Wednesday July 06, 2022

Oil sector facing FO ullage issues on nonpayment from power plants

June 24, 2022

KARACHI: The state-owned oil marketing company is facing ullage issues in the discharge of furnace oil (FO) cargoes owing to non-payment of dues by the power plants, SNGPL, and recent decline in consumption due to rain in various part of country, industry officials said on Thursday.

Pakistan State Oil (PSO) is yet to receive its dues against furnace oil supplies to the power sector and the gas utility. The PSO imported many cargoes of furnace oil because of strong demand, but power plants are sitting on the payments. As a result, the PSO is not releasing the heavy fuel to the power generation companies; however, it also doesn’t have any storage to keep the extra furnace oil, which is creating berthing issues at the FOTCO (Fauji Oil Terminal and Distribution Company Ltd) oil jetty.

“...the power have burnt nearly all of their stocks and are currently unable to purchase more from PSO [which is demanding them to pay up the outstanding amounts first],” Oil Companies Advisory Council (OCAC) stated in a letter to the Ministry of Energy.

The oil body pointed out that congestion at PQA was a permanent feature since the past many years due to increase in imports, availability of only one jetty, non-availability of night navigation, longer channel movement times, etc.

“The Industry is swapping the berthing sequence of vessels in order to ensure jetty utilisation at maximum level and the Jetty has not gone idle even for a single day for many months. This is fully on record and has been discussed in several high profile meetings,” the OCAC stated.

About "No instructions from Charterer" to berth PSO’s high-speed diesel vessel MT Khairpur, OCAC noted it was a one-off case because the charterer did not allow the vessel to berth on the scheduled date of 22 June, 2022.

However, PSO immediately berthed its other 1-151 vessel MT Regina in place of MT Khairpur without disturbing shipping activities as vessel agent of Khairpur had informed the PQA well in advance that the vessel could not berth and the PSO, a day prior, had also named the alternate vessel (MT Regina).

The OCAC stated that in view of the recent geopolitical situation and skyrocketing oil prices, plunging economies globally into recession, and its impact on financial condition of country and corporations, the oil industry was managing situation very well in terms of keeping their supply chain intact to ensure adequate supply of petroleum products in the country. Due to rising dollar parity with local currency and high oil prices, credit lines available with OMCs have been exhausted and additional credit facilities are not being extended, which limits the Industry capacity to manage their procurement internationally.

Companies are trying to get their credit lines enhanced from banks and the same is being requested from the Ministry of Energy and OGRA to take up the matter with concerned authorities for resolution.

Also due to ‘country risk’, the OCAC stated that the current economic scenario was making LCs either very expensive or unavailable to many industry members, while challenges were being faced by OMCs in LC opening due to reluctance of foreign banks.

“We believe that these issues will persist until the economic condition of Pakistan is improved,” the oil body stated.