Saudi Arabia to provide oil worth $100m per month

Aftab Ahmed 

Saudi Arabia will provide a US$100 million per month oil deferred payment facility for one year.

In this regard, Pakistan will sign the financing agreement on the import of Saudi Oil (petroleum products/Crude oil) with the Saudi Arabia Fund for Development.

During the Prime Minister’s visit to the Kingdom of Saudi Arabia from 23-25 October 2021, the Kingdom of Saudi Arabia committed to the provision of an oil facility amounting to USD 100 million per month for one year on deferred payments to Pakistan.

In this regard, the Saudi Fund for Development (SFD) has shared a draft financing agreement. The initial negotiations of the financing were held between EAD and SFD along with the concerned stakeholders from the Ministry of Petroleum and Finance Division.

As per the financing agreement, the SFD will extend the financing facility up to USS 100 million per month for one year. The term of financing includes the price of purchase by SFD along with a margin of 3.80 % per annum.

The financing agreement will be initially valid for one year, which can be extended for another one year with mutual consent.

Petroleum Division has worked out the requirements for the provision of oil facilities as per the requirement of the oil companies PARCO and NRL for the years 2022 and 2023 and has also furnished their comments.

Ministry of Law and Justice has vetted this Agreement. Finance Division. State Bank of Pakistan and FBR have concurred with the draft agreement.

Under the agreement, Pakistan will import crude oil and petroleum products as well.

Earlier, Pakistan State Oil (PSO) had agreed to import petrol from Saudi Arabia on a deferred payment facility.

This payment facility will help Pakistan ease the balance of payment due to high debt.

Earlier, Pakistan had utilized almost half the deferred payment facility due to an issue with Saudi Arabia on LNG import.

Saudi Arabia wanted to export LNG to Pakistan. It had also expressed interest to set up an LNG terminal in Pakistan.

Earlier, Saudi Arabia had restored the $1.5 billion annual crude oil supply facility to Pakistan on deferred payment.

Federal Energy Minister Hamad Azhar, along with Special Assistant to the Prime Minister for Revenue Dr Waqar Masood, told a press conference in PID that Saudi Arabia had provided $1.5 billion oil deferred payment facility.

Read More: Saudi Arabia gives greenlight to resume oil import

This is half deferred oil payment facility out of a total of $3 billion Saudi Arabia had approved earlier.

Federal Minister for Energy Hamad Azhar, while outlining the salient features of the National Electricity Policy, said that this policy would help in formulating long-term policies in the power sector.

 Besides, all future projects would be included and all new projects would be minimized. Under the policy, hydropower and alternative energy projects will be implemented for a period of ten years and priority will be given to generating electricity through local fuels.

He said that under this new policy, there will be an option for the government for power projects to implement on the government to government (G2G) basis, while there will also be a separate option for strategic and must-run projects, the federal minister added.

Sub-policies will also be part of this National Electricity Policy and later they will also make it part of the IGCP. We will see the effects of this policy ten years later, he added.

Cheap electricity, but also environmentally friendly electricity, will be available and, nowadays, it is not a matter of power generation, but of transmission.

Read More: Saudi Arabia to build an LNG terminal in Pakistan

This is because the power transmission system does not have the capacity to transmit more than 24,000 MW. The government has earmarked Rs 100 billion in the annual development program to improve it further in the power sector.

Replying to a question, the Federal Minister for Energy said that there was additional power. Existing plants cannot run because they use expensive fuel.

The prices of imported RLNG and furnace oil have also gone up, while the demand for electricity in the local industry has also gone up by 15 percent. Despite the fact that the country’s power generation projects have a capacity of more than 33,000 MW, these power plants cannot operate while delivering in the country due to high fuel and transmission costs.

The system cannot transmit more than 24,000 MW of electricity, while the new policy has fixed future plans to solve all these problems.

Earlier, Dr. Waqar Masood, Special Assistant to the Prime Minister for Revenue, while explaining some of the objections raised to the recent federal budget, said that the tax targets are not as unrealistic as the administrative actions and unilateral measures in the federal budget as well as the GDP.

He said the government will achieve the target of Rs. 5800 billion under Growth and Inflation. It has not levied tax but proposes measures to increase revenue, including revising existing tax rates and eliminating tax exemptions.

In addition, the trend of digital payments has increased in the country due to the corona, which will help to document the country’s economy.

There is a potential for 80,000 points of sales across the country, but there is no registration of single so far.

Referring to the petroleum levy, Dr. Waqar Masood said it is the policy of the government to keep the prices of products stable and set the target keeping in view the real potential.

Under the privatization program, the government has added only four LNG power plants. While the government will spend the development budget on people, the initial deficit will remain at one percent.

Read More: PSO to import petrol from Saudi Arabia on deferred payment