Islamabad: Given green light to import LNG, Saudi Arabia finally agrees to provide US$3.2 billion oil facility from next financial year.
The deal in maturing deferred payment facility from Saudi Arabia has also pushed Pakistan into IMF deal.
Pakistan and Saudi Arabia sign financing agreement (FA) had inked financing agreement for import of petroleum products, crude oil and LNG on February 17, 2019 during the visit of Crown Prince of Kingdom of Saudi Arabia in Islamabad.
However, LNG import deal was not part of this agreement. Later, Pakistan agreed to include deal of LNG under Saudi Development Fund.
‘Import LNG first, then we will execute oil deferred payment facility, Saudi Arabia authorities had told Pakistani side.
Pakistan was looking towards Qatar to secure more LNG deals that had annoyed Saudi Arabia. Qatar and Saudi Arabia have been arch rivals in Middle East. Pakistan has been market for Saudi oil since decades. But, Qatar had captured market by exporting gas. LNG had replaced furnace oil fuel in power sector.
Sources told Newztodays.com that Pakistan wanted to import petrol and diesel but Saudi Arabia wanted to export furnace oil to Pakistan on deferred payment. This conflict also led to delay in maturing Saudi oil facility on deferred payment, officials added.
Under FA, government of Pakistan will import crude oil, LNG and petroleum products from Saudi Arabia amounting to around US$ 3.2 million annually which amounts US$270 million per month on a 12 month deferred payment basis. However, the Financing Agreement may be extended to cover two more years upon the consent of the two parties. Government of Pakistan will provide an unconditional and irrevocable sovereign financial guarantee.
However, Pakistan faced delay in maturing deal as Saudi Arabia did not want Pakistani oil regulator and other agency HDIP involved in test of petroleum products to be imported from Saudi Arabia under deferred payment facility. The other issue being faced by Petroleum division is to seek relaxation
Under financing agreement, Pak Arab Refinery Company (Parco) and National Refinery Limited (NRL) will procure crude oil from Saudi Aramco (SA) while Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) would procure petroleum products and LNG respectively from Saudi Aramco Product Trading Company (ATC).Parco and NRL are already procuring crude oil from Saudi Arabia under long term arrangements while PSO will have to enter into a Sale Purchase Agreement (SPA) with ATC for import of petroleum products.
PSO is a public sector company and bound import petroleum products in line with the provision of public procurement rules 2004 and however, the company cannot follow open competitive bidding in the case of supply under FA. But, rule-5 of the PPRA rules provides exemption in the cases where federal government is involved in international and inter-governmental commitments.
HDIP laboratory conducts quality test of products at the discharge port prior to unloading. However, during negotiating the terms and conditions of the Sales Purchase Agreement (SPA) with PSO, ATC has insisted for procurement to be based on CFR/CIF Trade terms in line with incoterms 2010 published by the international chamber of commerce (ICC) as amended from time to time.
Under these terms, quality will be determined and finalized at the load port based on test results of the independent laboratory. Consequently, the existing procedure for sampling and testing of imported petroleum product intimated by Ogra from time to time will have to be relaxed in relations to supplies arranged by PSO from Saudi Arabia under Saudi Fund for Development. Now, petroleum division is seeking waiver from economic decision making body to secure deferred payment facility from Saudi Arabia.