Refineries shook up the government once more on Monday to settle their persistent trade-credit concerns, as the industry was facing closure next month due to a lack of crude oil imports, resulting in a severe lack of petroleum products, according to The News.
International banks were still refusing to confirm letters of credit (LCs) issued by local refineries for crude oil imports.
On the other hand, oil marketing companies (OMCs) are having difficulty getting their letters of credit (LCs) for the import of petroleum products confirmed by worldwide banks.
On Monday, it was revealed during a meeting of refinery and OMC representatives with Ministry of Petroleum Division high-ups.
According to insiders, Pakistan’s oil sector is on the edge of a disaster as a result of restricted trade credit.
“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 the country’s territorial water to offload the cargo due to non-confirmation of LCs by the international banks,” a source said.
According to the source, Pakistan Refinery and National Refinery have been dealing with non-confirmation of their LCs for some time, and now Pak Arab Refinery (PARCO) has joined them.
“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 reports, refineries have managed to assure crude oil supplies for making petroleum products in one manner or another; however, they may not be able to do so in July, which is expected to be a difficult month.
Officials believe that if refineries shut down due to a lack of crude oil, the flow of diesel would be reduced in half because fifty percent of the demand for diesel is satisfied by imported diesel and fifty percent by domestically produced fuel.
The oil industry has asked the government to immediately take unusual steps to remedy this situation, claiming that the trade credit crisis will entirely engulf OMCs after refineries to avoid a devastating petroleum product scarcity.
Non-confirmation of LCs by global banks arose as a result of the country’s ‘high country risk’ classification, mostly due to depleting forex reserves.
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