Wednesday June 29, 2022

Oil sector credit lines revised by SBP: OGRA

April 13, 2022

KARACHI: Cash-strapped oil industry's credit lines have been revised by State Bank of Pakistan (SBP), the energy watchdog said on Tuesday, in a bid to to ensure seamless imports and availability of petroleum products in the country.

This development followed a meeting between Masroor Khan, Chairman Oil and Gas Regulatory Authority (OGRA), and Member (Oil) Zain-ul-Abideen Qureshi with SBP Governor Reza Baqir and his team.

“The SBP governor has confirmed that oil industry credit lines have been revisited by allowing oil industry to meet the import petroleum products in the country,” OGRA said in a statement.

The energy regulator dubbed it a positive step towards supporting the liquidity-challenged oil industry that was struggling hard to import petroleum products .

The stakeholders have been demanding the government to increase their credit lines as their cash flows were disrupted by a record spike in global oil prices, but to no avail.

The price of petrol and diesel was frozen by the former government on February 28, 2022 until the next budget.

The decision was implemented. It included payment of subsidy to oil marketing companies (OMCs)/refineries in the form of Price Differential Claims (PDCs).

Subsequently, first Rs20 billion and then Rs11.73 billion were allocated for reimbursement of PDCs for the period of November 1-4, 2021 and March 1-31, 2022 through supplementary grant.

As per OGRA's assessment, the above allocated amount will be sufficient for the reimbursement of PDCs for the period of March 12-31, 2022. Due to continuously rising international oil prices, the PDCs for the first fortnight of April 2022 are projected at Rs26.47 billion. Based on this the PDC payment for the whole month of April 2022 is estimated to be around Rs53-55 billion, according to OGRA.

Petroleum Division moved a summary to ECC on April 1, 2022 for allocation of additional Rs55 billion through supplementary grant for the disbursement of PDCs for this month; however, this has not been approved by the competent authority. The summary stated that international energy markets are volatile and liquidity of OMCs/refineries is, therefore, under stress.

Petroleum Division said the availability of fuels in the country might be affected due to this stress.

Oil Marketing Companies Advisory Council (OCAC) has communicated the gravity of the situation to OGRA that also shares their concerns.

If the current uptrend continues in the energy markets, the estimated amount of PDCs payments for the period between April 16 to June 30, 2022 would be Rs136 billion, as per Petroleum Division. This is in addition to the already allocated amount of Rs31.73 billion for March 2022 and yet to be allocated amount of Rs26.47 billion for the first fortnight of April.