Govt scrambles to clinch Oman oil deal

Approves draft sale-purchase agreement for petroleum imports

ISLAMABAD:

As oil supply disruption through the Strait of Hormuz continues, pushing fuel prices up every day in Pakistan, the government has rushed to pave the way for an agreement with Oman to boost oil imports in a bid to stave off the looming crisis.

An oil supply agreement had been pending between Pakistan and Oman since 2021 and now Islamabad has approved it amid oil scarcity due to the US-Iran conflict that has choked supplies through the Red Sea and the Strait of Hormuz.

Pakistani consumers are reeling from the every-day oil shock, which is continuously pushing prices up. During discussions in a recent meeting of the Economic Coordination Committee (ECC), Minister of Petroleum Ali Pervaiz Malik mentioned that a sale-purchase agreement with Oman under a prior government-to-government (G2G) arrangement existed, aimed at promoting cooperation between OQ Trading and Pakistan State Oil (PSO).

The agreement will guarantee a tremendous boost through product and route diversification for sources of petroleum and its byproducts by augmenting supplies, strengthening Pakistan's supply chain, especially in the aftermath of Hormuz disruption.

The Ministry of Energy (Petroleum Division) briefed the ECC that an Inter-Governmental Agreement (IGA) was signed between Pakistan and Oman on May 14, 2018, where OQ Trading (OQT), formerly Oman Trading International (OTI), was nominated on behalf of Oman and PSO was nominated on behalf of Pakistan. Subsequently, a series of discussions were held on the draft sale-purchase agreement for supply of petroleum products in 2021. However, it could not be finalised because of disagreement on certain terms of the agreement.

Later, OQT expressed interest in entering into long-term supply contracts with Pakistan under the G2G arrangement in a meeting between Pakistan's energy minister, the OQ chief executive and PSO MD & CEO on November 30, 2023.

Pursuant to the IGA and the consequent re-engagement between PSO and OQT, a draft sale-purchase agreement was gradually prepared through multiple reviews and considerations. The draft covering supply of petroleum products from Oman to Pakistan was shared by the Omani side for endorsement by the Pakistani government.

The Petroleum Division apprised the ECC that the draft agreement was forwarded to the Law & Justice Division for vetting from the legal point of view and the Ministry of Foreign Affairs for examination from the political point of view and their concurrence/assessment was added to a summary.

Subsequently, the draft was sent to Oman through Pakistan's Ministry of Foreign Affairs for its concurrence and the Arab nation agreed with contents of the document. Comments of the Finance Division were taken and later response of PSO was also sought.

The Petroleum Division told the meeting that since formalities for signing the draft sale-purchase agreement had been completed, the ECC's approval was required for the final version of the agreement in light of Rule 25(4) read with Rule 18 of the Rules of Business, 1973, as proposed in para-3 of the summary.

The ECC considered the summary submitted by the Ministry of Energy (Petroleum Division), titled "Sale and Purchase Agreement for Petroleum Products between Pakistan State Oil Company Limited and OQ Trading Limited", and approved the proposal for signing an oil supply agreement with Oman.