Refineries seek early opening of escrow accounts for upgrade projects

KARACHI: The Oil and Gas Regulatory Authority (OGRA) and local refineries would meet on Wednesday to decide the modalities of agreements for opening joint Escrow Accounts under the newly passed Brownfield Refinery Policy.

Local refineries want the opening of the joint Escrow Accounts at earliest to avoid the losses they might incur in case of delay of opening of these accounts, oil sector people told The News on Monday.

The joint Escrow Accounts would be operated in accordance with the terms and conditions to be specified in the Escrow Account Agreement amongst OGRA, respective refinery and National Bank of Pakistan (NBP).

According to the policy, the eligible refinery importing used plant, machinery and equipment (PME) for the upgrade project, would be allowed to withdraw maximum of 22 percent of the total project cost from the joint Escrow Account.

The refineries importing new PME for upgrade project, would be allowed to withdraw maximum of 25 percent of the total project cost from the joint Escrow Account.

The release from the joint Escrow Account would be on a pro-rata basis i.e. a maximum capped limit of 22 percent or 25 percent as the case may be, from the joint Escrow Account, and remaining from the refineries’ own resources.

OGRA will allow withdrawal of a maximum of the respective capped limit of the refinery’s upgrade project cost, determined based on the final investment decision (FID). In case the funds deposited in the joint Escrow Account are lesser than the respective capped limit of the expenditure made on a milestone / deliverable and/ or on entire upgrade project basis, there will be no obligation / responsibility on the part of OGRA / government of Pakistan to meet the shortfall.

The funds from the joint Escrow Account will be available for withdrawal, post financial close of the upgrade project, against expenditure made for each milestone / deliverables of the respective refinery upgrade project. The interest accrued in the joint Escrow Account will also be used for the respective capped limit of the payment of upgrade project from the joint Escrow Account.

OGRA will have a unilateral right to withdraw funds from the relevant joint Escrow Account. The deposit in the joint Escrow Account will only be utilised for capital expenditure. The joint Escrow Account will not be used as any charge / lien / collateral or other instrument of borrowing.

The incremental incentives collected in a given month would be deposited by refineries in the joint Escrow Account, within 10 days of subsequent month. In the event the refinery does not deposit the due amount of incremental incentive in the escrow account as per the time stipulated, an interest on such unpaid amount shall accrue at the rate of one-month KIBOR + 3 percent, prevailing on the date that payment first becomes due and calculated for the actual number of days for which the relevant amount remains unpaid; and if the default continues beyond 30 days, the refinery will become ineligible to claim any funds out of joint Escrow Account till the time the due amount of incremental incentive along with interest is deposited in the joint Escrow Account.

“If the default continues beyond 60 days, the joint Escrow Account will be ceased by OGRA and the balance will be confiscated by OGRA in favour of IFEM and the waiver to produce and market their products shall also stand withdrawn / cancelled,” the policy said.