ISLAMABAD: The government is finding it difficult to deal with controversies over the import of about 520,000 tons of furnace oil and a plan to launch about 100 liquefied petroleum gas (LPG) filling stations.
Both the moves have been opposed by the refining industry.
According to sources, the prime minister’s secretariat has stopped the signing of an agreement between the Pakistan State Oil (PSO) and a private LPG producer, the Associated Group, for opening 100 LPG stations in major cities and sought a report from the petroleum ministry to ascertain if rules and procedures of the Pakistan Public Procurement Authority had been adhered to.
The sources said the two companies had already agreed on a legal document to jointly develop, transport, supply, promote and sell ‘Autogas’ for vehicles through 100 PSO stations.
The agreement needs to be cleared by the petroleum ministry and the prime minister’s secretariat before formal signing.
They said that almost all the refineries had opposed the plan to import about $250 million worth of furnace oil by the PSO and payment in foreign exchange to suppliers at a time when dues of billions of rupees had not been paid to them and they were operating at less than 60 per cent of their capacity.
The refineries have threatened to stop their operation unless their dues are paid to improve the utilisation of their capacity.
The sources said that PSO would open tenders for the import of 520,000 tons of furnace oil for December and January to meet the increasing requirement for power generation.
They said the issues raised by the refineries were likely to be taken up by the standing committees of the Senate and National Assembly on petroleum and natural resources over the next couple of days.
Sources in the PSO said the largest oil supplier was independent to decide whether to procure products from the domestic market or import them. They said some refineries had stopped or reduced supplies to the PSO at the height of a circular corporate debt crisis a few months ago and they should not raise a hue and cry now when PSO’s cash flow had improved.
They said the company was bound by long-term contracts with the power sector to fulfil their oil requirements.
A petroleum ministry official said it appeared that the fuel supplier was penalising the refineries for their decision to divert their supplies to private oil marketing companies on cash payment a few months ago when their receivables from the PSO had reached record levels.
He said a lot of foreign exchange could have been saved by utilising the maximum refining capacity at home after importing cheaper crude oil rather than the expensive finished product and payment of about Rs20 billion of the longstanding dues of refineries would also have significantly reduced the circular debt.
The sources said that leading furnace oil suppliers had held detailed discussions with the PSO management over the past days in Singapore and bids would be submitted and opened on Tuesday.
In a joint communication to the petroleum ministry, all major refineries said that the industry was on the verge of ‘financial collapse’ because their operations had become commercially unviable due to cash flow constraints and PSO’s continuing payment default.
They said the PSO was importing products at the expense of the refineries without clearing the backlog for the products it had procured and consumed.
They said bad debts should not result in closure of private refineries.
Tags: lpg,pso,furnace oil import,oil refineries
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