PNSC to be given priority in oil and LNG transportation

ECC gave directives to special committee for implementing relevant proposals

ISLAMABAD: The government of Pakistan Tehreek-e-Insaf (PTI) has reversed a decision of the previous Pakistan Muslim League-Nawaz (PML-N) administration and has decided that the state-run oil and gas companies will give priority to Pakistan National Shipping Corporation (PNSC) in transporting oil and liquefied natural gas (LNG).

During the PML-N's tenure, the Economic Coordination Committee (ECC) reviewed a summary in a meeting held on June 6, 2015 and directed that state-run Pakistan State Oil (PSO) may import premium motor gasoline (petrol) and low sulphur fuel oil (LSFO) on cost and freight (c&f) basis while high sulphur fuel oil (HSFO) may continue to be imported on free on board (fob) basis through PNSC.

PSO was allowed to import petroleum products except for furnace oil on c&f basis by inviting bids for three-month delivery in order to ensure a consistent and smooth supply of petrol, diesel and other products.

Lowest price offers made for LNG supply

The decision was taken as PNSC had an inadequate fleet and it owned only a few vessels. Consequently, PNSC started chartering vessels from other shipping companies for bringing petroleum products.

The decision on giving priority to PNSC came after the Ministry of Maritime Affairs approached the ECC, seeking the first right for PNSC in the transport of oil and LNG. The ECC then constituted a committee to consider the request.

Now, in a recent meeting, the committee recommended that all government strategic cargo including motor gasoline, HSFO, high-speed diesel, LPG and crude oil should be imported on fob basis by government organisations, shipped through PNSC-owned or chartered vessels, and freight should be paid in Pakistani rupees.

It was further suggested that over a period of three to five years, all government-to-government LNG imports should be on fob basis, shipped through PNSC-owned or chartered vessels and freight should be paid in Pakistani rupees. It was proposed that in the beginning 15% to 20% of cargoes could be shipped through PNSC during the said period.

The committee also recommended that Pakistan flag vessels should be given priority in allotting berths at all domestic ports.

Lowest price offers made for LNG supply

During the discussion, it was suggested that the transportation of government's strategic cargo should preferably be through Pakistan flag vessels as was being done in regional countries like India, Iran and Bangladesh.

The ECC agreed in principle to the proposals and directed the committee to evolve a mechanism for the implementation of these proposals.

The ECC was informed that the United Nations Conference on Trade and Development (Unctad) adopted a code of conduct in 1974 aimed at taking into account the special needs and challenges faced by developing countries concerning their shipping needs.

Unctad adopted a cargo-sharing formula, also known as 40-40-20 rule, which stipulated that 40% of cargo should be directed to national vessels of the originating country, 40% to vessels of trading partners and 20% to other vessels, thus protecting and developing national shipping lines by way of preferential treatment as a globally accepted practice.

The UN Framework for Development of National Shipping Policies recognises such policies contribute to long-term stability of the nation and could be used as a means of increasing global trade.

Published in The Express Tribune, June 29^th, 2019.

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