Oil supply: Government wants to keep PSO-PNSC contract intact

Shipping company faces accusation of delay in bringing oil cargoes

Zafar Bhutta May 02, 2015
The shipping company was utilising carriers of other companies to bring oil consignments for PSO, which was a clear violation of the federal government’s instructions. PHOTO: FILE


The country’s economic managers were hesitant to revoke an oil supply contract between Pakistan State Oil (PSO) and the Pakistan National Shipping Corporation (PNSC), which has been accused of causing delay in bringing oil shipments, leading to its shortage in the country.

The Economic Coordination Committee (ECC) of the cabinet, in a meeting held on April 23, discussed the row between the two state-owned companies and constituted a committee comprising secretaries of petroleum, finance, law and ports and shipping to address the matter, say officials aware of the development.

Finance Minister Ishaq Dar asked the secretaries of ports and shipping and law and justice to resolve the issue between the two companies.

“I don’t want to put PNSC in the privatisation list by letting PSO lose its business following cancellation of the contract between them,” Dar said.

In the meeting, PNSC said it had the capacity to bring 23 million tons of oil products from abroad annually and was handling 5 million tons for PSO.

The Ministry of Petroleum told the ECC that PNSC delayed 40 oil ships, which sparked problems for PSO in smooth supply of oil in the country.

In a summary sent to the ECC, the ministry held PNSC responsible for petrol shortage that hit Punjab and other parts of the country earlier this year.

It said the shipping company was utilising carriers of other companies to bring oil consignments for PSO, which was a clear violation of the federal government’s instructions, and asked the ECC to implement the actual decisions taken by the government in 2012.

The ministry sought permission to allow PSO to import oil through a bidding process and ensure uninterrupted and smooth supply of oil.

Earlier, the ECC meeting held on November 22, 2012 allowed PNSC to bring oil supplies for PSO with the condition that whenever the shipping company had no carrier of its own, it would issue a no-objection certificate to the cargo importer.

As a result, a contract was signed between PSO and PNSC in 2012 followed by an addendum dated January 8, 2013 for the transportation of premier motor gasoline and furnace oil.

However, the petroleum ministry told the ECC last month that the oil marketing company had raised objections in relation to the business relations with PNSC.

Because of an inadequate fleet and fewer vessels, PNSC chartered vessels from other shipping companies for the transportation of oil products, which was a violation of the guidelines given by the ECC, it said.

“This practice leads to frequent disturbances and operational issues in the supply chain, due in part to the delay in reporting of PNSC vessels at respective ports,” the ministry said.

“A major reason for the fuel crisis in the country was the late arrival of two PNSC tankers despite timely establishment of letters of credit by PSO.” One vessel was loaded with oil on January 12, though its arrival in Karachi was due between January 6 and 8. It arrived on 15th of the month.

Another vessel was supposed to reach the loading port in Singapore between January 3 and 5, which was also delayed and reached there on January 15. It subsequently arrived in Karachi on January 28 instead of January 16.

Published in The Express Tribune, May 3rd, 2015.

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