Page 13 - AsianOil Week 06 2023

AsianOil POLICY AsianOil

Pakistani oil industry teeters on collapse

over liquidity crisis, oil shortage

PAKISTAN PAKISTAN’S association of oil companies has enough for about 18 days’ worth of imports
warned the government that the oil industry is for Pakistan, which relies heavily on oil and
The industry cannot on the brink of collapse due to its inability to gas imports to meet its energy needs. The
arrange new letters of arrange new letters of credit (L/Cs) for new oil energy supply situation in recent weeks has
credit. deliveries and recover the losses incurred by forced the government to order reduced
exchange rate adjustments. usage of electricity, and power outages have
Since the Pakistan government last month hit much of the country.
removed the dollar cap on the rupee, as According to the OCAC, the anticipated
demanded by the International Monetary Fund losses will have a drastic impact on industry
(IMF), the value of the currency has taken a criti- profits. The letter to OGRA and the ministry
cal plunge, falling to some 276 to the dollar in the urged that urgent steps be taken to adjust the sys-
interbank market and creating yet another crisis tem of compensation for foreign exchange losses
for the country. with L/Cs and “ensure that exchange losses of the
Removing the cap was a stipulation set by the sector are fully reimbursed if the viability of the
IMF if it is to continue to provide Pakistan with industry and supplies to retail outlets are to be
financial assistance. The IMF also insisted that ensured.”
the government halt fuel subsidies. In early February the head of consumer sales
In a letter to Pakistan’s Oil and Gas Regula- at Cnergico PK wrote the Ministry of Energy
tory Authority (OGRA) and the Ministry of to say that its refinery, the largest in Pakistan,
Energy in early February, the Oil Companies would be shut from February 2 to February 10
Advisory Council (OCAC) said the oil industry due to a shortage of crude oil and that reopening
is facing losses worth billions of rupees because depended on the anticipated arrival of a ship-
their existing L/Cs are expected to be settled ment of crude oil.
using the new exchange rates while the crude oil The OCAC letter said: “In order to ensure the
that those letters covered has already been pro- import of adequate products into the country,
cessed and sold. it is important to increase the trade finance L/C
The OCAC informed OGRA that the limits of the industry in line with the current
increase in oil prices and continual deprecia- oil prices, exchange rate and the volumes being
tions in the rupee over the last 18 months had handled by each company. The industry is on the
resulted in inadequate trade finance limits from brink of collapse if immediate steps are not taken
the banks to the oil industry. The latest devalua- in respect of the above.”
tion had caused L/C limits by 15-20%. Meanwhile, Pakistan is reported to have
Islamabad has restricted L/Cs due to fall- reached an agreement with Russia regarding the
ing foreign exchange reserves, which at the import of crude oil at reduced rates, beginning
end of January stood at a little over $3bn, in April. ™

Week 06 10•February•2023 www. NEWSBASE .com P13