Petrol Shortage on the Cards After SBP Reportedly Shuts LCs Ahead of Sukuk Payment

A fuel shortage is expected to hit the country as the State Bank of Pakistan SBP) has allegedly barred the opening of all Letters of Credit (LCs) before paying off a Sukuk next Monday.

According to a national daily, LCs for the import of critical chemicals for refinery operations have not been opened, which may result in a reduction or suspension of refinery operations. This may cause a shortage of petroleum products, particularly MS Petrol. No LC will be opened until the payment of a $1 billion bond on December 6, 2022.

While the Oil Marketing Companies (OMCs) have been facing a similar problem as well, the issue of essential chemicals is dangerously critical, as delays in their import will impact the majority of refinery operations.

Local refineries use a variety of chemicals to process crude to meet the country’s specifications, but zero access to LCs critical to refinery operations has dented all progress. Some refineries have also written letters in support of chemical suppliers to ensure the import of essential chemicals.

More importantly, chemical suppliers have written to the central bank, requesting LCs for chemical imports. They warned that the lack of these chemicals could disrupt refinery operations and may cause a shortage of petroleum products, particularly MS Petrol.

The Oil Companies Advisory Council (OCAC) earlier this month had already warned authorities of a fuel shortage crisis. OCAC said fuel imports were finalized after extensive consultation and permitted to OMCs for the month of November, however, a deficit of 210,000 MT of HSD and 147,000 MT of petrol was detected.

Many OMCs had sales that were significantly higher than the projected demand and have been carrying low fuel stocks since October 2022.

The OMCs obtained their shipments in the final week of October, so the fuel was not available for use during the intended month. Similarly, the OMCs that were allowed imports during the period for November had already consumed their inventory in advance, which now critically endangers refinery operations for most of the winter season.

Currently, the government has maintained a “no shortage” stance on the matter, with OGRA saying early this month that Pakistan has enough fuel stockpiled to last a little over three weeks.

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