OMCs may be required to invest Rs6b in infrastructure
Condition is aimed at building adequate oil storages in country
The new companies will be asked to arrange a minimum equity of Rs3 billion including the paid-up capital. PHOTO: FILE
ISLAMABAD:
Several small oil marketing companies (OMCs) are likely to pull out of the market if the government approves a new policy which will require the OMCs to step up investment to Rs6 billion in infrastructure development.
At present, 59 OMCs are running in the country and they will face a higher investment condition when the new policy is given the go-ahead, say officials.
The Oil and Gas Regulatory Authority (Ogra) has given licences to several OMCs but many have failed to meet the condition of building oil storages.
At present, state-run Pakistan State Oil (PSO) and Shell Pakistan have storages but oil tanks are not enough to stave off an oil crisis, like the one that struck the country during tenure of the previous Pakistan Muslim League-Nawaz (PML-N) government.
The infrastructure development plan will be based on demand from provinces and regions with details of installations, storages and terminals at different locations and points.
The Petroleum Division, in a summary, suggested that a new company must build storage tanks with capacity of 20,000 tons each for high-speed diesel and petrol or capacity equal to 20 days of average sales, whichever is higher, prior to beginning petroleum product sales in the country.
“The new company, depending on imports, will create adequate storage and terminal facilities at the port,” the ministry said.
The government has planned to revise the criteria for setting up new OMCs which will bind the companies to increase investment from Rs500 million to Rs6 billion in infrastructure development and discourage investors from establishing more companies as already a large number of OMCs are doing business in the country.
The Economic Coordination Committee (ECC) had approved the criteria in October 2003 for setting up OMCs in the country.
According to the Petroleum Division, 53 out of the total of 59 OMCs have been granted marketing licences. Such a large number of OMCs are sufficient to ensure fair competition and efficiency in oil marketing.
Sources told The Express Tribune that the Pakistan Tehreek-e-Insaf (PTI) government wanted the existing OMCs to increase their investment in developing oil transport and storage infrastructure in order to cover remote areas of the country, which would spark competition.
The new companies will also be asked to arrange a minimum equity of Rs3 billion inclusive of the paid-up capital. The period for implementation will be defined by the regulator.
At present, an OMC investor is required to make an investment of Rs500 million in infrastructure development. However, the Petroleum Division had suggested to the ECC to revise the investment level upwards to Rs6 billion in an attempt to promote the establishment of infrastructure for storage and transportation of petroleum products.
Under the new policy, the investors will be required to submit an infrastructure investment plan besides the retail development plan with minimum upfront equity of Rs3 billion at the time of application.
Published in The Express Tribune, January 4th, 2019.
Several small oil marketing companies (OMCs) are likely to pull out of the market if the government approves a new policy which will require the OMCs to step up investment to Rs6 billion in infrastructure development.
At present, 59 OMCs are running in the country and they will face a higher investment condition when the new policy is given the go-ahead, say officials.
The Oil and Gas Regulatory Authority (Ogra) has given licences to several OMCs but many have failed to meet the condition of building oil storages.
At present, state-run Pakistan State Oil (PSO) and Shell Pakistan have storages but oil tanks are not enough to stave off an oil crisis, like the one that struck the country during tenure of the previous Pakistan Muslim League-Nawaz (PML-N) government.
The infrastructure development plan will be based on demand from provinces and regions with details of installations, storages and terminals at different locations and points.
The Petroleum Division, in a summary, suggested that a new company must build storage tanks with capacity of 20,000 tons each for high-speed diesel and petrol or capacity equal to 20 days of average sales, whichever is higher, prior to beginning petroleum product sales in the country.
“The new company, depending on imports, will create adequate storage and terminal facilities at the port,” the ministry said.
The government has planned to revise the criteria for setting up new OMCs which will bind the companies to increase investment from Rs500 million to Rs6 billion in infrastructure development and discourage investors from establishing more companies as already a large number of OMCs are doing business in the country.
The Economic Coordination Committee (ECC) had approved the criteria in October 2003 for setting up OMCs in the country.
According to the Petroleum Division, 53 out of the total of 59 OMCs have been granted marketing licences. Such a large number of OMCs are sufficient to ensure fair competition and efficiency in oil marketing.
Sources told The Express Tribune that the Pakistan Tehreek-e-Insaf (PTI) government wanted the existing OMCs to increase their investment in developing oil transport and storage infrastructure in order to cover remote areas of the country, which would spark competition.
The new companies will also be asked to arrange a minimum equity of Rs3 billion inclusive of the paid-up capital. The period for implementation will be defined by the regulator.
At present, an OMC investor is required to make an investment of Rs500 million in infrastructure development. However, the Petroleum Division had suggested to the ECC to revise the investment level upwards to Rs6 billion in an attempt to promote the establishment of infrastructure for storage and transportation of petroleum products.
Under the new policy, the investors will be required to submit an infrastructure investment plan besides the retail development plan with minimum upfront equity of Rs3 billion at the time of application.
Published in The Express Tribune, January 4th, 2019.