Rs6bn approved for PSO to avoid default

The Ministry of Finance on Thursday approved payment of Rs6 billion (about $60 million) to the country’s largest fuel supplier as an urgent case to avoid an international default next week against fuel supplies.

Simultaneously, the Ministry of Petroleum and Natural Resources and the oil industry decided to put on hold future fuel oil import orders until the Ministry of Water and Power submits a firm plan for payment and draw down of record stocks built over the past few weeks.

Informed sources said the Rs6bn payment ordered by the finance ministry would take a couple of days to pass through various bureaucratic process at the Estab­lishment Division and Accountant General Office. The couple of letters of credit (LCs) for oil imports are due for payment on March 27-28 while the Pakistan State Oil (PSO) had already overexposed itself to even enhanced credit lines.

Mainly because of non-payments by the power sector, the receivables of the PSO had gone beyond Rs270bn. These include about Rs231bn outstanding against the power sector led by public sector generation companies of Rs140bn, Rs61bn of Hubco and Rs22bn of Kot Addu Power Company. Another Rs24bn is due against Pakistan International Airlines and the federal government and Rs13 billion against Sui Southern Gas company on account of liquefied natural gas (LNG) supplies.

It was in this background that a delegation of Oil Companies’ Advisory Committee (OCAC) had consultations with the petroleum ministry where it was decided to put on hold import orders at the risk and cost of the water and power ministry.

The sources said the power ministry had been told to submit a comprehensive and firm demand plan for furnace oil, gas and LNG so that the supplies of these fuels could be adjusted.

The sources said at least two leading refineries had informed the government that they would need to go on shutdown their operations because the PSO was not uplifting furnace oil and as a consequence the production of other petroleum products like jet fuel, petrol and diesel would be affected.

The PSO expressed its inability to be of any help saying its furnace oil depots were not only full to the brim but its tankers were also standing on roads because of lower consumption by the power plants.

As if that was not enough, around 14-15 ships carrying furnace oil and other products were standing in the open sea for anchoring, causing $20,000-25,000 per day demurrage charges per ship to PSO.

On the other hand, the sources said, the power sector had shut-down about 3,500MW of furnace oil based power plants to secure savings on fuel costs amid lower demand from consumers as well as loadshedding being parked in low revenue yielding consumer sectors.