Refineries refuse output boost citing cash crunch

KARACHI: Refineries on Thursday declined the government’s call to raise output to ward off possible fuel shortages down the road as world oil markets are far from stable, citing multiple challenges including cash flow constraints, industry officials said.

Local refineries in a meeting with Petroleum Division high-ups expressed their inability to increase production citing cash flow and capacity challenges, source told The News.

Sources, privy to the minutes of meeting, revealed that only Cnergyico (formerly Byco) refinery currently had the capacity to enhance the production.

Interestingly, when Cnergyico officials, expressing willingness to increase production, asked the government to get them crude oil for refining as they were facing liquidity constraints, the latter refused flatly, sources said.

The government however asked refiners to talk to banks for more credit as the authorities could not help them in this regard, as per officials.

They said although present fuel stocks were sufficient to meet domestic demand; however, the government was a bit too apprehensive about a possible shortage in the coming weeks.

Sources pointed out the government was mostly concerned with the availability of high-speed diesel (HSD), aviation fuel JP-1, and furnace oil (FO).

Refineries are facing cash flow issues because of delay in payment of their receivables from the government side.

Refineries have not received the price differential claims (PDC) for the four days of November 2021 and fear the same for the payment of almost Rs30 billion worth of PDCs for the fortnight period ending on March 15, 2022.

“PDC of Rs32-33 billion would also become payable for the fortnight of March 16-31,” sources said adding while PDC for diesel for the next fortnight had been worked out at Rs35/litre and for petrol Rs22/litre.

During the first two weeks of April, the ex-depot price of petrol is predicted to reach Rs169.50/litre against Rs149.86/litre in the fortnight starting from March 16 and ending on 30th.

Furthermore, during the next fortnight that starts from April 1, the ex-depot price of HSD has been figured at Rs180.22/litre against Rs144.15/litre for this fortnight.

Sources say refineries can enhance their production by using heavy crude oil; however, it may reduce the production of diesel as more furnace oil is extracted from heavy crude oil.

The government also wanted the refineries to produce furnace oil in view of its more demand for power generation as gas shortage is hitting the power production.

Industry officials also noted that more FO could have been produced now had the government rescued refineries during the recent FO storage crisis because of its non-upliftment, which forced them to sell it at throwaway rates to stay operational.