ISLAMABAD: The government’s ban on furnace oil-based power plants has created a financial nightmare for Pakistan State Oil as it faces payments of millions of dollars in demurrages for failing to offload furnace oil worth $100m.
Rising circular debt and now these possible payable damages of demurrages has added to PSO’s financial miseries as it already had ordered furnace oil supplies worth $100m before the government’s sudden decision to ban oil-based power plants, reported a local newspaper.
Power plants using furnace oil were among the major customers of oil marketing companies (OMCs) and were supposed to make billions of rupees payment for its supply.
PSO had issued a warning to the government that it would struggle to manage the situation as it had ordered fuel supplies worth billions of rupees and situation may worsen if oil wasn’t lifted.
According to market sources, the decision of Cabinet Committee on Energy (CCOE) to ban use of furnace oil for power generation was hasty and could lead to closure of refineries and cause financial misery for PSO.
They said the furnace oil stocks should have implemented the decision in phases for disposing furnace oil stocks.
The government had ordered PSO to ensure provision of fuel supplies for power generation purposes till December 2017, and it then placed orders for seven ships. Cargo from one-ship has already been off-loaded whereas six are said to be due in next few days and weeks.
An official said in case of orders cancellation, PSO would be required to pay a penalty. PSO’s receivables have touched Rs307b and power companies owed it Rs155b, Hubco Rs81b and Kapco Rs81b.
PSO owes its creditors payment of Rs79b which includes Rs63b to international oil and LNG suppliers.