Oil refineries may hold foreign currency accounts

ISLAMABAD: The government is considering a proposal to allow oil refineries to retain their export proceeds in foreign currency accounts in order to help them sustain price volatility in international markets, The News learnt on Tuesday.

“Subject to applicable regulations of the State Bank of Pakistan and fulfilling all codal formalities, refineries shall be allowed to open and maintain foreign currency account and retain export proceeds in foreign currency to meet the operational/ emergency requirements,” said a draft of Pakistan Oil Refining and Marketing Policy 2019.

The document showed that the government was considering forward cover on foreign exchange in addition to fix refining margins for struggling oil refineries on import of crude oil.

“The current deemed duty of 7.5 percent on high-speed diesel may discontinue and instead refinery margins may be introduced on the basis of 50 percent OMCs (oil marketing companies) margin on MS (motor spirit or petrol) and HSD being worked out on CPI (consumer price index) on annual basis,” the document said.

The government may also include ‘ocean losses’ in import parity formula in case of motor spirit and diesel and also add weighted average of actual tender premium, freight and incidentals of Pakistan State Oil’s cargoes from the last importing period.

“To fully recover all the actual cost incurred on the import of crude oil and petroleum products by importing refineries and OMCs, including all duties and import incidental expenses, the relevant foreign exchange currency rate on import parity price shall be applicable,” the document said.

“Any gain/ loss including losses due to delay in SBP approval to OMCs/ refineries because of in-month movement of the foreign exchange rate shall be adjusted in the following period’s price.”

An official of the petroleum ministry conceded proposals were under consideration, “but the government is also asking the refineries to upgrade their plants.”“The proposed package is very attractive… the refineries can cover their losses and get handsome profits,” the official said, requesting anonymity.Five oil refineries– Attock Refinery, Pakistan Refinery Limited, National Refinery, Byco Petroleum and Parco –have combined refining capacity of more than 0.4 million barrels/ day.