CIRCULAR DEBT CAUSING LIQUIDITY CONSTRAINTS FOR REFINERIES---COUNTRY TO CONSUME OVER 22 M TONS OF OIL THIS YEAR
INTERVIEW; KALIM A SIDDIQI
PRESIDENT PETROLEUM MARKETING BUSINESS
BYCO PETROLEUM PAKISTAN LIMITED (BPPL) (FORMERLY BOSICOR PAKISTAN LIMITED)
Sep 27 - Oct 3, 2010
Mr. Kalim A. Siddiqui is President of Petroleum Marketing Business in Byco Petroleum Pakistan Limited (BPPL). Mr. Siddiqui has taken this responsibility from 1st April 2009 to lead Byco's Petroleum Marketing Business initiatives to become a dominant market player.
Mr. Siddiqui, holding a Bachelor in Chemical Engineering and a Masters in Chemistry, has broad-based, global experience in business development, system re-engineering and streamlining processes, managing supply chain, marketing and sales, overall operations management in the oil industry for over 30 years holding various senior management positions. He was in PSO before joining Byco Group, where he served for nearly eight years in different management roles. As the Managing Director, being his last position in the company, he ensured continuity of supply chain to meet country's fuel needs for private and public sectors despite difficult economic conditions.
Mr. Siddiqui has served as Chairman Oil Companies Advisory Committee (OCAC) and has held directorships in various reputable companies, & professional and educational institutes including Pakistan Refinery Limited, Pak-Arab Pipeline Company, Asia Petroleum Limited, Agrimall, Pak-Grease Manufacturing Company Limited, Petroleum Institute of Pakistan, Pakistan Advertisers Society and Lahore University of Management Sciences. Before joining PSO, he served in Caltex (now Chevron) for 20 years locally as well as internationally. His international assignments were located in the USA, Vietnam and Australia. In Caltex he has dealt with fuel & lube marketing, lube product development and production, LPG marketing, and product engineering activities. He also worked for three years in the UK with Howden Engineering Company, Burmah-Castrol Refinery, North West Water Authority and A.P.V Company before coming to Pakistan in 1980.
Kalim A Siddiqi while explaining the recent petrol crisis in Punjab and Quetta said there were three four reasons behind that chaos. The first and foremost factor was the closure of PARCO as the flood waters had damaged its infrastructure. The closure of the largest refinery of the country which has a capacity of 50,000 tons a naturally resulted in reducing production and supplies hence the impact was quite natural. Besides PARCO closure, the flash floods had their own devastations which seriously damaged the road infrastructure. The road between Jacobabad and Balochistan was also washed away by the flood waters. Another problem which aggravated the situation was the logistic movement disturbed by the flood waters. Those vehicles which had gone from South to North were stuck up there due to damaged roads which also resulted in shortage of vehicles. A seasonal factor of Eid also played a role in the crisis. Actually on Eid occasions those tankers destined from south to north also stayed back to celebrate the occasion which usually affect availability of vehicles, Kaljm said.
Besides the natural calamity another factor contributing in shortage of fuel was the piling up circular debt as the refineries located in South could have played a positive role in overcoming the crisis but the liquidity constraints stemmed from held up bills of the refinery did not allow them to produce enough to compensate the oil shortage.
Discussing the overall oil situation in the country Kalim said refineries were looking towards new pricing formula which may help improve margin of the refineries was still in pending despite lengthy discussions with the government leaving no interest for the refineries to produce surplus production.
When asked to elaborate the circular debt situation how it affected the refineries, Kalim said actually the most affected segment of the oil regime are the refinery sector because whosoever is on the tail end had to bear the brunt. For example the oil marketing companies have the lever to pressure the consumers to pay their outstanding otherwise they would suspend the supplies, the consumers mostly power generating companies can press the utilities to stop generation if they were not paid the dues while the utility companies also have the facility to disconnect the power supplies to the defaulters, while refineries being at the tail end have no option but to continue to supply to remain in the business because it cannot pass on the burden of the held up bills, hence the most aggrieved party of the stuck corporate debt is the refinery sector.
Actually out of the total stuck corporate debt, oil companies owe around Rs120 billion to the refinery sector which is a major cause of liquidity crunch faced by the refinery sector. When the refineries are not getting back their dues how they are surviving?
Kalim with a smile on his face said actually the refineries were paid a little whenever before they close or collapse they are given oxygen hence they are struggle to survive through one way or the other unless the dues were cleared.
Pakistan has a refining capacity of 13.7 million tons against more double of the total requirement, as last year Pakistan consumed a total of 30 million tons of oil.
As far as installed capacity was concerned it was around 13 million tons but in exact terms it production capacity is not more than 65 percent of the installed capacity, hence country had to import over 12-13 million of finished products last year. When asked about the details of the finished product we import, Kalim said that at present the deficit we are facing in fuel oil and diesel and even petrol which we have to import to cater to the need of the country.
Referring the last meeting of the product review committee which determine how much crude is to import but the refineries could not come up to the level because of circular debt that was another reason for petrol shortage in the country.
Regarding scope for further investment in refinery sector, he said a lot of room for improvement is still there because at present refineries are producing 7-8 million tons locally that means that we are still importing 11-12 million tons of finished products indicating that refinery sector needs further expansion. This year too we have too country is well poised to consumed 21-22 million tons hence we have to import to meet the petroleum needs.
When asked about the forthcoming BYCO refinery and its capacity forthcoming byco will add 4.5-5 million tons to production capacity that hopefully make a difference and prove an effective import substitute for the petroleum sector.
Kalim was however confident that future outlook of the refinery sector is encouraging and the ever growing consumption in any way is a silver lining for the economy as well as the petroleum sector.