Oil transportation: Ministry backs revocation of PSO-PNSC agreement

Support comes in wake of court case, risk and quality factors.


Zafar Bhutta June 14, 2015
PNSC was allowed to bring only furnace oil on its vessels for consumption in the country’s power plants.. PHOTO: PNSC

ISLAMABAD: The Ministry of Petroleum and Natural Resources wants to revoke the oil transport agreement between Pakistan State Oil (PSO) and Pakistan National Shipping Corporation (PNSC) as litigation in court and quality factors threaten future supply of vital petroleum products.

Keeping in view the court proceedings between PSO and PNSC, shifting of title, risk and quality factors, the ministry has suggested to the Economic Coordination Committee (ECC) to do away with free-on-board oil transportation through PNSC vessels, officials say.

In its previous meeting, the ECC allowed PSO to import petroleum products except for furnace oil on a cost-and-freight basis through opening bidding for three months in order to ensure consistent and smooth supply of petrol, diesel and other products.

PNSC was allowed to bring only furnace oil on its vessels for consumption in the country’s power plants.

According to officials, the ECC will review the situation after three months and decide whether the free-on-board arrangement between PNSC and PSO should be restored or cancelled.

Talking to The Express Tribune, a senior PNSC official alleged that the national shipping line’s freight rate was lower than the oil supply arranged by PSO on a cost-and-freight basis. “PNSC wanted to review the freight rate, but PSO did not respond,” he said.

However, petroleum ministry officials dismissed the allegation, saying freight was not a separate feature in oil supply on the basis of cost and freight. The oil supply was arranged through a competitive bidding process, they said.

Officials argue that oil imports through PNSC have been a longstanding issue, which should be settled once and for all so that the country can stave off a big gap between demand and supply of petroleum products and the subsequent acute shortage.

They point out that PNSC has four vessels in its fleet sufficient to meet the demand for crude oil import from three refineries – National Refinery Limited, Pakistan Refinery Limited and Pak Arab Refinery.

On the other hand, they say, PNSC has dearth of ships for the import of refined petroleum products for which it hires vessels from the international market, but it leads to frequent delay in the provision of vessels and other problems with PSO.

Moreover, the free-on-board arrangement exposes the buyer to the risk/title of vessels along with quality matters. Therefore, PSO does not see any rationale behind continuing with the Contract of Affreightment with the shipping company and making imports on free-on-board basis.

The Ministry of Petroleum strongly backed PSO’s point of view before the ECC.

Published in The Express Tribune, June 14th, 2015.

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COMMENTS (1)

Sher Nawaz | 6 years ago | Reply The bottleneck to most of Pakistan's existing petroleum - oil and natural gas related woes undoubtedly lies in poor governance, particularly at the Federal Level. Such affairs are overseen by the Ministry of Petroleum & Natural Resources, and the ministry is headed by a highly incompetent gentlemen - Mr. Shahid Khaqan Abbasi. Hence, to alleviate the intensity of prevailing oil & gas crisis in Pakistan, it is therefore vital that Federal Petroleum Minister resign's from Office at the earliest. Thereafter, the task should be handed over to a person of good reputation in the industry, reflected by his overt all professional accomplishments and educational credentials.
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