Despite the recent investigation by Federal Investigation Agency into the alleged role of two prominent members of the Oil Companies Advisory Council (OCAC) in illegal exploitation of bank LC facilities, OCAC has requested the Governor, State Bank of Pakistan (SBP) to consider enhancing the trade finance facilities for the entire oil sector.
OCAC, in a letter dated January 31, 2022 to the SBP Governor, has highlighted the enhanced financing requirements of the oil marketing sector and the refineries as well, saying banks should be instructed to support uninterrupted supply of oil products, which in turn augment the country’s defence and strategic objectives.
The OCAC also said that OMCs and refineries are the backbone of the energy sector and the economy, any disruption in their business will result in catastrophic impact on the entire energy supply chain of the country.
The OCAC through this letter has further requested the Governor SBP to resolve regulatory issues with respect to Prudential Regulations of SBP for corporate customers which imposes certain restrictions on banks for extending additional financing to companies.
Giving reasons for significant increase in trade finance requirements of refineries and OMCs, OCAC said that sales of POL products in the country have increased by 24per cent as compared to last year. Motor gasoline (Petrol), high speed diesel (HSD) and furnace oil (FO) consumption is up by 14per cent, 27per cent and 38per cent respectively.
However, due to limited refinery capacity in the country, the additional demand of POL products is continuously being catered via imports. OMCs during FY 2021 had imported 10 million metric tons of POL products valuing $4.80 billion.
It added that due to opening of COVID-19 related lockdowns, there is a significant surge in global oil prices whereby year to date crude oil, MS, HSD and FO prices are up by 7pc, 66pc, 57pc and 64pc.This has resulted in manifold increase in OMCs non funded facility requirements.
“It is anticipated that due to opening of lockdowns in various countries and supply chain disruptions coupled with the tense geopolitical situation in the Middle East & Ukraine the international POL prices are projected to increase in upcoming months,” said OCAC.