Pakistan: PSO Survives Difficult Month

In the middle of September, sources said the launch of Term Finance Certs had been delayed by more than two weeks, resulting in problems for PSO, which is the largest importer of furnace oil and diesel in the country. A Finance Ministry official acknowledged the launch of TFCs had been delayed due to procedural formalities.

According to the sources, PSO was facing a severe liquidity shortage due to a money blockage caused by circular debt. Although the Finance Ministry had claimed to have finalised the deal to issue TFCs valued at Rs 89 billion, it was later learned the deal was facing procedural difficulties. A senior PSO official confirmed that payment for four shipments of furnace oil that had been imported from the UAE, were overdue on September 17 and the company therefore had  not been in a position to clear the amount.  Many contractors would back off from entering into any kind of supply-deal with Pakistan in the future and some might even impose penalties between 0.5 percent and 1.0 percent for future contracts with PSO. 

However it emerged this week that the  Pakistan State Oil (PSO) has bought by tender 250,000 tonnes of 0.5 percent sulphur gas oil for delivery from October to December, traders said from Vitol. PSO secured two 50,000-tonne cargoes in each of October and November, and one cargo for December.  The October cargoes fetched a premium of $2.79 a barrel to Middle East quotes on a cost-and-freight basis, while the November and December lots were awarded at premiums of $3.07 and $3.37 a barrel respectively. The company had requested to buy 235,000-250,000 tonnes of 0.5 percent gas oil for the fourth quarter, with an option to buy an additional 50,000 tonnes.

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