Minister of State for Petroleum Musadik Malik said on Wednesday the government had introduced a new bonded bulk storage policy to end the problem of “dry-outs” in the petroleum sector.

Following the introduction of this policy, “there will never be a time in Pakistan when thousands of tonnes of oil is not present in our storage facility”, he said during a press conference in Lahore.

“In the future, we don’t see a time in Pakistan when there’s a shortage of oil and you witness queues outside petrol stations,” he added.

The minister’s statement comes a day after the government allowed traders to import crude oil and petroleum products on suppliers’ credit and approved policy guidelines on foreign suppliers’ accounts through customs-bonded storage facilities under the new policy.

The policy provides for foreign suppliers to maintain crude oil and product inventories in bulk within their own Customs Public Bonded Warehouses near Pakistani ports and would function without payment of foreign exchange until the products are sold in the local market or re-exported. There would be no restriction on the foreign supplier to register a local subsidiary — a decision taken by Finance Minister Ishaq Dar — against some suggestions that firms should be based in Pakistan.

The move would help address oil supply challenges including those relating to foreign exchange and create an additional facility without any cost to the government as the traders would arrange imports on supplier’s credit compared to the letters of credit-based imports by major domestic companies.

Elaborating on this today, Malik explained that under this policy, oil companies from around the world would be able to construct bonded warehouses for oil storage in various major cities, and it would not just bring in foreign exchange reserves to Pakistan but also ensure the continuous availability of petrol and diesel in the country.

Moreover, he said, the measure would lead to “breaking the monopoly of a few oil marketing companies, which used to create an artificial shortage of oil in the country on various pretexts, and also discourage illegal hoarding of oil to gain more profits”.

The minister further explained that foreign companies storing petroleum and diesel in the bonded warehouses would register themselves in Pakistan and would have to open their business accounts in local commercial banks.

“Consequently, it will resolve the issue of LCs (Letters of Credit) confirmation as these companies will make business transactions in dollars or in rupees directly through banks and, in a way, it would also reduce the pressure on the country’s foreign exchange reserves while creating a little bit of space for the government in making various payments.”

He added that this initiative would also do away with LC charges, which so far were being passed on to the end consumer.

Malik said the step would be a “great relief” for the small filling stations, which faced even more problems during the shortage of oil, adding that now they would be able to continue their business after buying oil from the bonded warehouses.

He also assured that the government was taking “appropriate and comprehensive measures to maintain or gradually lower the prices of energy, including petroleum, gas and electricity”.

Russian oil

With regards to the import of Russian oil, the petroleum minister said “all criticism” directed at the government had died down with the arrival of the second oil cargo from Russia.

The oil tanker carrying 56,000 tonnes of Russian crude oil arrived at the Karachi Port on Tuesday, with Russia completing the first shipment of 100,000 tonnes of Ural oil to Pakistan.

Malik also mentioned that the coalition government recently made a deal with Azerbaijan “on its own terms and conditions for inexpensive gas”. Under this deal, Azerbaijan would offer a gas tanker every month and it would be up to Pakistan whether to purchase or not, he said.

“We will purchase this gas if the price is in our favour. This deal will also help end the gas shortage in the country during the winter season.

“We have arranged inexpensive oil and gas and also put in place an effective and viable solution to cope with the dry-out problem in the petroleum sector,” he remarked.

In addition, he said that as per the government’s commitment to the promotion of renewable energy, the prime minister had also launched four solar energy projects with an accumulative capacity of 10,000 megawatts.

The prime minister had also issued directives for working out a comprehensive plan to divert all the major petroleum companies of Pakistan towards renewable energy, green hydrogen and green ammonia, he added.