ISLAMABAD: The country may plunge into the worst imaginable energy crisis as virtually all refineries are teetering on the verge of financial default and may close down operations by Jan 15.

All the oil refineries of the country, currently working on a negative gross revenue margin, and with their borrowing limits already exhausted, are likely to shut down within the next two weeks following their expected default to retire the existing L/Cs to import crude oil. The shutdown would mean no oil supplies for thermal power generation plants and the picture turns outright dark.

This harrowing scenario of the looming crisis was given to The News by a senior functionary of the Ministry of Petroleum and Natural Resources, speaking on condition of anonymity.

The functionary said that after generating over Rs 85 billion from banks by marketing TFCs (Terms Finance Certificates), the circular debt has again started to haunt all the players involved in the energy sector.

“Some players in the energy sector, including Oil Marketing Companies (OMCs) and refineries have termed the Pakistan Electric Power Company (Pepco) responsible for the monster of circular debt, which has surfaced again, saying this is the most disorganised company which failed to pay the dues of PSO which have amounted to Rs69.7 billion,” the source said, adding: “The refineries have also informed the government that they will not be able to get fresh loans to continue functioning, as their borrowing limits have already been exhausted.”

The functionary further said that the refineries faced with losses had not being paid Rs 60.1 billion by the government owned entity Pakistan State Oil and that the refineries have warned the government that in the event of the non-payment of their dues their operations will be closed down “because of the liquidity crisis and, moreover, their equity too would be wiped out.”

The ministry functionary told The News that officials of the Ministry of Finance have held three to four meetings with representatives of the refineries and PSO and hopefully their outstanding issues would be resolved within a week.

According to latest available figures, the Pakistan State Oil (PSO) needs to pay Rs 25.5 billion to the Pak-Arab Refinery Company (PARCO), Attock Refinery Limited (ARL), Rs 11.2 billion; Pakistan Refinery Limited (PRL), Rs 11.2 billion; National Refinery Limited (NRL) and Bosicar, Rs 4.1 billion. Currently all the refineries are only working at 50 per cent capacity.

Meanwhile, the PSO, itself suffering at the hands of others, has reportedly conveyed to Pepco, Hub Power Company (Hubco) and Kot Addu Power Company (Kapco) that their orders for fuel will not be entrained if they did not clear the huge dues of PSO which now amount to approximately Rs69.7 billion.

The PSO sources insisted that the entities have the capacity to clear their dues. In case the feared closure of all the refineries does take place by January 15, then the oil supply to country’s thermal power plants will be severely curtailed, compounding the already severe power shortage crisis in the country.

The sources in the refineries said that their capacity to import the crude oil has dwindled to almost zero and if their outstanding dues are not cleared then the government’s sovereign guarantee would be required to restore the import of crude oil.

When contacted, Finance Minister Shaukat Tarin said that no doubt that the refineries are on verge of default, but Prime Minister Syed Yusuf Raza Gilani has convened the meeting on the issue any time in next week.

Asked if circular debt has surfaced again that has started choking the oil supply chain to power thermal houses, as refineries have asked the government that they are going to close their operations by January 15 in the wake of no cash flows which is why they are unable even to further import crude oil, Mr Tarin said: “Earlier, we have managed over Rs85 billion through TFCs to break the vicious cycle of circular debt once for all, now this monster of Rs70 to Rs90 billion has again emerged just because of the inability of Pepco, which should collect its revenue on its own and does not rely on the government. Pepco should take its dues from the Sindh government and KESC, and should not remain in ‘comfort zone’.

“Pepco’s bread and butter depends upon the efficient collection of revenue and to this effect I have asked the prime minister to get Pepco out of comfort zone and direct it to take stern measures to collect its dues even from government departments.”

The minister said: “We have bailed out Pepco for many times and now it should bailout itself on its own by ensuring their efficient revenue collection. . . .Pepco should pay the dues of the PSO so that it could bail out refineries,” Tarin said.

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