ISLAMABAD: The Ministry of Energy (Petroleum Division) has sought Technical Supplementary Grant (TSG) of Rs 14.6 billion and $ 64.4 million to pay outstanding claims of oil companies for payment in current fiscal year 2020-21, well informed sources told Business Recorder.
Petroleum Division had submitted outstanding guaranteed/obligatory payment claims of oil sector for budgetary allocation in the Federal Budget 2020-21. However, sufficient provision could not be made in the Federal Budget FY 2020-21 due to budgetary constraints. Since these payments may lead to exchange rate exposure and Late Payment Surcharge (LPS), if delayed, therefore the matter was again referred to Finance Division for early payments through supplement grant/TSG. The Finance Division examined the case and advised Petroleum Division to move a summary for ECC/Cabinet for the release of payment through supplementary grant/TSG.
Sharing the details, sources said, the guaranteed and obligatory payments are as follows: (i) shortfall in annual guaranteed throughput to Asia Petroleum Ltd is Rs 3.478 billion. Pursuant to the Implementation Agreement (IA), a Fuel Transportation Agreement (FTA) was executed on May 13, 2004 between Pakistan State Oil Limited (PSO) and Asia Petroleum Limited (APL) for supply of Residual Furnace Oil (RFO) to M/s Hubco whereby an annual guaranteed throughput of 1.5 million MTs was committed by PSO to APL in its clause-1.1(e) and 6.1.1(f) at an agreed tariff ($ 12.13/ton for first 19 years and thereafter $ 8.49 per ton) as per Section 18.1 of IA till 2027. GoP under Schedule-3 of the IA had provided a sovereign guarantee to pay for any shortfall in the above guaranteed throughput which PSO is obliged to pay to APL. Delay in APL's payments lead to variation in Exchange Rate exposure/Late Payment Charges.
In the APL's venture, PSO owns 49% shares while 51% shares are owned by foreign shareholders including Infraavset (Hong Kong listed company), Veco Incorporation (USA) and Independent Petroleum Group (Kuwait).
Due to a paradigm shift in GoP policy from 2018 towards utilization of cost-efficient fuels and other alternate sources, the demand of Furnace Oil (FO) has been drastically reduced, resultantly shortfall in transporting FO occurred. Therefore, APL raised guaranteed shortfall claim which was placed before ECC on August 08, 2019 which allowed release the guaranteed payment through Technical Supplementary Grant (TSG) for the period July 01, 2018 till June 30, 2019 amounting to Rs. 1,882 billion. Accordingly, Finance Division sanctioned the payment through AGPR.
According to sources, due to continuous shortfall in the demand of RFO by power sector, a similar guaranteed claim of Rs 3.478 billion duly audited by A.F Ferguson was lodged by APL for the period July 01,2019 till December 31, 2020 (including LPS of Rs Rs.500 million) along with an expected claim of Rs 1.023 billion for the remaining period of the current FY 2020-21 which was submitted to ECC of the Cabinet for its consideration to release payment to PSO through supplementary grant/TSG in line with the last year APL's claim approved.
While approving the APL's claim last year, ECC had also directed in its decision to explore remedial measures for optimal use of the facility to reduce its cost to the Government of Pakistan.
In this regard various meetings of all concerned stakeholders have been held, attended by Finance Division, Power Division, Petroleum Division, OGRA, PSO, Hubco and APL with the intention to explore the options available for legal remedies in view of the relevant documents for minimizing risk/liability exposure of GoP.
The following options are being explored which would take sufficient time to conclude: (i) termination of Hubco and APL contracts; (ii) to assess the possibility of utilizing the pipeline for transporting Byco's product from Hub to Port Qasim; and (iii) PSO to explore the possibility of installing its own SPM or utilize Parco's proposed SPM and use the pipeline to transport the product imported at SPM.
The sources said, outstanding shortfall in guaranteed throughput claims of PAPCO are $64.40 million, Papco operates a state-of-the-art cross-country pipeline system to transport High Speed Diesel (HSD) from Port Qasim up-country vide clause-6 of the Implementation Agreement (IA) of July 19, 2001 signed between the GoP & Emirates of Abu Dhabi along with Papco. As per the agreement PAPCO has to move the product for 25 years effective from 2005 to 2030 but GoP had given a throughput guarantee only for the first 8 years from 2005 to 2013. PAPCO had submitted audited shortfall claims from time to time on the entire guaranteed period of 8 years amounting to $ 90.70 million out of which $ 26.30 million had already been released up to 2012 through Finance Division leaving a balance of $ 64.40 million payable to Papco.
It is a one-time guaranteed payment, pended since long which may be released to fulfill the GoP's commitment once and for all.
Besides the guaranteed payments the following one-time obligatory payments are also pending since long and are required to be released: (i) refund claim for excess payment made by OGDCL to Federal Government in FY 2000 (Rs. 88.40 million); (ii) outstanding balance of price differential claims on account of Mogas amounting to Rs. 3.350 billion for the period 2007-11; (iii) Price Differential Claims - Gas Load Management Program (GLMP) (2009- 2010) amounting to Rs. 3.9 billion; (iv) PSO's Price Differential Claims - LSFO amounting to Rs. 3.4 billion during 1996-2004; and (v) PSO's Price Differential Claims - HSD (Aug 2009) amounting Rs. 351 million.
The Petroleum Division has solicited approval of the ECC for the Supplementary/TSG for payments amounting Rs.3.478 billion, $64.40 million and Rs.11.089. billion.
Copyright Business Recorder, 2021