Monday March 20, 2023

E&P companies raise alarm on forex crisis

January 17, 2023

KARACHI: Forex crisis is now jeopardising the exploration activities of Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) as the companies cannot import parts, equipment and chemicals, The News learnt on Monday.

Both the companies raised alarms regarding the issue at a gathering, sources privy to the meeting revealed. The companies cited difficulties in the import of required parts and materials and the adverse impact this had on oil and gas exploration activities.

The meeting was attended by officials of the Ministry of Energy, Oil and Gas Regulatory Authority (OGRA), representatives of oil marketing companies (OMCs), refineries, OGDC and PPL.

Pakistan is facing a burgeoning dollar shortage, with massive impact on the ability of companies to import necessary equipment, raw material, spare parts and other equipment and inputs due to the banks’ refusal to establish letters of credit (LC). Both OGDC and PPL pointed out that their oil and gas exploration plans have been adversely impacted in the recent weeks as their LCs were not being settled against their imports for parts, machinery and chemicals as banks were not giving them priority.

“When approached, the banks refused to open and settle LCs for not being in the essential items import list,” representatives of both companies told the meeting, pointing out that according to the banks, they were not in the LC settlement priority list.

OGDC and PPL representatives asked the government as well as the State Bank of Pakistan (SBP) to put the import of equipment and chemicals for the purpose of oil and gas exploration activities on their priority list to achieve the desired domestic production levels.

Sources disclosed that during the meeting, refineries also complained about the difficulties in importing crude oil; however, their representatives pointed out that they were managing the issue one way or the other.

In the meeting, OMCs also complained about the refusal of banks to open and settle LCs for the import of petroleum products, which they pointed out could create a shortage of products in the local market.

However, OGRA officials ruled out any shortage as the demand of petroleum products had slumped in the recent weeks. Oil Companies Advisory Council’s (OCAC) officials, however noted that though demand was on the lower side due to winter vacations and fog in various parts of the country, it would soon begin to increase after vacations end and the intensity of fog declines. Upon the complaints and reservations of the oil and gas sector, OMCs and refineries, the government side agreed to convene another meeting with the Ministry of Finance and SBP to take up the LC issue.