KARACHI: Country’s oil sector has demanded government-to-government level arrangement for confirmation of letters of credit for import of crude oil from Saudi Arabia on the pattern of Kuwait...
KARACHI: Country’s oil sector has demanded government-to-government (G2G) level arrangement for confirmation of letters of credit (LCs) for import of crude oil from Saudi Arabia on the pattern of Kuwait Petroleum Company (KPC).
Import of oil products from Kuwait does not require any confirmation of LC from the international banks, but the import of oil from Saudi Arabia needs the confirmation of LC from international banks.
According to sources in the oil sector, the local oil sector, especially refineries were still struggling to import crude oil after confirmation of their LC from the global banks.
Recently, a local oil firm secured the confirmation of LC for import of crude oil itself from Saudi Arabia through personal request, the infirmed.
However, this was an exception and not always a workable solution, sources said, and added that since Pakistan heavily relied on crude oil import from Saudi Arabia, government intervention would
be necessary to waive off the condition of LC confirmation from the global bank to import crude from the kingdom.
Out of the total oil imports from Saudi Arabia, 95 percent is crude whereas Pakistan mostly import petroleum products from Kuwait and United Arab Emirates.
Sources said that refineries were still facing problems in getting confirmation of LC from global banks and recently a refinery secured the confirmation from a global bank only after hectic efforts.
As per sources, out of five local refineries, three were facing problems and were operating below their capacity.
One refinery was operating at 80 percent of its capacity, whereas another refining 4,800 tonnes of crude oil per day a month back was now down to 3,800 tonnes per day, and the third one had closed down its operations in recent weeks for lack of crude oil.
Industry sources urged the government to reach out to Saudi Arabia for seeking waiver on LC confirmation from the global banks on the basis of five decades of bilateral relations and never defaulting on oil import payments to Saudi Arabia.
The issue they admitted was discussed once with the government recently; however it needs extensive deliberations and action on the highest level to resolve the matter, which has been causing problems for the local oil sector.
Pakistan’s oil sector is grappling with the confirmation of credit letters from the international banks in the recent weeks after the country’s perceived risk level increased following the reluctance of the International Monetary Fund to revive the stalled loan programme.