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Oil, Gas and Refinery Projects update

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Oil consumption declines

  • Petrol and diesel consumption declines 21% and 44% respectively

ISLAMABAD: The country’s consumption of two key petroleum products, Petroleum Motor Gasoline (PMG) or petrol and HSD, has declined by 21 per cent and 44 per cent, respectively due to measures taken by the government to curtail imports and massive increase in their prices by the incumbent government.

Industry sources told Business Recorder that daily consumption of diesel has reduced to 13,000 MT per day from 23,000 MT whereas consumption of petrol has declined to 19,000 MT per day from 24,000 MT.

“If the current pattern of consumption continues during the remaining days of current month, then petrol stock is enough for 32 days and HSD for 62 days,” said industry sources. Presently, the stock of PMG stood at 695,000 MT whereas stock of HSD was 760,000 MT.

On July 21, 2022, addressing a press conference on Minister of State for Petroleum and Natural Resources, Dr Musadik Malik claimed that the stocks of HSD are enough for 66 days while petrol stock was for 34 days, a claim that was made in spite of the fact that the regulatory requirement of stock is of 20-22 days.
 

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Petrol, diesel sales decline on slower agri, transport activities​

Tanveer Malik
August 02, 2022

KARACHI: The sale of diesel and petrol declined by 27 percent and 38 percent respectively in the month of July 2022 on the back of long holidays of Eid as well as rains, which slowed down agriculture and transport activities in the country.

Overall sale of petroleum products also shrank during the month under review as it fell by 26 percent YoY, oil sale data showed on Monday. The sale of petroleum products plunged to 1.44 million tonnes in of July compared to 1.94 million tonnes of July last year and 1.94 million tonnes, recorded in June this year.

Petrol sales went down by 27 percent on year-on-year basis and 15 percent on month-on-month basis to 0.59 million tonnes, which was the lowest sale volume since April 2020. The sale of high speed diesel (HSD) decreased by 38 percent on YoY basis and fell by the same percentage on MoM basis.

Similarly, furnace oil sales also declined five percent YoY basis 23 percent MoM. Tahir Abbas, head of research at Arif Habib Limited told The News that the long holidays of Eid and rains slowed down activities that resulted in lower consumption of petroleum products.

Sales of Pakistan State Oil (PSO) decreased 25 percent YoY and 27 percent MoM. Sales of Attock Petroleum Limited decreased 12 percent YoY and 25 percent MoM. Shell sales also went down 30 percent YoY and 34 percent on MoM basis.
The rainy month of July halted agricultural activities in almost the entire country, which slashed diesel demand that is mostly used as a fuel in the agriculture sector.

“Harvesting season is over and now rains are lashing almost the whole country, putting breaks on agriculture activity,” a top executive of an oil firm told The News.
Low consumption has led to diesel stockpile of up to 660,000 tonnes in the country, which was sufficient for the next few days, keeping in view the current daily consumption of the fuel, the executive said.

About low sale of petrol, he said that this could mainly be attributed to the price hike, as people were not bringing out their vehicles on the roads to cut back on fuel expenses. Petrol stocks in the country stand at 650,000 tonnes, more than the required quantity for the time being.

On Sunday, the federal government decreased the price of petrol by Rs3.05 but increased diesel by Rs8.95 for the next fortnight. The Finance Division, in its notification, said that in view of the fluctuations in petroleum prices in the international market and exchange rate variation, the government has decided to revise the existing prices of petroleum products to pass on the impact to the consumers.
 

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Private Banks Refuses to Give Loan to PSO, Need Rs. 80 Billion to Avoid 2 Months Oil Import Ban

Rising prices of fuel have been the headline for some days, now Private Banks refuse to give Loan to PSO, need Rs. 80 Billion to avoid 2 months Oil Import Ban.

PSO feared that besides the disruption in the company’s supply chain due to default, the delay in receipts from the power sector could have very serious financial, regulatory and political implications and a considerable time would be required to put the supply chain back on track and restore the confidence of suppliers.

The receivables from the domestic sector on the provision of liquefied natural gas (LNG) have reached Rs. 344.76 billion, whereas the receivables of the power sector stood at Rs. 183.31 billion. In addition, government institutions also owe Rs. 77.66 billion to state-owned company. The Central Power Purchasing Agency (CPPA) owes Rs. 149 billion to PSO.
 

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Pakistan is likely to get additional oil facility on delayed payment from Saudi Arabia and the oil facility is also likely to increase from $1.2 billion to $2.4 billion.

According to officials of the Ministry of Finance, significant progress has been made in the talks between Pakistan and Saudi Arabia, as Saudi Arabia has expressed its support for providing additional oil facilities to Pakistan on deferred payment.

Officials of the Ministry of Finance say that Brother Malik has informed officially, however, he will make the announcement in this regard himself.

Officials from the Ministry of Finance said that the oil facility is likely to increase from $1.2 billion to $2.4 billion.

According to Finance Ministry officials, China has so far rolled over $4.3 billion in debt, including $2.3 billion in commercial loans and $2 billion in deposits.
Sources said that at present Pakistan is being supplied with loan oil worth 100 million dollars per month by Saudi Arabia, and if the package is extended, Pakistan will be provided with loan oil worth 300 million dollars per month.
 

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Govt agrees to deregulate oil prices​

In new policy, market forces will determine margins of OMCs and refineries

Zafar Bhutta
August 05, 2022


The government has agreed to give a free hand to the oil industry to set petroleum product prices by implementing a deregulation mechanism under the new proposed oil policy effective November 1, 2022.

At present, the prices of petroleum products like petrol and high-speed diesel (HSD) are regulated while the price of furnace oil is deregulated.

In a meeting held on Wednesday, the executives of oil refineries, Minister of State for Petroleum Musadik Malik, Energy Task Force Chairman Shahid Khaqan Abbasi and officials of the Oil and Gas Regulatory Authority (Ogra) reached an agreement.

Sources told The Express Tribune that all sides agreed that both the products produced locally by oil refineries and those imported by Pakistan State Oil (PSO) would compete in the local market.

At present, PSO imports 50% of petroleum products whereas 50% of products are produced locally by oil refineries to meet energy demand of the country.

Sources said that there would be competition between PSO and local oil refineries in the country’s market.

Recently, the government has agreed to raise margins of oil marketing companies (OMCs) that would be effective till November 1, 2022.

After implementation of the new oil refinery policy, the government will withdraw the margins set for the OMCs including PSO.

The government also recently increased margins of dealers to Rs7 per litre that would continue to remain in place after the implementation of the new oil refinery policy.

In the new policy, market forces will determine the margins of OMCs and oil refineries, officials said.

In the proposed policy, the government had reduced the regulatory duty from 5% to 2.5%, which was later increased to 5% on the import of crude oil.

According to the agreement, officials said, the government agreed to reduce the duty to zero in the new oil refinery policy.

“If the government does not withdraw the duty, then the new refinery policy will lose its significance for the refining sector,” a senior government official said.

Officials said that the government had already increased the deemed duty on petrol and diesel to 10%. However, the entire collection was going into the national exchequer.

The refineries and the previous government of PTI had been locked in a dispute on the formula of allowing incremental revenue to the oil refineries for upgrading their plants.

The previous government agreed to allow 30% of the total incremental revenue to the refineries for investment in plant upgrades.

However, some key ministers from Karachi had been in tussle with a local refinery, which created hurdles in the way of approving this mechanism.

Now, the government will allow 30% of funds from the incremental revenue collection to be invested in upgrading plants.

Local refineries need $4 to $5 billion in total investment for upgrading their plants. Byco refinery has already started work on upgrading the plants.

Regarding the question of monopoly of the oil sector, oil industry officials ruled out any such situation. They said that PSO had 50% market share whereas the remaining 50% share was held by the local refineries.

PSO is a state-owned company and therefore, the government has complete control over this entity.

They said that the new refinery policy would also be helpful for PSO that was facing financial crunch and the risk of default on international payments.

The government has recently approved Rs30 billion to rescue PSO from a liquidity crisis as its receivables have crossed Rs600 billion.

The new oil refinery policy will provide PSO with the freedom to set margins and compete with other refineries.

The oil industry officials said that competition would also result in competitive oil prices for the consumers.

Published in The Express Tribune, August 5th, 2022.
 

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Shell Pakistan announces to discontinue aviation operations across the country


  • Says after consideration of a wide range of factors, SPL has taken the decision not to participate in the tender floated by PCAA for the operation of six airports

BR
August 17, 2022

Shell Pakistan Limited (SPL) on Wednesday announced that it has decided to discontinue its aviation operations across Pakistan.

In a notice to the Pakistan Stock Exchange (PSX), Shell Pakistan informed that the company carries out its aviation-related operations at the following locations: (i) Jinnah International Airport (JIAP) (ii) Quetta International Airport (QIAP) (ii) Begum Nusrat Bhutto Airport (BNB) (Sukkur) and (iv) Nawabshah Airport (WNS).

“Following the expiry of the leases related to the above airports, the Pakistan Civil Aviation Authority (CAA) has floated a joint-tender inviting participants to bid for the operation of six (6) airports, including all four of the airports currently operated by SPL as well as Skardu International Airport (KDU) and Gwadar International Airport (GDU).

“After due consideration of a wide range of factors, including legal compliance, financial and commercial considerations, SPL has taken the decision not to participate in the tender,” read the notice.

SPL said it remains committed to the safe handover of operations to the CAA and/or relevant stakeholders (as appropriate) at the airports at which it is currently operating.

"The final date of exit from these airports will be communicated after consultation with the CAA," it added.

SPL further said that it remains committed to continuing all its other businesses and operations in Pakistan, which remain unaffected.

The oil marketing company recorded a drop of 37% in its month-on-month oil sales in the month of July, but the overall trend was lower as well.

Its sales clocked in at 100,000 tons on account of Eid holidays during the first half of the month where inter-provincial transportation activity decreased, which led to lower HSD sales, and monsoon season across the country resulted in lower traffic on the roads.

Moreover, Pakistan's oil sales commenced FY23 with a decline of 26% on month-on-month basis to clock in at 1.44 million tons in July 2022. Oil sales in July 2022 were the lowest since February 2021.
 

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The Frontier Post

KARACHI: United Bank Limited (UBL) and JS Global Capital Limited (JSGCL) have been jointly awarded the mandate for Financial Advisory and Arrangement Services for local debt and equity for Pakistan Refinery Limited (PRL). This appointment will assist in meeting PRL’s financing requirements for a Refinery Expansion & Upgrade Project (REUP) at an estimated cost of USD 1,200 Million.

The objective of the project is to enhance PRL’s production capacity from 50,000 barrels per day to 100,000 barrels per day and produce advanced quality Euro-V MOGAS/HSD. The expansion and upgradation will not only develop eco-friendly Deep Conversion Refinery but also aid the national economy via import substitution.

The contract signing ceremony was held on August 19, 2022.

The contract was signed by Mr. Shazad G. Dada President & CEO UBL, Mr. Zahid Mir, MD & CEO PRL and Mr. Kamran Nasir, CEO JS Global on behalf of their respective organisations.

The ceremony was also attended by Mr. Tariq Kirmani, Chairman PRL Board of Directors, Mr. Mohsin Mangi, member PRL Board of Directors and senior management of UBL, PRL & JS Global.
 

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Pakistan LNG Limited (PLL) has guaranteed timely payments to international LNG suppliers for spot cargoes till December 2028 through standby letters of credit (SBLCs) to international banks.
PLL, a state-owned entity (SOE), will receive one cargo per month (72 cargoes in total) in the next 6, Dawn reported on Monday.

For this, the company issued tenders at the start of this month with a deadline of 13 September. However, the LNG suppliers asked for payment assurances or sovereign guarantees due to the ongoing balance-of-payments issues being faced by Pakistan.
 

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LNG company rejects strict terms​

Pakistan GasPort finding it difficult to utilise excess terminal capacity

Zafar Bhutta
September 20, 2022

under the agreement pgpc would have unconditional right to use excess capacity available at lng terminal for third party and its affiliates photo file

Under the agreement, PGPC would have unconditional right to use excess capacity available at LNG terminal for third party and its affiliates. photo: file


ISLAMABAD:
Pakistan GasPort Consortium (PGPC), which operates a liquefied natural gas (LNG) terminal, has turned down the strict conditions laid down for utilising excess capacity of its terminal.

PGPC’s terminal has handling capacity of 750 million cubic feet per day (mmcfd) of LNG. State-owned Pakistan LNG Limited has been allocated 600 mmcfd of capacity at the terminal, which has operated at full capacity for only a few days.
The terminal operator is seeking to utilise its 150mmcfd idle capacity at its own risk. PGPC and PLL also signed an agreement on August 3, 2022 that gave unconditional rights to the former to utilise surplus capacity of the terminal.
However, the government has made it difficult for the terminal operator and is not permitting it to utilise its own capacity.
In a letter to the Petroleum Division, PGPC has turned down the laid-down terms and conditions, saying it had not been able to facilitate private investors in receiving a single LNG ship over the last four years despite idle capacity at the terminal.
On the other hand, PLL has failed to arrange LNG over the last one year, particularly ahead of the winter season.

PGPC is handling only two ships a month against the government’s allocation of six ships due to PLL’s failure to arrange LNG cargoes.

In the letter, PGPC said “in a country which desperately needs gas and which has been offered a viable solution by private sector to bring gas and sell it at its own risk and responsibility, to say the least, your (Petroleum Division) letter is disappointing”.
The company was referring to a letter written by the Petroleum Division on September 11, 2022, which imposed some conditions that seemed to be giving PLL the primary rights of utilising the full terminal capacity.

After four “frustrating” years, according to the terminal operator, PLL and PGPC signed an arrangement vide PLL’s letter of August 3, 2022, which, if it had been allowed to be implemented, would have seen at least one cargo at the PGPC terminal by now.

“Any deviation from the agreement is not workable for PGPC,” it said, adding that PGPC, therefore, regrets its inability to accept the terms proposed by the Petroleum Division in its letter.

PLL, in its letter sent to PGPC CEO on August 3, 2022, sought PGPC’s confirmation of the import of third-party cargoes.

Under the arrangement, out of the total physical capacity of 750 mmcfd of the Floating Storage and Re-gasification Unit (FSRU), PLL shall have unconditional access to the peak daily delivery capacity of 650 mmcfd for 300 days (which may be increased to 350 days) and 690 mmcfd for 45 days on the “operator’s reasonable endeavour” basis, subject to the unloading of a maximum of 4.5 million tons of LNG per annum by PLL at the terminal.

PLL further said it would have berthing priority for its cargoes, however, both parties would work together for managing the berthing slots and there would be no restrictions on utilising the storage by either party.

“If PLL suffers any demurrages or loss as a consequence of failure of the third party/ operator, then PGPC will bear the loss suffered by PLL and will indemnify PLL in any such instance.

“PLL, on the other hand, will not take any additional liabilities, nor incur any extra costs for facilitating the import of private sector LNG cargoes.”

PLL said “this clarification letter shall be valid for the remaining term” of the agreement and would be considered terminated if the London court upheld the termination notice issued by PLL.

Subject to this arrangement, PGPC, under Clause 9.4 of the agreement, shall have unconditional right to use the excess capacity available at the terminal for third-party (including PGPC’s affiliates) use, after meeting its obligations to PLL.

According to the letter sent by the Petroleum Division to PLL and PGPC, the division floated some proposals that violated the earlier arrangement between the two companies.

It said the arrangement between PLL and PGPC would become effective only after the operational capacity test of FSRU at the operator’s expense and confirmation that the daily delivery capacity of 650 mmcfd for 350 days could be made available to PLL on a firm basis.

“Out of the total physical capacity of 750 mmcfd of the FSRU, PLL shall have unconditional access to daily delivery capacity of 650 mmcfd on a firm basis for 350 days.”

It further said that the peak daily delivery capacity of 690 mmcfd would be available to PLL, as and when required, for a specific number of days (at least 45 days) on a firm basis instead of “on reasonable endeavour” basis.

“Third-party access (TPA) may be for up to one year only, extendable through mutual agreement.”

Since revenue through the TPA will be an additional benefit to PGPC without making any additional investment and PLL will have to compromise by sharing its storage capacity, berthing slot, etc, therefore, 50% of the monthly capacity charges, prorated for one cargo, (out of capacity payments of average six cargoes a month) will be netted off by PLL from the capacity payments of PGPC.

However, PGPC turned down the proposals.

Published in The Express Tribune, September 20th, 2022.
 

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