Refineries once again shook up the government to resolve their lingering trade credit issues as in the absence of crude oil imports the industry was facing a shutdown next month, resulting in an acute shortage of petroleum products, The News learnt on Monday.https://ff5b1984769a4368d6250e084c793058.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
The foreign banks were still not confirming local refineries’ letters of credit (LCs) for crude oil imports. On the other hand, oil marketing companies (OMCs) are also struggling to get their LCs confirmed by the global banks for import of petroleum products.
It was revealed during the meeting of the representatives of refineries and OMCs with the high-ups of the Ministry of Petroleum Division on Monday. According to sources, the issue of blocked trade credit is on the verge of turning into a crisis for Pakistan’s oil sector.
“The severity of the issue can be gauged from the fact that even state-owned Pakistan State Oil has now started feeling the heat as two of its cargos carrying petroleum products are anchored in the international waters and can’t enter in the country’s territorial water to offload the cargo due to non-confirmation of LCs by the international banks,” a sources said.
According to the source, Pakistan Refinery and National Refinery have already been struggling with the issue of non-confirmation of their LCs and now Pak Arab Refinery (PARCO) has also joined the club.
“Petroleum Division officials have been informed that refineries are now heading towards closing down their operations and there will be a serious shortage of petroleum products in the country in July, if the issue is not resolved,” the source added.
According to sources, refineries have somehow managed, in one way or the other, to ensure crude oil supply for manufacturing of petroleum products; however, they may not be able to pull that feat in July, which is going to be a very tough month. Officials say if the refineries shut down their operation due to non-availability of crude oil, the supply of diesel would be cut by half as the total demand of the diesel is met by fifty percent imported diesel and fifty percent locally produced diesel.
The oil sector has urged the government to take some urgent and out of the way steps to resolve this issue as the trade credit crisis would engulf OMCs completely after refineries to avert a crippling shortage of petroleum products. The non-confirmation of LCs by global banks surfaced due to ‘high country risk’ status after mostly because of dwindling forex reserves.