PSO defaults on payments to LNG supplier, local refineries

ISLAMABAD: The country’s public sector company – Pakistan State Oil (PSO) has recently defaulted on payments to LNG supplier- Gunvor – and payments on various POL products to some local refineries of PARCO (Pak-Arab Refinery Company), National Refinery Limited (NRL) and ENAR due to severe liquidity crisis that has touched new heights due to non-payment of dues of over Rs100 billion that Sui Northern has failed to pay to the entity against the LNG supply.

"The PSO’s top management has sensitized the Petroleum Division about the recent defaults and asked the top men of the ministry to summon an emergency meeting of both the gas companies to settle the dues of PSO. Secretary Petroleum had called the meeting but he had to defer it because of his own hectic official engagements and now the meeting would be scheduled in next week," one of the top officials of Petroleum Division confirmed this to The News.

In the letter, seen by The News, PSO requested to the Petroleum Division for convening the meeting of the Sui Northern with PSO officials for payment of over Rs100 billion informing its recent defaults following the worsening of liquidity crisis. The official said that top management of Sui Southern would also attend the meeting. Keeping in view the importance of the meeting, the chairpersons of the BoDs of both the gas companies would also participate.

A senior official of PSO confirmed on condition of anonymity that the public sector entity had defaulted on payment of LNG to Gunvor but later it coped with the situation. However, it avoided the default on payment to Qatar Gas Company on LNG after diverting the payments needed to be made to local refineries PARCO, NRL and ENAR company to avoid the international embarrassment.

According to the receivables and payables position of PSO as of today, Sui Northern needs to pay Rs102.9 billion to the state-owned company. The top official of PSO said that since there was no payment from the power sector, which owes Rs207 billion because of COVID-19’s adverse impact, the liquidity crisis has swelled to a large extent. The power division’s recovery has gone down from 92 percent to about 40 percent, which is why the Power Division is unable to pay to PSO. He said that the PSO defaulted on LNG payments as Sui Northern failed to pay its dues of over Rs100 billion on LNG supply.

The PSO’s top management wants the PetroleumDivision to force the Sui Northern to arrange loan of Rs40 billion at least to ensure substantial payment to the state-owned oil marketing company. It also argued saying that it is unable to get more loans to continue its LNG imports as it has already exhausted its limit of exposure towards getting loans.

However, a Sui Northern top official, when contacted, on condition of anonymity, said that the Sui Northern has not been able to pay PSO Rs85 billion against the LNG supply. When asked that PSO claims the outstanding amount stands at RS102.9 billion, he said, the PSO has also included the late payment surcharge (LPS) of Rs14.9 billion in the outstanding dues. He also confirmed that Sui Northern also needs to pay Rs30 billion to Pakistan LNG Limited (PLL) for the LNG supply through the second LNG terminal.

The Sui Northern top official also disclosed that if the amount of Rs50 billion, which is pending from Sui Southern to Sui Northern in the head of LNG payments is cleared, then Sui Northern will be in position to pay off its maximum dues which are due to be paid to PSO. The Sui Southern says the reconciled figure with Sui Northern about payments stand at Rs7-10 billion, not the amount of Rs50 billion.

The Sui Northern has also come up with a valid point saying that most of the LNG has been used in domestic sector on the directives of the government. The cost of LNG diverted to the domestic sector in Punjab stands at Rs85 billion and the said amount has not been recovered which is why Sui Northern is unable to pay the dues of PSO.

The official further said that a summary is being prepared for the ECC to pay Rs85 billion against the costly LNG diverted to domestic sector. He said LNG of 150-200 mmcfd RLNG is still being injected to domestic sector in Punjab.

"The forthcoming meeting of Sui Northern, Sui Southern and PSO in the presence of top officials of Petroleum Division which is now scheduled in next week will be stormy," the official said.