Saudi Arabia will begin supplying oil to Pakistan on deferred payment at the start of new fiscal year in July, the kingdom’s embassy in Islamabad said on Monday.
“Pakistan will start receiving monthly oil supplies worth $275 million from Saudi Arabia with effect of July 1, 2019,” the embassy said in a notification. “These supplies will continue over the next three years, with a total value of $9.9 billion,” it added.
The two countries inked a financing agreement for the import of petroleum products, crude oil and LNG on February 17 during the Saudi crown prince’s Islamabad visit earlier this year.
Pakistan expects the Saudi facility to help ease pressure on the balance of payments.
The oil facility had been announced in November and it was initially expected to become operational from January 1. However, due to various procedural and regulatory issues it took seven months to make the facility operational by July 1, which coincides with the start of new fiscal year.
Riyadh did not want the Oil and Gas Regulatory Authority (Ogra) and the Hydrocarbon Development Institute of Pakistan (HDIP) to be involved in the testing of petroleum products to be imported from the Kingdom under the deferred payment facility, according to a story published in The Express Tribune.
Under the agreement, the Pak-Arab Refinery Company (Parco) and the National Refinery Limited (NRL) would procure crude oil from the Saudi Aramco Product Trading Company. Similarly, the Pakistan State Oil (PSO) and the Pakistan LNG Limited (PLL) would procure petroleum products and LNG from the Saudi company respectively.
The HDIP laboratory tests products at the discharge port prior to unloading. However, while negotiating the terms and conditions of the sales purchase agreement with the PSO, Saudi Aramco insisted that the procurement should be based on the cost, insurance and freight (CFR/CIF)) terms in line with the International Chamber of Commerce’s Incoterms 2000. Under these terms, the quality would be determined and finalised at the load port based on the test results of an independent laboratory.