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ISLAMABAD: Government of Saudi Arabia is helping Pakistan in getting another deferred oil facility of $1.2 billion through Islamic Development Bank (IDB) as Pakistan is already enjoying $1.2 billion deferred oil payment facility through Saudi Development Fund (SDF).

Petroleum Division Secretary Ali Raza Bhutta informed the Public Accounts Committee (PAC) on Wednesday that there would be no fuel crises in the country as Pakistan was negotiating for another deferred oil payment facility from the International Islamic Trade Finance Corporation (ITFC) a subsidiary of the IDB.

He further said that Prime Minister Shehbaz Sharif and Energy Minister Musadik Malik had separate meetings with the government of Saudi Arabia on its assistance and investment in the oil and gas sector for Pakistan to ease down pressure on the economy.

Noor Alam Khan chaired the meeting which examined the audit report of the Petroleum Division for the year 2019-20.

Islamabad, Riyadh agree to operationalise $1.2bn oil facility

Responding to a question raised by Member Committee Rohail Asghar that the government of Saudi Arabia should be approached for an exemption on mandatory four to five percent interest rate charged by international banks as guarantees against Letters of Credit (LCs) so that Pakistan State Oil (PSO) or other public sector refinery could import crude oil from Saudi Arabia on reduced prices.

The Petroleum Division Secretary replied that it was one of the requirements in all commercial agreements which could not be renegotiated; otherwise Saudi Arabia had to renegotiate all commercial contracts with other countries.

He maintained that the federal government was importing oil from Qatar on credit facility of 80 days and LCs were opened on spot purchase. Pakistan was importing crude and refined fuel from various countries on long-term contracts, he added.

He further revealed that the Petroleum Division was formulating a policy to give an extension of licences to the oil and gas exploration companies on the condition that they would resume their operations. Many of the foreign companies wind up their operation in Pakistan, he added.

The committee further directed the Secretary Petroleum to probe into claims of the previous Government of Pakistan Tehreek-e-Insaf (PTI) that Russia was ready to supply oil at cheaper rates. Member Committee from the PTI Syed Shibli Faraz recommended the secretary to find out any initial discussion between Pakistan and Russian available in written on oil import.

Responding to another question regarding local oil and gas production, the secretary said that Oil and Gas Development Company (OGDCL) and Pakistan Petroleum Limited (PPL) and other exploration and production companies had suspended their operations in various places as they did not have investment as the circular debt of oil and gas reached to Rs1.5 trillion and reliance on imported fuel was increasing.

The Chairman Committee observed that one of the reasons that contributed to a decline in foreign direct investment (FDI) in the oil and gas sector was the lengthy process of the Oil and Gas Regulatory Authority (OGRA) awarding licenses to a company.

He said OGRA was creating hurdles in the inflow of foreign investment in the oil and gas sector and was not resolving their issues. The secretary said, “Yes, it is a perception about the OGRA but everyone has his own opinion”.

During the audit of the PSO for the financial year 2014-17, an audit report pointed out that it was observed that claims of Rs2.1 billion on account of the IFEM could not be got settled from the OGRA due to non-conducting of IFEM audit since 2012.

The audit report further states that the OGRA should adopt a timeline of completion of IFEM audit activity.

Copyright Business Recorder, 2022

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