ISLAMABAD: Ministry of Energy (Petroleum Division) has finalised the modified draft Refinery Policy 2021 after incorporation of the recommendations of Cabinet Committee on Energy (CCoE).
Sources close to SAPM on Power and Petroleum told Business Recorder that Petroleum Division submitted a summary on August 13, 2021 to the CCoE on Pakistan Oil Refineries Policy 2021 which was considered in its meeting held on August 20, 2021.
The Committee headed by Minister for Planning, Development and Special Initiatives, Asad Umar had directed Petroleum Division to review the policy with reference to specific points/observations highlighted by the forum and submit the revised draft policy to the CCoE for consideration after incorporating viable recommendations.
Accordingly, Petroleum Division reviewed the CCoE’s observations and following modifications have been made in the draft policy: (i) upfront utilization of incremental tariff protection revenue was previously provided in the Policy from January 1, 2022; however, under the new proposed arrangement this amount can only be used after award of EPC contract by the respective refineries expected by start by 2024 (Sub-section 22.214.171.124 of the Policy); and (ii) OGRA will monitor the generation of incremental revenue to be deposited in a special reserve account by each refinery under a separate bank account to be opened in National Bank of Pakistan (NBP) and ensure its utilization for the purpose of the up-gradation/expansion of the refineries, on proportionate basis of the incremental revenue and refinery’s contribution (under the principle of Sub-section 126.96.36.199 of the Policy).
According to the Power Division, in order to simplify the governance arrangements, the mechanism of hiring of joint external consultant as proposed during the presentation in CCoE’s meeting on August 20, 2021, has been dropped.
The sources maintained that as force majeure is a project specific contractual arrangement; hence, it has been deleted from the draft policy (Sub-section 188.8.131.52 (e) of the Policy). Previously, bank guarantee worth Rs500 million per refinery was required till financial close. As a precaution, this has been extended till commissioning of the project. The form and features of guarantee will be subject to acceptance by Ministry of Energy (Petroleum Division (Sub-section 184.108.40.206 of the Policy).
On August, 20, 2021, during the CCoE meeting, Ministry of Maritime Affairs pointed out that the business of Single Point Mooring (SPM) pertained to it and a policy related to SPM was presently being deliberated upon by the stakeholders.
It was further pointed out that fiscal incentives, proposed in Pakistan Oil Refining Policy 2021, would be at the cost of Sea Ports, therefore Ministry of Maritime Affairs did not recommend such incentives proposed in the draft policy.
Asad Umar also expressed his concern over the proposed upfront availability of tariff protection incentives to the existing refineries for upgradation. He argued that this incentive should be granted after the Commercial Operation Date (COD) of projects. He also observed that monitoring/ governance mechanism suggested for utilization of the proposed tariff protection incentive should be simplified to minimize the role of government.
The CCoE directed the Petroleum Division to review the policy with reference to following specific points/observation highlighted by the forum: (i) availability of upfront tariff protection incentives to the existing refineries for upgradation; (ii)simplification of monitoring /governance mechanism suggested for utilization of the proposed tariff protection incentives to minimize the role of government; and (iii) treatment of the tariff protection incentives during the period from July 1 to December 31, 2021.
Copyright Business Recorder, 2021