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The country's oil and gas sector is reportedly facing billions of loss every day due to onslaught of Covid-19 pandemic which has slowed economic activities across the world, sources close to Prime Minister Special Assistant on Petroleum told Business Recorder.

"The country's five refineries have sought a bailout package to survive at this critical time as refineries cannot bear further losses," the sources added.

The Covid-19 has not only impacted all business activity but also adversely affected the oil and gas supply chain resultantly with low demand/ consumption, oil prices have slumped. The exogenous shocks coupled with the impact of the pandemic on Pakistan characterized by the economic slow down and ongoing lockdown has resulted in asymmetries in the supply chain of oil and gas in the country including upstream, midstream and downstream activities.

According to sources, the economic impact on all sectors of the hydrocarbon chain shows that the upstream activities include oil and gas exploration and drilling and production which are being looked after by the Directorate General of Petroleum Concessions. The estimated loss to this sector is Rs 7.579 billion on account of reduction in sales and Rs 947 million on royalty on oil and gas.

The refineries are facing inventory losses of about Rs 1 billion per month due to reduction in demand of gasoline/ petrol and diesel fuel in the country which will resultantly impact government revenues i.e. Petroleum Levy, windfall and discount on crude to the extent of Rs 6 billion per month. Moreover, due to reduced off-take of RLNG, the demurrages incurred on LNG imports in March 2020 were $ 650,000.

The downstream activities include transmission and distribution of natural gas by SNGPL and SSGCL, operations of Oil Marketing Companies(OMCs) and LPG marketing companies are also facing difficulties. SSGCL's revenue loss per day during March 2020 was Rs 215 million per day and for April, 2020 it is Rs 314 million per day. For SNGPL the revenue loss during March 2020 was Rs 324 million and for April it is Rs 430 million per day due to reduced demand of natural gas and RNLG. The OMCs are facing inventory losses to the tune of Rs 9 billion per month which will result in reduction of government revenue i.e. Petroleum Levy by an estimate of Rs 4 billion per month. The decrease of LPG supplies and its marketing will adversely impact the sector by Rs 70 million per month.

Last week representatives of five refineries held a detailed meeting with Prime Minister Special Assistant on Petroleum Nadeem Babar and conveyed that they are shutting down refineries due to massive losses.

The three refineries have declared results of three quarters which show substantial losses. The Pakistan Refinery Limited has suffered Rs 5.08 billion loss in nine months, whereas National Refineries posted Rs 8 billion loss and ARL's inventory loss was recorded at Rs 3.3 billion.

Refineries had submitted a proposal for up-gradation for which incentives were also sought from the government but during the meeting with Special Assistant, refineries informed that up-gradation is totally irrelevant at this juncture as they are not even able to survive with current level of losses.

The sources said, refineries shared the loss details till March 2020 but further heavy losses are projected by the end of current month.

"Refineries conveyed in plain words that they cannot even discuss long-term policy like up-gradation in current circumstances," the sources said, adding that refineries have also highlighted non-cooperation from OMCs with respect to lifting of their products and LNG stocks.

Copyright Business Recorder, 2020

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