CCP approves product supply agreement between Aramco, GO Petroleum

ISLAMABAD: The Competition Commission of Pakistan (CCP) has granted a time-bound exemption on the relevant clauses of product supply agreement between Aramco Trading (ATC) Fujairah FZE Ltd and Gas & Oil Pakistan Ltd (GO Petroleum) for importing and selling gasoline and diesel products to Pakistan.

ATC Fujairah, registered in the United Arab Emirates, is one of the world’s largest integrated energy and chemicals companies. Gas & Oil Pakistan Ltd, an Oil Marketing Company (OMC) registered in Pakistan that operates a network of retail outlets across the country that sell petrol, diesel, and lubricants.

Under the referred agreement, ATC Fujairah intends to meet GO Petroleum’s demand for essential petroleum products for its outlets, which primarily includes gasoline and diesel.

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The parties submitted to the CCP that this arrangement is expected to achieve economies of scale in procurement for GO Petroleum, potentially resulting in better prices for Pakistani consumers. Accordingly, the exemption sought was on exclusivity aspects of the commercial agreement to supply 100% demand of imported products for GO Petroleum’s retail outlets.

The CCP while considering the matter sought information on how the arrangement will enhance distribution network and resultant benefits will translate for the consumers.

It also sought the status of approvals from relevant regulators on fuel stations, fuel terminals and storage depots.

The CCP also considered how synergy between the GO Petroleum and ATC Fujairah will benefit the economy and consumers besides enhancing competition in the relevant market.

The CCP grants exemptions pursuant to Section 9 of the Competition Act, 2010, inter alia ensuring that such exemptions have the economic benefits that outweigh the anti-competitive effects. Besides, this promotes economic progress for the benefit of consumers and results in improving production and distribution.

The CCP has accordingly granted exemption on the product supply agreement with certain conditions included therein. The CCP’s conditions stipulate that both parties must refrain from engaging in anti-competitive activities. Importantly, the exemption does not include approval on any pricing terms and mechanisms related to the products.

Additionally, as the agreement has referred to certain off specification products, however approval of concerned sector regulator should be ensured for import and sales. The applicants have also been directed to ensure required approvals on their terminals and storage facilities by relevant authorities to be used in the execution of this agreement.

Subject to these conditions, the CCP has granted exemption until June 2026. If the exemption is to be extended, both the applicants can approach the Commission with required details and also identifying the benefits that have accrued to the improved distribution network of petroleum products, enhanced competition in the relevant market.

Copyright Business Recorder, 2024