close
Thursday March 28, 2024

Oil stock dries out, power crisis to worsen

Govt says shortage may persist for one and a half months; PSO says it can’t import fuel because of late payments; dues surge up to Rs200 bn; no improvement in supplies in sight

By our correspondents
January 17, 2015
ISLAMABAD: In an alarming development, the furnace oil stock that is used by power houses for electricity generation has dried and it will worsen the power crisis in the country as the Pakistan State Oil (PSO) has formally informed the government that it is unable to import fuel cargoes because of late payments.
The crisis is not likely to mitigate anytime soon as the government has told a Senate committee that the shortage may persist for one and a half months.In the month of January, no cargo of furnace oil was imported and only one cargo was imported during December.
“Unless the power sector clears its dues, PSO will not be able to import the furnace oil and diesel in the country,” PSO told top mandarins in Islamabad. The total amount of PSO dues have surged up to Rs200 billion out of which Rs176 billion are owed by the power sector.
On an average, PSO imports three to four cargoes of furnace oil (of 65,000 MT each) per month. The authorities in Islamabad are unmoved and have rather asked Byco to provide furnace oil to run the Hubco power house and Pak-Arab Refinery Company (Parco) to provide furnace oil to Kot Addu power plant for power generation and seem least interested to pay the dues of PSO.
Wapda owes to pay Rs99.3 billion to PSO, Hubco Rs58 billion and Kapco Rs13.6 billion, KESC Rs3.8 billion, Saba Power and Southern Electric Rs579 million. On top of that, PIA needs to pay Rs14 billion as of today, Pakistan Railways Rs830 million, National Logistics Cell (NLC) Rs279 million and OGDCL Rs180 million.To a question, the official said that in the deal with Byco and Parco for furnace oil for power sector, PSO has been used by the government as broker.
The official said as the PSO is out of furnace oil stock, the government has issued directives that Hubco will now purchase oil from Byco on advance payment with PSO being the broker. On receipt of the payment, Byco will release furnace oil for onward supply to Hubco. This arrangement will no longer sustain and the power crisis is feared to worsen further. Default in payment for furnace oil L/Cs has also impacted PSO’s ability to import white oil products, including petrol, as the company is unable to open further L/Cs until the clearance of the current outstanding dues. The official said that on average PSO imports four cargoes of Mogas (petrol) of 50,000 MT per month. In January, only one cargo of Mogas was imported on with another cargo of Mogas expected to be imported at the end of current month.
The PSO defaulted on payment of Rs46 billion against the L/Cs which resulted in the company’s credit lines and overdraft limits being exhausted. Consequently, the banks have cut PSO’s credit lines which mean that the company is no longer able to open any further L/C.
The PSO requested Rs74 billion on an urgent basis by December 31, 2014 to honour local and international payments, but the Finance Ministry released Rs17.5 billion and PSO has been asked that the Ministry of Water and Power will pay to it Rs10 billion by January 31. The PSO incurred penalties of approximately Rs250 million on account of delayed payments to banks along with demurrage payments of $1.8 million and supplier’s claim of $6.4 million due to delays in opening of L/Cs.
Meanwhile, Federal Secretary Finance Dr Waqar Masood told the Senate Standing Committee on Finance and Revenues here at the Parliament House that the difficulties might remain there during January and February as the supply chain for POL products was broken down in the country.
He said the Finance Ministry released Rs17 billion out of total requirement of Rs27 billion for PSO and the ship carrying 50,000 ton POL products arrived at Karachi port.The circular debt, he said, has emerged because of inability to recover arrears and increasing losses of power sector. It is relevant to mention here that the monster of circular debt has choked the ability of state-run PSO to import POL in order to meet the country’s requirements.
The Senate committee met with Senator Nasreen Jalil in the chair in order to get detailed briefing on overall economic situation in the context of sit-ins organised by PTI for more than 100 days.
Giving his testimony before the panel, the secretary finance said that the oil import bill was estimated to reduce in the range of $3 to $5 billion during the current fiscal year so the prices of POL products and electricity tariff would continue witnessing declining trend this month.
“There is time lag between import of crude oil and then making POL products. It is a transparent mechanism under which the prices are passed on to the consumers,” he said and added that the domestic prices of POL products as well as electricity tariff would further be reduced in months ahead.
He said this decline in prices of the POL products would result into causing positive impact on prices of all other items as the government was constantly in touch with the provinces to reduce transport fares in accordance with the reduction in petroleum prices.
Meanwhile, Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said the current petrol crisis will persist for five to eight days.Addressing a press conference here, he said the consumption of petrol has increased by 25 percent in January. He said the sale of petrol on January 1, 2015 was recorded at 40,000 tons. He said this raise in the consumption of petrol was made by the masses due to reduction in the prices of oil.
Giving details of upcoming cargo to cater to the requirements of petrol, Abbasi said that a cargo of Hescol carrying 15,000 tons would reach Karachi port by Friday night, while on January 18 another cargo of Shell carrying 20,000 tons will reach Pakistan and a cargo of Pakistan State Oil (PSO) will arrive here on January 24.
The minister said at least Rs5/litre reduction in POL prices was expected next month. Our correspondents add: Severe petrol crisis continued in Punjab for the fourth consecutive day on Friday as no improvement was witnessed in supplies of petroleum products in various cities of the province.
Motorists spent the whole night at various petrol pumps waiting in long queues to get fuel. Petroleum Dealers Association officials believe the shortage would continue till the next month. There will be little improvement in transportation of petrol and other products from Karachi, but the situation will take some time to improve.
A decrease is expected in petroleum products prices by the end of this month and therefore owners of petrol pumps are expected to keep their stocks at minimum levels. It is also feared that gaps in import consignments will remain during the next few weeks.
About 20 percent of daily demand of three million litres is being supplied to some of about 300 filling stations in Lahore city. According to an estimate, 70-80 per cent of filling stations are closed due to drying up of fuel stocks. Owners of some petrol pumps have completely closed their stations as they see no improvement in near future.
Motorists spent the whole night at PSO pumps in Lahore and only succeeded in getting fuel for their vehicles in the morning. At some places, queues of vehicles were as long as half a kilometre. Chaotic scenes were witnessed at almost all open petrol pumps as desperate motorists were trying to get petrol at all costs. People also complained about black-marketing and rationing of petrol.
“I am unable to comprehend scarcity of fuel,” said Asim Ali, waiting in a queue near a petrol pump in Model Town, Lahore. He said “if business sense prevails, I should have been given petrol as I am willing to pay and there is no restriction on its transportation and import”.
All Pakistan Anjuman-e-Tajiran has also criticised the government for mismanagement, which resulted in severe shortage of petroleum products. In a statement, it said the prime minister, finance minister and federal ministers had no concern for the public as they are busy in foreign tours.
Agencies add: Oil and Gas Regulatory Authority (Ogra) Chairman Saeed Ahmed Khan said petrol demand had been increased by at least 26pc and it is expected that compressed natural gas (CNG) would get more expensive than petrol. He said the companies having less than mandatory 20-day backup supplies have been issued notices.
“The oil marketing companies in 23 cities are not storing 20-day oil,” he added. The Ogra chairman said the authority has taken serious notice of the Liquefied Petroleum Gas (LPG) price-hike and immediately dispatched inspection teams to cities where prices were reported high.
Also, Minister for Water and Power Khawaja Asif said the government was taking significant steps to address the issue of shortage of petrol in the country.Talking to media outside the Parliament House, the minister said the government had started paying the debt of PSO. He said the state institutions are under debt of Rs200 billion.