Foreign energy firms wary of Pakistan’s warehouse policy

KARACHI: Foreign energy suppliers such as Chevron and Vitol are hesitating to store and trade fuel in Pakistan, either through private or public bonded warehouses, given the current policy framework.

A working paper, set to be discussed at an upcoming Petroleum Division meeting on August 29, 2024, highlights that foreign suppliers are reluctant to establish a physical presence in Pakistan due to the country’s investment climate. This reluctance extends to suppliers like Chevron and Vitol, who had initially shown interest in the policy framework but are now wary of proceeding under the current conditions.

The working paper explains that the original intent of the policy was to improve product availability for new and smaller oil marketing companies (OMCs) in Pakistan. These companies have faced challenges in sourcing fuel from local refineries and importing from abroad, often encountering numerous hurdles in the process.

Smaller OMCs struggle with importing in bulk due to their limited demand, which complicates import arrangements and affects pricing, creating various issues in the oil supply chain.

Prepared in response to the Special Investment Facilitation Council’s (SIFC) request for feedback from the Petroleum Division and Federal Board of Revenue (FBR), the working paper suggests amendments to the policy. It proposes making the physical presence of foreign suppliers or their subsidiaries optional rather than mandatory. It also recommends redefining ‘consignee’ to include operators of customs licensed bonded warehouses and expanding the policy to cover liquid chemicals and petrochemicals not listed in the negative or restricted lists under Appendices A and B.

The upcoming meeting will evaluate the feasibility of allowing foreign suppliers to sign agreements with Pakistani operators of bonded warehouses or storage facilities for product supply and storage.

It will also consider redefining ‘consignee’ to include registered local operators of customs licensed bonded warehouses or terminals, provided they have agreements with foreign suppliers and are authenticated by the relevant consulate or embassy. The inclusion of chemicals and petrochemicals will be reviewed by the Ministry of Industries.