More Iranian fuel being smuggled to Pakistan, petroleum dealers say 

People on motorcycles wait for their turn to get petrol at a petrol station, after Pakistan Petroleum Dealers Association (PPDA) announced a countrywide strike, in Karachi, Pakistan, on November 25, 2021. (REUTERS/File)
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Updated 09 May 2023
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More Iranian fuel being smuggled to Pakistan, petroleum dealers say 

  • Up to 35 percent of diesel sold Pakistan has arrived illegally from Iran, Pakistan Petroleum Dealers Association says 
  • Association said smuggling of fuel limited to province of Balochistan previously, now has spread to the rest of the country

KARACHI: Petroleum dealers have flagged a surge in the smuggling of Iranian fuel to Pakistan, saying that up to 35 percent of diesel sold in the South Asian country has arrived illegally from Iran, the Pakistan Petroleum Dealers Association (PPDA) told Reuters on Tuesday.

The association said that in the past, the smuggling of fuel was limited to the Pakistani province of Balochistan, but that it has now spread to the rest of the country.

In April, Pakistan’s energy ministry asked security forces to clamp down on fuel smuggling from Iran, according to an official memo seen by Reuters. The memo said diesel sales have slumped “more than 40 percent” due to smuggled products.

Pakistan mostly meets its demand for fuel from the Middle East, but it is also smuggled in through its western border with Iran.

The minister of state for petroleum was not immediately available for comment.

The country is facing an acute balance of payment crisis with barely enough foreign exchange reserves to cover a month’s imports. Pakistan is undertaking several measures, including raising fuel prices, to unlock a $1.1 billion tranche of aid from the International Monetary Fund.

Fuel prices have jumped 143 rupees ($0.5046), or nearly 100 percent, in the last 12 months. Inflation stands at a record high of 36.4 percent for April, significantly diminishing purchasing power for individuals and companies.

The country’s oil product sales have dropped 46 percent to 8.8 million barrels in April compared to last year, according to the Oil Companies Advisory Council in Pakistan. A breakdown shows diesel sales have slumped 50 percent year on year. This excludes smuggled fuel.

According to an S&P Global Commodity Insights report, Iranian fuel is around 53 rupees cheaper than the official retail price per liter.

“Private dealers have been able to make decent profits by selling Iranian diesel rupees 35 ($0.1235)/liter cheaper than local dealers,” it added.

The energy ministry said that according to the Oil & Gas Regulatory Authority (OGRA), around 4,000 tons per day of fuel smuggled into Pakistan was causing a total revenue loss of around 10.2 billion rupees a month.

The PPDA said that Iranian fuel smuggled into Pakistan was further hurting the industry, already reeling from low sales.

“I think they’re allowing Iranian oil to be smuggled into the country because there’s an FX shortage,” Abdul Sami Khan, chairman PPDA told Reuters.

“In the past smuggled fuel was restricted to just Balochistan, but it has now spread all over,” Khan said.

Due to Iranian fuel being significantly cheaper than domestic fuel, refineries are having trouble with stock uptake.

The energy ministry said there was a threat of supply insecurity for products other than diesel as refineries are operating at between 50-70 percent of capacity.

Earlier this month, Attock Refinery Limited told the Pakistan Stock Exchange that it would operate at around 25 percent capacity due to low sales owing to “multiple reasons, including the possible inflow of smuggled product in our supply envelope.”


Pakistan to raise special force to guard Balochistan minerals as Barrick reviews Reko Diq project — official

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Pakistan to raise special force to guard Balochistan minerals as Barrick reviews Reko Diq project — official

  • Barrick decision follows coordinated separatist attacks in several districts across Balochistan last Saturday that killed over 50 civilians and security personnel
  • Balochistan, which borders Iran and Afghanistan, is the site of a decades-long insurgency by Baloch separatist groups who often attack security forces, foreigners

KARACHI: Pakistan has decided to boost intelligence network and raise a special force to guard the mineral-rich Balochistan province and its borders with Iran and Afghanistan, a provincial government official said on Saturday.

The development comes days after Canadian giant Barrick Mining Corporation said it planned to “immediately” begin a comprehensive review of all aspects of the multibillion-dollar Reko Diq copper-gold project in Balochistan.

Barrick decision followed coordinated separatist attacks by the Baloch Liberation Army (BLA) group in several districts across Balochistan last Saturday that killed 36 civilians and 22 security personnel. Authorities said they had killed 216 militants in follow-up operations.

Mineral-rich Balochistan, which borders Iran and Afghanistan, is the site of a decades-long insurgency waged by Baloch separatist groups who often attack security forces, foreigners and non-local Pakistanis and kidnap government officials.

“In light of the terrorists events, the provincial government in tandem with security forces is redesigning the entire security architecture,” Shahid Rind, an aide to Chief Minister Sarfraz Bugti for media and political affairs, told Arab News.

“This includes raising of dedicated Frontier Corps for the mineral-bearing area, securing both borders i.e. Iran and Afghanistan.”

Arab News reached out to Pakistan’s information minister, Attaullah Tarar, but he did not respond to questions seeking comment on the matter.

The Balochistan government will also beef up intelligence network and work closely with mining companies in the region.

“The Balochistan government is extremely serious about foreign investment in the province and considers Reko Diq as the flag-bearer of foreign investment,” Rind said.

“The provincial government will do whatever is necessary to maintain that.”

The recent attacks have apparently alarmed international investors, especially Barrick, which is developing one of the world’s largest copper and gold mines in Balochistan.

“As we stated in our public documents, Barrick is undertaking a review of all aspects of the Reko Diq project, including with respect to the project’s security arrangements, development timetable and capital budget,” a Barrick spokesperson said in response to an Arab News email.

In a Feb. 5 statement issued with its fourth-quarter financial results, Barrick said the Reko Diq project “continued to advance site works in Q4, although in light of a recent increase in security incidents, management is currently reviewing all aspects of the project.”

“The review will begin immediately,” the Barrick spokesperson said. “An update will be provided when the review has been completed.”

Barrick owns 50 percent share in Reko Diq, along with three Pakistani federal state-owned enterprises that own 25 percent, while the Balochistan government has the remaining 25 percent share in the project.

The project is expected to begin production in 2028 and is central to Pakistan’s hopes of boosting mineral exports and attracting foreign investment into its underdeveloped mining sector. Despite heightened threats in Balochistan, development linked to the project continues in other parts of the country.

Barrick is expected to start investing in Pakistan’s port infrastructure soon as it prepares for exports.

Pakistan International Bulk Terminal Ltd. (PIBT), the country’s first dirty bulk terminal located at Port Qasim in Karachi, will host dedicated facilities to ship Reko Diq’s output.

PIBT CEO Sharique Azim Siddiqui told Arab News this week that Barrick would invest $150 million to build a shed and upgrade other dedicated facilities to handle shipments of copper-gold concentrate once Reko Diq production begins in 2028.

Barrick’s Pakistani subsidiary, Reko Diq Mining Company, last week signed an export agreement with PIBT under which the miner will export 800,000 tons of copper and gold concentrate through the terminal in the first phase, doubling the volume in the second phase, according to Siddiqui.

Revived in 2022 after years of legal disputes, the Reko Diq project is billed by the government as a transformative investment for Balochistan, Pakistan’s largest but least developed province.

But persistent militant activity and rising attacks targeting security forces, state institutions and infrastructure have raised concerns among investors.

The latest separatist attacks, one of the deadliest flare-ups in Balochistan in recent years, have prompted large-scale security operations across the province as authorities continue their hunt for militant facilitators.

Siddiqui said the recent surge in militancy in Balochistan remains a concern for them.

“Security challenges have always been there in Pakistan. The investors do realize that, and we take it in our stride, and we hope for the best,” Siddiqui said.

“If there is no security for the cargo movement, then that’s going to hurt that (Reko Diq) project and hurt everyone.”