penalising OMCs and vessels for not achieving an average flow rate of 2,500 tonnes per hour is unjustifiable and commercially unsustainable,” PSO said.
The company added that, considering historical vessel occupancy times at Pakistan and international ports, and a standard 48-hour laycan window, Fotco’s expectation of discharging a 50,000-tonne cargo within a maximum of 20 hours on a regular basis was unrealistic.
“Imposing a penalty thereafter appears less like a performance deterrent and more like an attempt to create a permanent additional revenue stream,” PSO said.
Fotco, however, has defended its new flow-rate performance penalties for vessels at its jetty, saying the charges are necessary to improve efficiency and reduce costs for the national oil supply chain.
In a statement released last week amid objections from the Oil Companies Advisory Council (OCAC), Fotco said the OCAC’s claims misrepresent the operational rationale behind the measures and overlook verified, data-backed causes of congestion, including sub-optimal vessel pumping rates and storage terminal constraints. “Such penalties will significantly enhance jetty efficiency and generate savings for the national exchequer,” the statement said.
Based on historical data, PSO noted that more than 90 per cent of cargoes calling at Fotco would incur substantial penalties in US dollars under the proposed formula. The company warned that disregarding port infrastructure constraints and levying penalties on vessels operated by reputable international suppliers could deter foreign suppliers and shipping lines. This, it said, could reduce participation in Pakistan-bound supplies, increase premiums and ultimately lead to higher petroleum product prices, placing an additional burden on consumers.
Given that the matter is currently under consideration at the relevant ministries, PSO advised Fotco to refrain from implementing the proposed agreements and flow-rate penalties. It urged the terminal operator to initiate structured consultations with the industry to identify the root causes of reduced jetty efficiency and agree on corrective measures to improve port operations.
“PSO reserves all rights to pursue legal, regulatory and all other available remedies should Fotco proceed with this unilateral action,” the letter said, adding that the company expected confirmation of the withdrawal of the proposed measures to avoid further escalation and potential disruption to the national fuel supply.
