LAHORE: Prime Minister Muhammad Nawaz Sharif Saturday took strict notice of the fuel shortage in various parts of the country and suspended four officials concerned.
After arriving from Saudi Arabia, the Prime Minister called a meeting at the airport and took decisions to improve the situation on immediate basis.
The four immediately suspended officers responsible for the crisis included Secretary Petroleum Abid Saeed, Additional Secretary Petroleum Naeem Malik, DG Oil C.M. Azam and Managing Director Pakistan State Oil (PSO) Amjid Janjua, said a press release.
The provincial governments were directed to check sale of petrol in black and expedite its supply and delivery.
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Petrol crisis: Oil companies, govt trade accusations of culpability
KARACHI / ISLAMABAD:
Oil companies and government officials continued to trade accusations on Friday, with neither side willing to accept culpability for the sudden crunch in petrol supplies in the northern half of the country.
Both sides agree on one fact: there was an unprecedented surge in demand for petrol after the government decided to reduce prices. At a press conference on Friday night, Petroleum Minister Shahid Khaqan Abbasi said that demand had surged by 25% after the 27% drop in oil prices from their peak in June 2014. Both sides also agree that the oil companies did not have the legally required 20 days’ worth of inventory to help deal with supply disruptions. But that is where the agreement ends.
Government officials claimed that the lack of inventory was the sole reason for the petrol shortage. Oil and Gas Regulatory Authority (Ogra) Chairman Saeed Ahmad Khan announced at a press conference on Friday that Ogra would be serving notices to oil companies for failing to meet the legally required levels of inventory.
But industry officials point out that if inventory was the only issue, then there would also be a shortage of diesel and the shortages would be uniform across the country. “The industry cannot be blamed for this situation. There is no shortage of diesel anywhere and petrol is available at all the pumps in Sindh and Balochistan,” said Aftab Husain, CEO of Pakistan Refinery and head of the Oil Companies Advisory Council (OCAC), an industry group.
Husain explained that one ship carrying 50,000 tons of oil products was delayed by a few days. “This, along with heavy fog in Punjab, hampered transportation and disrupted the supply chain,” he said.
Diesel is transported through a cross-country pipeline originating at Port Qasim, whereas petrol is transported mostly through trucks going north from Karachi.
Husain admitted that the oil industry often does not carry the full 20 days of required inventories, especially when prices are declining, but blamed government pricing policy for the situation. “Petroleum prices are revised once a month and whenever the price drops, we book a loss due to the reduced value of our petroleum stock,” he said. “Complete deregulation of prices is the answer. But whenever we talk about it everyone starts writing against us.”
Ogra acknowledges the commercial difficulties faced by oil companies when prices are declining, but appears in no mood to accept this as an excuse for not complying with regulatory requirements, said the regulatory body’s chairman.
However, even though he blamed the oil companies for the current crisis, Khan agreed with their stance that oil and liquefied petroleum gas (LPG) prices should be deregulated. “In the beginning it will not be pleasant, but it will be good in the long run due to market competition,” said the Ogra chairman.
Yet even though everyone agrees that the oil price drop resulted in an unprecedented surge in demand, the government is planning on decreasing prices even further. The petroleum minister announced at his press conference that prices could be reduced by more than Rs5 per litre in February. Abbasi also appeared to insist that the privately owned oil marketing companies were more responsible for the supply crunch than the state-owned PSO, even though PSO has a 65% share in the petrol market.
Sales of petrol tend to rise particularly sharply on the first day of a government-mandated price cut. “Petrol sales hit 40,000 tons on January 1,” admitted the petroleum minister.
The current crisis appears to have been worsened by the fact that alternatives to petrol – specifically compressed natural gas (CNG) – have largely been absent from the market due to a shutdown of gas supply to CNG stations in Punjab. Abbasi said that if the weather did not turn too cold, the government might consider reopening some of the supply of natural gas to CNG stations. Natural gas is the primary heating fuel in most of the affluent parts of urban Pakistan.
Meanwhile, at a hearing at the Senate finance committee on Friday, Federal Finance Secretary Waqar Masood suggested that the current shortage is just the tip of the iceberg and that the country could be facing a rough six weeks before the crisis is fully resolved. Masood’s timeline is far longer than the 10 to 12 days promised by cabinet members during their speeches in the National Assembly on the same day.
The finance secretary pointed out that there is a 45 day lag between when an oil company opens a letter of credit (LC) with a bank for oil imports and when the petrol is actually delivered to petrol pumps across the country. The finance ministry has released Rs17 billion to the state-owned PSO to handle its LC requirements, but admits the company needs Rs27 billion for this month alone.
Masood admitted that the inter-corporate circular debt in the energy industry, caused in large part by government entities refusing to make the full payments they owe power companies, was at least partially the cause of the crisis. PSO has defaulted on at least Rs110 billion in LCs owed to its foreign suppliers. The finance secretary claimed that the government had been making timely payments of the subsidies it owes to power companies, which in turn owe PSO money for the fuel they use to generate electricity.
However, he admitted that the finance ministry refused to pay amount related to the cost of theft, meaning that the power companies still do not have enough money to pay PSO. When the power companies fail to pay PSO on time, PSO defaults on its payments due to foreign suppliers, who then refuse to supply more fuel without payments made upfront in cash.
The finance ministry has paid out Rs222 billion power subsidies so far this fiscal year, said Masood. The finance ministry has been urging the water and power ministry to crack down on electricity theft so that the circular debt problem can end once and for all.
Sources told The Express Tribune that another reason for the supply crunch was Finance Minister Ishaq Dar’s refusal to allow state-owned PSO to buy US dollars to make oil payments to its international supplies in December, because doing so would have reduced the country’s foreign exchange reserves below the $15 billion mark the minister was targeting.
Despite hearing that the drop in oil prices was at least partially responsible for the sudden supply shortage, the Senate finance committee passed a resolution demanding that the government reduce domestic oil prices even further, to fully match the global price drop.
Published in The Express Tribune, January 17th, 2015.
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By Zafar Bhutta / Saad Hasan / Shahbaz Rana / Photo: Shahbaz Malik
Published: January 17, 2015
Customers throng a filling station in Lahore amid severe dearth of petrol. PHOTO: SHAHBAZ MALIK/EXPRESS
KARACHI / ISLAMABAD:
Oil companies and government officials continued to trade accusations on Friday, with neither side willing to accept culpability for the sudden crunch in petrol supplies in the northern half of the country.
Both sides agree on one fact: there was an unprecedented surge in demand for petrol after the government decided to reduce prices. At a press conference on Friday night, Petroleum Minister Shahid Khaqan Abbasi said that demand had surged by 25% after the 27% drop in oil prices from their peak in June 2014. Both sides also agree that the oil companies did not have the legally required 20 days’ worth of inventory to help deal with supply disruptions. But that is where the agreement ends.
Government officials claimed that the lack of inventory was the sole reason for the petrol shortage. Oil and Gas Regulatory Authority (Ogra) Chairman Saeed Ahmad Khan announced at a press conference on Friday that Ogra would be serving notices to oil companies for failing to meet the legally required levels of inventory.
But industry officials point out that if inventory was the only issue, then there would also be a shortage of diesel and the shortages would be uniform across the country. “The industry cannot be blamed for this situation. There is no shortage of diesel anywhere and petrol is available at all the pumps in Sindh and Balochistan,” said Aftab Husain, CEO of Pakistan Refinery and head of the Oil Companies Advisory Council (OCAC), an industry group.
Husain explained that one ship carrying 50,000 tons of oil products was delayed by a few days. “This, along with heavy fog in Punjab, hampered transportation and disrupted the supply chain,” he said.
Diesel is transported through a cross-country pipeline originating at Port Qasim, whereas petrol is transported mostly through trucks going north from Karachi.
Husain admitted that the oil industry often does not carry the full 20 days of required inventories, especially when prices are declining, but blamed government pricing policy for the situation. “Petroleum prices are revised once a month and whenever the price drops, we book a loss due to the reduced value of our petroleum stock,” he said. “Complete deregulation of prices is the answer. But whenever we talk about it everyone starts writing against us.”
Ogra acknowledges the commercial difficulties faced by oil companies when prices are declining, but appears in no mood to accept this as an excuse for not complying with regulatory requirements, said the regulatory body’s chairman.
However, even though he blamed the oil companies for the current crisis, Khan agreed with their stance that oil and liquefied petroleum gas (LPG) prices should be deregulated. “In the beginning it will not be pleasant, but it will be good in the long run due to market competition,” said the Ogra chairman.
Yet even though everyone agrees that the oil price drop resulted in an unprecedented surge in demand, the government is planning on decreasing prices even further. The petroleum minister announced at his press conference that prices could be reduced by more than Rs5 per litre in February. Abbasi also appeared to insist that the privately owned oil marketing companies were more responsible for the supply crunch than the state-owned PSO, even though PSO has a 65% share in the petrol market.
Sales of petrol tend to rise particularly sharply on the first day of a government-mandated price cut. “Petrol sales hit 40,000 tons on January 1,” admitted the petroleum minister.
The current crisis appears to have been worsened by the fact that alternatives to petrol – specifically compressed natural gas (CNG) – have largely been absent from the market due to a shutdown of gas supply to CNG stations in Punjab. Abbasi said that if the weather did not turn too cold, the government might consider reopening some of the supply of natural gas to CNG stations. Natural gas is the primary heating fuel in most of the affluent parts of urban Pakistan.
Meanwhile, at a hearing at the Senate finance committee on Friday, Federal Finance Secretary Waqar Masood suggested that the current shortage is just the tip of the iceberg and that the country could be facing a rough six weeks before the crisis is fully resolved. Masood’s timeline is far longer than the 10 to 12 days promised by cabinet members during their speeches in the National Assembly on the same day.
The finance secretary pointed out that there is a 45 day lag between when an oil company opens a letter of credit (LC) with a bank for oil imports and when the petrol is actually delivered to petrol pumps across the country. The finance ministry has released Rs17 billion to the state-owned PSO to handle its LC requirements, but admits the company needs Rs27 billion for this month alone.
Masood admitted that the inter-corporate circular debt in the energy industry, caused in large part by government entities refusing to make the full payments they owe power companies, was at least partially the cause of the crisis. PSO has defaulted on at least Rs110 billion in LCs owed to its foreign suppliers. The finance secretary claimed that the government had been making timely payments of the subsidies it owes to power companies, which in turn owe PSO money for the fuel they use to generate electricity.
However, he admitted that the finance ministry refused to pay amount related to the cost of theft, meaning that the power companies still do not have enough money to pay PSO. When the power companies fail to pay PSO on time, PSO defaults on its payments due to foreign suppliers, who then refuse to supply more fuel without payments made upfront in cash.
The finance ministry has paid out Rs222 billion power subsidies so far this fiscal year, said Masood. The finance ministry has been urging the water and power ministry to crack down on electricity theft so that the circular debt problem can end once and for all.
Sources told The Express Tribune that another reason for the supply crunch was Finance Minister Ishaq Dar’s refusal to allow state-owned PSO to buy US dollars to make oil payments to its international supplies in December, because doing so would have reduced the country’s foreign exchange reserves below the $15 billion mark the minister was targeting.
Despite hearing that the drop in oil prices was at least partially responsible for the sudden supply shortage, the Senate finance committee passed a resolution demanding that the government reduce domestic oil prices even further, to fully match the global price drop.
Published in The Express Tribune, January 17th, 2015.
==================
Schlumberger To Lay Off 9,000 Workers
January 16, 2015
Oilfield services giant Schlumberger plans to cut 9,000 jobs as the global collapse in crude oil prices crimps production in 2015 and perhaps even longer.
The cuts — nearly 8% of Schlumberger's 120,000 workers, were announced Thursday "to better align with anticipated activity levels for 2015,'' the company said.
With production surging and waning growth, the world is awash with oil. That's led to a collapse in prices that's taken benchmark crude price down more than 50% since last June. Thursday, West Texas Intermediate fell 4.6% to $46.22 a barrel, while Brent crude slipped 2% to $47.67. Yet many forecasters say crude isn't close to bottoming.
"In this uncertain environment, we continue to focus on what we can control,'' said CEO Paal Kibsgaard. "We have already taken a number of actions to restructure and resize our organization that have led us to record a number of charges in the fourth quarter. We are convinced that performance must now be driven by an accelerated change in the way we work through our transformation program."
The layoffs come despite a relatively solid fourth-quarter earnings report in which the Houston-based Schlumberger increased revenue 6% to $12.6 billion and boosted earnings 11% to $1.94 billion. Schlumberger is also boosting its stock dividend 25%.
Houston-based energy explorer Apache Corp. began laying off about 5% of its workers earlier this week.
..
Read more: http://www.drillingahead.com/page/schlumberger-to-lay-off-9-000-workers?xgs=1&xg_source=msg_share_page#ixzz3P4ZZEWC6
===========================
Ahmad Fraz Khan
Published about 7 hours ago
A petrol pump seen deserted due to the shortage petrol.— Online/File
A petrol pump seen deserted due to the shortage petrol.— Online/File
LAHORE: The country is left with oil stock of less than three days and its import has totally dried up as the Pakistan State Oil defaults on its payments and says it will need at least Rs100 billion and eight weeks’ time to retrieve the situation.
According to PSO officials, no oil consignment has arrived at any port in the country for the past two weeks, whereas usually six to eight ships, each carrying 65,000 tons of oil, come to the country in a fortnight.
“The company has exhausted all its overdraft (OD) facilities over the past few weeks. All its LCs (letters of credit) lines have been choked as its total receivables now run over Rs215bn,” a PSO official said, adding that the power sector owed Rs190bn and PIA Rs12.5bn.
PSO defaults on its payments, needs Rs100 billion to retrieve situation
The company’s default on its payments to a few local banks has made all others cautious; no bank is now ready to underwrite PSO’s LCs. Exporters are also not ready to trust the PSO with their commodity without hard cash or bank guarantees.
“The piecemeal payments being made by the government cannot provide any relief to PSO given the size of default. On Thursday, the government released Rs17bn, but like all such previous payments, it went into retiring overdue drafts, making no impact on fresh imports.
Also read: Petrol shortage continues for third consecutive day
“The company needs at least Rs100bn immediately to set things right. Even if it gets the required money, it will need another two months to line up imports and restore the supply line,” the official said.
“Apart from the financial crisis, it is ad hocism at the top that has landed the PSO into this ditch,” said another official.
“With the acting managing director sitting at the top of the company and being more interested in import of liquefied natural gas (LNG) — a new pastime of the PML-N — PSO has been sliding deep into crisis,” he said. “No one really knows how a bankrupt PSO will import LNG. Why has it not stopped supplies to the defaulting companies, be it IPPs (independent power producers) or the PIA?
“Why did the PSO remain content on small payments of a few billion rupees over the past year or so, which made no difference to the import?
“Why did other oil marketing companies (Shell, Total, Caltex), which are duty bound to keep stocks of at least two weeks, fail in their essential business obligation?” the official wondered.
All these questions, he added, needed to be answered and should be made part of an investigation into how the company had stumbled into the current crisis.
“The government is pressing local refineries to supply oil to the PSO on credit. If this happens, there may be some temporary relief in supplies in the days to come. But the situation will not improve in the long run unless the government arranges Rs100bn, and makes sure that the company gets regular payments from all its buyers,” the official said.
Published in Dawn, January 17th, 2015
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