September 19, 2010Print : Business
KARACHI: Attock Refinery Limited (ARL) may shut off production if Pakistan State Oil (PSO) does not clear dues of over Rs24.7 billion, a senior petroleum ministry official, requesting anonymity, said on Saturday.
“It is most unfortunate that despite assurances from the highest government authorities, PSO continues to default on its payment to local refineries,” he said, quoting a letter sent by ARL Chief Executive Officer, Adil Khattak, to the ministry.
State-run PSO has been delaying payment of the petroleum products it purchases from ARL, which refines 42,000 barrels of crude oil per day.
PSO, itself, is embroiled in inter-corporate circular debt and facing liquidity crunch for over two years. The problem is rooted in furnace oil purchase, the fuel which generates electricity in power plants.
“In case the issue of circular debt is not addressed promptly, ARL will be left with no option,†but to either curtail or completely shut down operations,” it said. PSO has been importing petroleum products at the expense of local refineries by defaulting on their payments, it said. “It is not even making payments for the diesel supplies, which is sold on cash to the customers.”
ARL’s overdue receivables from PSO have surged, from Rs9.5 billion in June 2009 to Rs24.769 billion, and cost the refinery Rs3.5 billion in interest expense, the letter said.
As PSO delays clearing this backlog, ARL faces difficulty in paying Rs21.8 billion it owes to crude suppliers, including Oil and Gas Development Company (OGDCL). “They are demanding delayed payment charges, which in case of OGDCL alone is over two billion rupees.”
The refinery also sought revision in pricing formula, an issue that has been dragging on for more than two years. “It is not possible for us to continue economically unsustainable operations for an indefinite period,” the letter said.