Oil imports: Govt to take higher credit ceiling plea to gulf states

Plan comes in the face of mounting pressure on foreign reserves.

ISLAMABAD:

Pakistan has decided to approach four Gulf Arab countries, including the world’s largest oil exporter Saudi Arabia, to seek an increase in the credit limit on oil imports in an effort to ease pressure on its weakening foreign currency reserves.

The Muslim countries that will be contacted are Saudi Arabia, the United Arab Emirates (UAE), Qatar and Kuwait, officials say.

The previous PPP-led coalition government had also tried to persuade Saudi Arabia to increase the oil import credit ceiling, but Riyadh gave Islamabad the cold shoulder.

In addition to the higher credit facility, the government is also planning to strike a state-to-state deal with the Gulf countries to reduce the cost of crude oil imports. Oil and its products’ import eats up roughly $15 billion a year.



In this connection, officials of the Ministry of Finance met representatives of oil marketing companies and refineries on Friday to discuss the measures aimed at curtailing the oil import bill and increasing the credit limit.

At present, Pakistan imports petroleum products from Saudi Arabia on 30-day credit and from the UAE it buys oil on 60-day deferred payment.

The country’s consumption of petroleum products stands at 22 million tons, of which about 13 million tons are imported. Apart from this, oil refineries import nine million tons of crude oil per annum to meet their processing needs.

Government officials believe that the import bill will swell further in the wake of closure of compressed natural gas (CNG) stations in Punjab and lack of gas supply for running power plants.

Demand for petrol from vehicle owners surges following shutdown of CNG outlets while absence of gas for power plants increases the need for furnace oil.

“In this scenario, we see pressure mounting on the already thin foreign exchange reserves of the country,” an official remarked.

Industry players say private companies in the oil sector have already made commercial arrangements with different oil suppliers. “And now, the government is planning to enter into relatively long-term oil import contracts with administrations of friendly Muslim countries,” the official said.

According to a statement issued here, Finance Minister Ishaq Dar held a meeting with representatives of Pakistan State Oil, Pakistan Refinery Limited and Pak Arab Refinery (Parco) at the finance ministry on Friday.

He discussed and reviewed their performance with specific reference to the source of oil imports as well as their consumption.

“It is important that we have comprehensive data of oil products and the source of imports for proper planning so that decisions can be made about them,” Dar said.

He pressed the oil marketing companies and refineries to brief the government on the present pattern of oil imports and its marketing and suggest measures for improvement.

The minister expressed satisfaction over the current availability of petroleum products in the country.

Published in The Express Tribune, February 2^nd 2014.

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