WEDNESDAY AUGUST 17: ECC approves reopening of four oil depots: oil marketing companies' dealers' margins increased

ISLAMABAD: The Economic Co-ordination Committee (ECC) of the Cabinet has approved reopening of four oil storage depots of Pakistan State Oil (PSO) in Punjab and directed the Finance and Petroleum Ministries to devise a strategy with respect to increase in cost impact of inland freight equalisation margin (IFEM).
Sources said that the ECC meeting, held with Finance Minister Dr Abdul Hafeez Sheikh in the chair, directed Secretary Finance and Secretary Petroleum to decide whether increase in IFEM of Rs 0.11 per litre on high speed diesel and Rs .07 per litre on motor spirit after the reopening of four PSO depots in Punjab would be the responsibility of PSO and would be passed on to the consumers. An official told Business Recorder that Finance and Petroleum have been asked to sit together and devise a strategy in next few days about the impact of IFEM.
According to a statement, the ECC after a lengthy deliberation on the proposals moved by Ministry of Petroleum and Natural resources approved the resumption of POL supplies to Faqirabad, Kotla Jam, Sahiwal and Shershah. The Ministry of Petroleum and Natural resources had proposed that the abandoned depots of PSO in Faqirabad, Kotal Jam, Sahiwal and Shershah may be re-opened under the Inland Freight Equalisation Mechanism (IFEM). Other oil marketing companies (OMCs) will also be allowed IFEM from these locations as and when they open their storages at these locations.
The petroleum products storage at these depots has strategic importance and inclusion in the IFEM mechanism would bring relief to the upcountry consumers and help avoid recurrence of product shortage. While reviewing the petroleum product pricing formula, the ECC agreed to implement the proposals of Ministry of Petroleum and Natural Resources. The ECC approved upward revision in the oil marketing companies and dealers margins on high speed diesel and motor spirit. OMC margin on motor spirit has been increased from Rs 1.50 to Rs 1.98 per litre and on high speed diesel from Rs 1.35 to Rs 1.76 per litre.
The margin of dealers on motor spirit has increased from Rs 1.87 to Rs 2.39 per litre and on high speed diesel from Rs 1.50 to Rs 2.20 per litre. The ECC further directed to apply the proposals in three phases in order to avoid sudden burden on the consumers or the end user of their products.
In order to further facilitate the potential investors in LNG sector, by bringing more clarity and predictability for investors, the Ministry for Petroleum and Natural Resources had suggested to the Oil and Gas Regulatory Authority (Ogra) to propose amendments in the LNG Policy, 2006 on the basis of their experience and the bottlenecks pointed out by the potential investors during various interactions with Ogra. The draft of LNG Policy, 2011 which is a revision of LNG policy 2006 was presented to the committee and nine out of ten proposals in the LNG policy draft were approved.
The proposals approved in draft LNG policy included:
(i) The conditionality of having long-term supply agreement/commitment as well as availability of sufficient natural gas reserves for minimum twenty years has been abolished;
(ii) prior permission of GoP for Spot purchase of LNG will no more be required;
(iii) SSGC/SNGPL will not sell gas priced under weighted average cost of gas mechanism, to industries, which are selected by GoP to use RLNG from time to time;
(iv) a new clause has been added requiring licensees to furnish guarantee against its delivery commitment;
(v) it has also been provided that in case of failure of the licensee to deliver LNG by stipulated date, its first right to 3rd-Party access will stand waived off;
(vi) the clause related to involvement of Coast Guards or any other agency to control activities of entry and exit of shipping traffic and requirement of security escort through Coast Guards at the expense of LNG developer, LNG Terminal Owner/Operator and LNG Buyer has been deleted;
(vii) port authorities have been obligated to convey their decision on acceptance of site within one month of submittal of NOC from Singh Environmental protection Agency, Quantitative Risk Assessment Study and Navigational Simulation Study;
(viii) Ogra's discretionary rights to grant exemptions from mandatory Regulated Third Part Access (RTOA) or Negotiated Third Party Access requirements have been deleted;
(ix) The project proponents have been allowed to establish gas storage facility subject to applicable rules and Ogea has been mandated to determine storage tariff.
The committee will take up the tariff rationalisation in the next meeting giving maximum time for discussion and all the stakeholders may have time to come well prepared. Ministers for Petroleum, Law and Justice, Railways, Secretary Petroleum, Secretary Finance, Chairman FBR Dy Chairman Planning Commission, Governor SBP and all others high officials of related departments were present in the meeting.