ISLAMABAD: The chronic power sector circular debt has for the first time spilled massively over into the entire fuel supply chain, choking ports, refineries and down to railway bogies and tanker lorries.

“Fuel storages are full to capacity, movement of tankers and bogies has come to a halt and more than 15 ships full of fuel are waiting at the port for unloading as the power sector struggles to make payments or at least uplift the product,” said a senior official. This was despite cancellation of a few import orders by the Pakistan State Oil.

Furnace oil stocks in storages stood at more than 800,000 tonnes, the highest in the country’s history and enough for more than 40 days of average consumption. “We have repeatedly cautioned the government, particularly the power ministry. We are trying to manage the crisis and approaching every forum,” sources in the Oil Companies Advisory Council (OCAC) told Dawn.

Because of the massive stocks, the local refineries are bringing down their capacity utilisation that will cause shortage of other products like petrol, diesel and jet fuels. An official said the storages of refineries and oil companies were also full to capacity at the moment.

Fuel storages full to capacity, over 15 ships waiting at port for unloading

“If the situation is not brought under control immediately, refineries would be forced to shut down because there is no way to produce petroleum products without furnace oil off-take,” a refinery official said. “The situation is very precarious at present and our operations are under threat,” he said, adding that jet fuel for commercial planes and defence aircraft are already in the trouble zone.

The official said the issue had been raised at product review meetings for three months and the director general oil had warned all concerned, but no remedial steps had been taken.

On the other side, in addition to independent power producers’ claims of over Rs414 billion, non-payments to oil companies are reported to be in excess of Rs300bn, including Rs270bn receivables of the PSO alone.

Officials at the ministries of petroleum and finance point fingers at the power sector for mismanaged planning leading to the development of new dimension to the crisis – oversupplies, storage constraints and logistic problems. The power ministry officials, on the other hand, blame the finance ministry and the power sector regulator for under-budgeting power sector subsidy and unrealistic tariff, respectively.

“Yes, there is a problem today and we are trying to manage it, but storages would take time” to come down, said Petroleum Minister Shahid Khaqan Abbasi. “There needs to be efficient management, effective planning. The power sector management should have been better.”

He said the PSO planned fuel imports on the basis of power sector’s demand. The import process involves 60 to 90 days and orders once made cannot be cancelled. But fuel off-take by the power sector is not according to their demand.

The minister said the whole issue should be taken up in a holistic manner and the National Electric Power Regulatory Authority should also be realistic to allow efficiency gains to companies to let them perform instead of passing these on to consumers.

Informed sources said the power ministry had moved a fresh case for arranging about Rs36bn, including Rs6bn for payments, on an emergency basis.

A petroleum ministry official said the power sector had been demanding 16,000-18,000 tonnes per day for consumption, but power plants were not lifting more than 8,000-9,000 tonnes.

“We spent money out of our resources and exhausted credit limits to line up shipments. Our depots are full, but neither payments are coming in nor stocks going out,” he said.

He said the fuel consumption had dropped by 30 per cent over the past year due to better availability of natural gas and higher LNG imports, but the power ministry did not plan accordingly, despite warnings by the petroleum ministry and the OCAC.

The official said the railways ministry had also written a number of letters for early discharge of their stuck up wagons, while private fuel tankers were lining up outside depots and power plants.

“Around 15 ships are waiting for offloading at ports and demurrage charges are piling up,” he said, adding the Fauji Oil Terminal Company (Fotco) management had also lodged complaints with the top leadership for port congestion on both sides – by tanker lorries and ships.

The sources said the finance ministry was reluctant to provide more funds out of its kitty until the next year budget to contain fiscal deficit.

A finance ministry official, however, said the ministry should not be expected to pay for bad planning and double fuel supplies. “Why should we pay for 40 days of fuel stocks when the mandatory requirement is 21-day coverage?” he asked.

At the receiving end were also the owners and operators of fuel tankers, standing with full occupancy outside Fotco and at various storage depots and power plants but without additional payments for the days lost.

Published in Dawn, March 16th, 2017