ISLAMABAD:
The Oil Companies Advisory Committee (OCAC) has asked the petroleum ministry to come to the rescue of oil companies which have been plagued by runaway inter-corporate debt.
“Circular debt is crippling the oil industry especially refineries and the Ministry of Petroleum is requested to intervene and facilitate early availability of funds for Pak-Arab Refinery Company (Parco) that is to receive money from Pakistan State Oil (PSO),” sources quoted an OCAC letter to the oil ministry as saying.
PSO too has been facing financial problems and has threatened many a time to stop furnace oil supply to power plants. Recently, it either sharply curtailed or completely stopped oil supply to some power plants to press the government to release some money.
Though PSO received Rs12 billion from power companies a few days ago, its payables to local and international fuel suppliers were still standing at a whopping Rs152.3 billion. At this amount, PSO has to pay Rs83.01 billion to international fuel suppliers and Rs69.3 billion to domestic refineries. On the other hand, the oil marketing giant has to receive Rs141.07 billion mainly from power companies as well as from other customers.
Owing to financial constraints, PSO’s market share dropped to 65.6 per cent in financial year 2011 compared to 71.1 per cent in 2010. The company mainly depends on import of petroleum products as domestic refineries are operating below capacity as piling inter-corporate debt has affected their ability to operate at optimum levels.
PSO’s market share in Mogas sales increased to 49.3 per cent in financial year 2011 against 45.9 per cent in 2010 with an increase in number of vehicles on the roads, high generator usage due to electricity breakdowns and increase in gas holidays. Sales rose from 892,000 tons in 2010 to 1.13 million tons in 2011.
Sales of high-speed diesel dropped to 54.9 per cent in 2011 from 56.8 per cent in 2010. The market share came down following a downward trend in the industry, high diesel prices and a halt to supplies to rural areas.
In furnace oil, PSO’s market share fell to 78.5 per cent in 2011 against 88.8 per cent in 2010 because floods damaged the road network, creating problems in oil transportation. Several power plants in the central region also came to a halt due to the floods and no furnace oil sales were made for three to four months. One of PSO’s main depots at Mehmoodkot was also shut after it submerged under water 8-10 feet deep.
Jet fuel (JP-1) sales declined to 64.2 per cent from 65.8 per cent as demand weakened in the face of reduced number of flights by Pakistan International Airlines (PIA).
Oil and Gas Development Company (OGDC) is also facing a critical situation as oil refineries and gas companies owe a massive Rs130 billion. On the other hand, OGDC does not have to pay anything to companies in the energy chain.
“We have taken up the issue of receivables with finance and petroleum ministries, but no remedial measures have been taken so far,” an OGDC official said, adding the company was working on big oil and gas projects like Kunnar Pasakhi and Uch-II projects.
Published in The Express Tribune, October 9th, 2011.
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