Largest refinery shuts down

Lack of dollar inflows, rupee free fall restrict crude imports


Our Correspondent February 04, 2023
A chimney emits fire at the PCK Raffinerie oil refinery in Schwedt/Oder, Germany, March 7, 2022. The company receives crude oil from Russia via the 'Friendship' pipeline. Picture taken March 7, 2022. PHOTO: REUTERS

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KARACHI:

Pakistan’s largest oil refinery has shut down for about a week due to the unavailability of crude oil as the US dollar shortfall and massive rupee devaluation hit its crude import capacity.

Cnergyico PK Head of Consumer Sales Syed Adeel Azam, in a letter to the Ministry of Energy (Petroleum Division) dated January 31, 2023, said “Cnergyico refinery (formerly known as Byco Petroleum) shall shut down from February 2, 2023 and will restart production from February 10, 2023 in line with our crude oil vessel arrival timeline”.

The refinery has installed processing capacity of 156,000 barrels per day of crude oil for the production of petrol, diesel, furnace oil and other petroleum products.

“The industry is on the brink of collapse if immediate steps are not taken in respect of arranging financing to ensure imports,” Oil Companies Advisory Council (OCAC) said in a letter to the Oil and Gas Regulatory Authority (Ogra) late last week.

“Due to the increase in oil prices and successive depreciation of Pakistani rupee over the last 18 months, the trade finance limits available from the banking sector have become inadequate. As a result of the recent devaluation alone, the LC (letter of credit/ import) limits have shrunk overnight by 15-20%,” wrote OCAC.

“It is requested that the banking sector be immediately requested through the State Bank of Pakistan to enhance the limit of our member companies (including Cnergyico),” the letter added.

Earlier, the refinery reported to the stock market in October 2022 that recent floods had washed out roads and bridges connecting the refinery to markets. They have adopted alternative routes, but that is causing serious losses in addition to the one incurred on account of rupee devaluation.

The company’s share price dropped 3.18%, or Rs0.13, and closed at Rs3.72 with trading in 7.49 million shares at Pakistan Stock Exchange (PSX) on Friday.

The company recorded net sales of Rs52.7 billion in the first quarter (Jul-Sept) of current fiscal year compared to Rs34.4 billion in the same period of last year, which was due to increased oil prices and sharp rupee depreciation.

“Extremely low refinery throughput resulted in a gross loss of Rs4.6 billion compared to the gross profit of Rs751 million in the same period of last year,” the company said in its first quarterly report.

Published in The Express Tribune, February 4th, 2023.

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