Pakistan State Oil (PSO) will sign an agreement with Saudi Aramco’s product Trading Company (ATC) for the establishment of a 12-month deferred payment facility worth $270 million per month.
The agreement will be finalized after taking approval from the Economic Coordination Committee (ECC) of the Cabinet, which is expected to give a go-ahead today.
As per the sources, the government has signed a Financing Agreement (FA) with the Saudi Fund for Development (SFD) for purchasing crude oil and LNG. The government signed the agreement on February 15, 2019, when Saudi Crown Prince, Muhammad Bin Salman was on a visit to Pakistan.
Under the agreement, Pakistan will import petroleum products, crude oil, and LNG from Saudi Arabia worth $3.2 billion annually on a 12-month deferred payment basis. The FA can be extended to cover two more years if agreed upon by both sides.
The FA required the government of Pakistan to provide an unconditional and irrevocable sovereign financial guarantee. Under the FA, the PSO and Pakistan LNG (PLL) terminal will obtain petroleum products and LNG from the Saudi ATC.
While other relevant bodies have already entered into long-term agreements for the procurement of crude oil from the Kingdom, PSO needs to enter into a Sale Purchase Agreement (SPA) with ATC to import the petroleum products.
As PSO is a public entity, it is obliged to make the said transaction in line with the provisions of Public Procurement Rules, 2004. However, the open bidding process under the said rules cannot be followed in case of supply through SFD under the FA.
A provision in the PPRA Rules can enable PSO to make the transactions as per the agreed terms. The ECC is expected to authorize the Petroleum Division to invoke the aforementioned provision in the PPRA rules.