Economic Coordination Committee of the Cabinet Approves Three Proposals of Ministry of Petroleum

Islamabad: The Economic Coordination Committee of the Cabinet (ECC) which met here today with the Federal Minister for Finance and Economic Affairs, Dr. Abdul Hafeez Shaikh in the chair has approved three subjects of national importance including “Resumption of POL supplies to Ex-Fakirabad, Kotla Jam, Sahiwal and Shershah “Review of Petroleum Product Pricing Formula” and “Draft LNG policy, 2011”.

After a lengthy deliberation of the proposals put forward by Ministry of Petroleum and Natural resources, the committee has approved the resumption of POL supplies to Fakirabad, Kotla Jam, Sahiwal and Shershah. The Ministry of Petroleum and Natural resources had proposed that the abandoned depots of PSO in Fakirabad, Kotal Jam, Sahiwal and Shershah may be re-opened under the Inland Freight Equalization Mechanism (IFEM). Other Oil Marketing Companies (OMCs) will also be allowed IFEM from these locations as and when they open their storages at these locations. The petroleum products storage of these depots has strategic importance and inclusion in the IFEM mechanism would bring relief to the consumers of upcountry and help avoid recurrence of product shortage.

While reviewing the petroleum product pricing formula, the ECC agreed to implement the proposals of Ministry of Petroleum and Natural Resources. It is approved that OMCs/Dealers margin on HSD and MS to be revised upward as detailed below:

The ECC further directed to apply the proposals in three phases in order to avoid any sudden burden on the consumers or the final user of their products.

In order to further facilitate the potential investors in LNG sector, by bringing more clarity and predictability for investors, the Ministry for Petroleum and Natural Resources had suggested the Oil and Gas Regulatory Authority (OGRA) to propose amendments in the LNG Policy, 2006 on the basis of their experience and the bottlenecks pointed out by the potential investors during various interactions with OGRA. The Draft of LNG Policy, 2011 which is a revision of LNG policy 2006 was presented to the committee and nine out of the ten proposals in the LNG policy draft were approved which include.

i. The conditionality of having long term supply agreement/commitment as well as availability of sufficient natural gas reserves for minimum twenty years has been abolished.

ii. Prior permission of GOP for Spot purchase of LNG will no more be required.

iii. SSGCL/SNGPL will not sell gas priced under weighted average cost of gas mechanism, to industries which are selected by GOP to use RLNG from time to time.

iv. A new clause has been added requiring licensees to furnish guarantee against its delivery commitment.

v. It has also been provided that in case of failure of the licensee to deliver LNG by stipulated date, its first right to 3rd Party Access will stand waived off.

vi. The clause related to involvement of Coast Guards or any other agency to control activities of entry and exit of shipping traffic and requirement of security escort through coast Guards at the expense of LNG developer, LNG Terminal Owner/Operator and LNG Buyer has been deleted.

vii. Port authorities have been obligated to convey their decision on acceptance of site within one month of submittal of NOC from Singh Environmental protection Agency, Quantitative Risk Assessment Study and Navigational Simulation Study.

viii. OGRA’s discretionary rights to grant exemptions from mandatory Regulated Third Part Access or Negotiated Third Party Access requirements have been deleted.

ix. The project proponents have been allowed to establish gas storage facility subject to applicable rules and OGRA has been mandated to determine storage tariff.

The committee will take up the tariff rationalization in the next meeting giving maximum time for discussion and all the stake holders may have their time to come well prepared.

Ministers for Petroleum, Law and Justice, Railways, Secretary Petroleum, Secretary Finance, Chairman FBR Dy. Chairman Planning Commission, Governor SBP and all others high officials of related departments were present in the meeting.

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