Cnergyico Refinery shut down on cash flow concerns

KARACHI: Cnergyico Refinery (formerly Byco Refinery) has shut down its operation following serious cash flow problems in buying expensive crude oil from the international market, The News learnt on Tuesday.

A top executive of the company also confirmed that refinery operations have been closed down for the last one week. However, the refinery would resume its operations in a day or two after the arrival of crude oil.

Cnergyico is dependent on imported crude oil for its operation, which it buys from the global market compared to its competitors.

The company competitors, including Attock Refinery, depends on local crude oil, whereas National Refinery Limited (NRL) and Pak-Arab Refinery use Saudi crude oil under the assistance of the government. Since Pakistan State Oil (PSO) has major stakes in Pakistan Refinery, PSO helps it in crude supply.

Cnergyico’s issues are totally different from the other refineries and it faces serious issues in buying the crude oil to produce diesel, petrol and furnace oil, refinery official said.

The refinery produces 5,000 to 6,000 barrel of diesel, petrol and furnace oil per day.

The official said that the major issue was working capital constraints for the refinery as the credit lines for the refinery have not been enhanced despite the fact that crude oil prices have gone up manifold in the international market.

If six to seven months ago, there was a credit line of $200 million to buy crude oil, the same credit line was no longer sufficient to buy crude oil, which has peaked to its highest level in recent months.

A crude oil cargo of 750,000 barrel capacity cost Rs10 billion in the last months of 2021; now, the same cargo costs anywhere between Rs16 and 17 billion due to high prices of the commodity in the global market.

The official added that in order to bridge the huge gap in the cost of crude oil, the company was now faced with serious financial problems.

However, the official informed that after the closure of refinery operations for more than one week, arrangements have been made, and the refinery would likely resume its operations in a day or two.

According to sources in the oil sector, credit line issue for Cnergyico was not easy as banks were reluctant to increase the credit line for the company on the back of the Hascol, which defaulted on its financial obligations.