Despite large profits in the past fiscal year, Pakistan State Oil (PSO) continues to face the challenge of circular debt due to customers’ inability to pay their bills on time.
Recently, the company announced its highest-ever after-tax profit of Rs 29.1 billion for fiscal year 2020-2021. Even if he claims to have improved his balance sheet, the debts of PSO on all customers reached Rs362 billion.
PSO recovered Rs 25.8 billion from the power industry as well as late payment surcharge income.
At present, PSO has to recover 362 billion rupees from its customers. Previously, the government had made a payment to independent power producers (IPPs) who made the payment to PSO.
For this reason, the outstanding amount had fallen to Rs243 billion. However, they continue to rise and are now reaching the Rs 262 billion mark.
The management of the company reduced the financial costs by 3.2 billion rupees, which further supplemented the profitability of the company. However, it still faces a critical period due to unprecedented high debts.
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PSO supplies oil to different customers and now a new phenomenon in the form of circular debt has arisen because of liquefied natural gas (LNG).
Of the total, PSO is to receive Rs 185 billion from the power sector as the supply of oil for power generation.
The production companies are the main defaulters who have to pay 138 billion rupees. Hubco owes Rs 38 billion, while Kapco owes Rs 8.4 billion.
PSO has also played a central role in the LNG sector. The company has entered into another deal with Qatar Petroleum as part of a G2G deal to supply an additional three million tonnes of LNG for a period of 10 years.
This contract will add additional volumes to an already signed 15-year long-term purchase-sale (SPA) contract, making PSO the country’s largest LNG supplier with a supply base of 6.75 million tonnes per year.
However, the company faces a circular debt issue in this industry. It supplies LNG to Sui Northern Gas Pipelines Limited (SNGPL) for distribution to consumers.
SNGPL has to pay Rs 139 billion to PSO for the LNG supply. This is a new addition in the chain of circular debt in the oil and gas sectors.
Pakistan International Airlines (PIA) is another major PSO defaulter. PSO supplies jet fuel to the airline to continue operations. However, he was unable to pay PSO dues due to the fuel supply.
PIA must pay PSO 21.5 billion rupees. The state oil company is expected to receive 9.2 billion rupees from the government due to price differential claims.
Despite PSO’s multibillion rupees being blocked due to non-payment of dues from his customers, he made large payments to oil refineries in Pakistan.
PSO has to pay 23 billion rupees to oil refineries. She owes 11 billion rupees to Pak-Arab Refinery Company (Parco), 4.5 billion rupees to Pakistan Refinery Limited (PRL), 2 billion rupees to National Refinery Limited (NRL), 3.7 billion rupees to Attock Refinery Limited (ARL), 276 million rupees to Byco and Rs1 billion Enar.
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PSO is also the largest importer of oil. It has an agreement with Kuwait Petroleum. He is due to pay the company 129 billion rupees in LC payments for oil and LNG.
The financial results demonstrated the agility and strength of PSO across its diversified portfolio despite the difficult economic scenario and recurring waves of the pandemic.
PSO largely dominates the market, delivering phenomenal performance above the industry average.
Despite exceptional growth, the company posted exceptional growth of 21.9% in liquid fuels over the past year with volumes reaching 9.2 million tonnes, reaching a market share of 46.3% in FY21 versus 44.3% in FY20.
PSO also reached its highest volume of 7.6 million tonnes in the white petroleum segment despite the contraction of the jet fuel and kerosene industry, with a market share of 45.2% during FY21 against 44% during FY20.
PSO set an all-time high in Motor Gasoline (MoGas), reaching volumes of 3.5 million tonnes, an increase of 21.2% over FY20, resulting in market share 41.3% compared to 38.7% last year.
The company also carried out a strong close of Hi-Cetane Diesel, achieving volumetric growth of 21.1% versus industry growth of 17.5%, resulting in volumes of 3.7 million. tonnes in fiscal year 21.
Posted in The Express Tribune, August 29e, 2021.
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