VENEZUELA RAISES FUEL PRICES AFTER ARRIVAL OF IRANIAN OIL TANKERS
AFP 31 May, 2020
- Beyond that, individuals will be required to pay international prices.
- Public transport fares would not be affected by the changes, he added.
CARACAS: Venezuela will increase fuel prices in June, the president said, putting a limit on state subsidies that for decades had allowed citizens to fill their gas tanks virtually for free.
Although the country has huge oil reserves, production has collapsed and Venezuelans are facing dire shortages — exacerbated by the impact of COVID-19 on the economy.
Under the changes, which will come into force on June 1, drivers will be allowed up to 120 liters of gasoline a month and up to 60 liters for motorbikes at a subsidized price of 5,000 bolivars (US$0.025) per liter.
Beyond that, individuals will be required to pay international prices.
It comes days after Iranian fuel tankers, carrying much-needed gasoline, arrived in Venezuela.
“We have decided that 200 service stations will be allowed to sell this product at an international price,” president Nicholas Maduro said Saturday, announcing an end to the state monopoly on fuel.
Speaking from Caracas, he said prices at these stations would be set at 50 US cents per liter.
The 200 service stations will be “run by private contractors” who will be allowed to import gasoline, said Maduro, but he did not say who had been awarded licenses.
Public transport fares would not be affected by the changes, he added.
Venezuela’s oil minister Tareck El Aissami said diesel fuel — vitally important for industries — would remain “100%” subsidized.
The country is almost entirely dependent on oil exports for revenues but production has fallen to roughly a quarter of its 2008 level as Venezuela enters its sixth year in recession.
US sanctions have targeted Venezuelan oil exports, starving Caracas of vital income.
Maduro’s government blames the loss in production on US sanctions, including against the state oil company PDVSA, but many analysts say the regime has failed to invest in or maintain infrastructure.
ECC TO DECIDE ON RS20BN PLAN FOR HEDGING OF OIL IMPORTS
Khaleeq Kiani Updated 04 Jun, 2020
ISLAMABAD: The government has called a meeting of the Economic Coordination Committee (ECC) of the Cabinet on Wednesday to consider hedging of oil prices and about Rs120 billion worth of funds to finance improvement of western border management and low bill recoveries in the power sector.
To be presided over by Finance Adviser Dr Abdul Hafeez Shaikh, the ECC may also approve payment of over Rs4.4bn to Broadsheet LLC after the National Accountability Bureau (NAB) lost an arbitration case in London courts.
Informed sources said the Broadsheet was hired in 2001-02 by NAB under Musharraf government to probe leading Pakistani citizens but then terminated the contract. Pakistan lost arbitration and then appeals. The ECC will today take up payment of part final award (Quantum) of Rs4.4bn.
Approval also possible for force enhancement on western border
The ECC will also approve Rs8.8bn Capacity Enhancement of Western Border Management Phase-II for creation of a few additional battalions of Balochistan and Frontier Corps (South).
The meeting is also expected to approve depositing about Rs17bn in apex court account on account of pensioners and staff of Pakistan Steel Mills in a case filed by Mr Zardad Abbasi and 75 others besides taking up about Rs18.8bn retrenchment plan for about 9,000 remaining employees of PSM.
The ECC is also expected to approve a summary for supply of gas to residents in the five kilometres radius of some new gas field and reimbursement of operational cost of single point mooring installed by Byco Petroleum.
It will also take up a summary of the Power Division for about Rs100bn fiscal support out of Covid-19 Stimulus Package in three months to power companies to compensate for low recoveries which have dropped from over 90pc to about 65pc due to installments and related problems.
The Ministry of Petroleum is seeking hedging of about 20 per cent of Pakistan’s total oil imports and pass on the cost of this higher rate to consumers. The products proposed for hedging crude oil, motor gasoline, high speed diesel as well as LNG.
The proposal has been finalised in consultation with the Standard Chartered Bank, Citibank, Habib Bank and JP Morgan. Some of the stakeholders had previously opposed the proposal saying the government should not go for betting.
The petroleum ministry has sought approval for a call option for 15 million barrels of oil for one year, divided in 12 equal monthly amounts, for a strike price of $8 above current Brent as long as fee is within acceptable range.
It has sought to have another call option for 15m barrels of oil for two years, divided in 12 equal monthly amounts, for a strike price of $15 above current Brent as long as fee is within acceptable range.
The ECC has also been asked to give policy direction to the Oil and Gas Regulatory Authority to include monthly price of the option in the cost of LNG or any other oil product chosen in announcing the monthly prices.
The call option is a financial instrument exercise under which when the price goes above the call level, the amount received can be allocated to any particular product to keep its pricing fixed at the ceiling for the hedged period.
Published in Dawn, June 3rd, 2020
‘ARTIFICIAL’ SHORTAGE OF PETROL: CABINET ORDERS ‘MAXIMUM’ PUNITIVE ACTION
Nuzhat Nazar 10 Jun, 2020
ISLAMABAD: The federal cabinet on Tuesday directed the Petroleum Division and the Ogra to take action against artificial shortage of petrol and ensure regular supplies within 48-72 hours.
Taking notice of artificial shortage of petrol, the government asked the concerned authorities to take appropriate measures to resolve the issue.
The prime minister directed that “maximum” punitive action must be taken against all those responsible.
The Cabinet noted that the Ogra and the Petroleum Division had legal authority to physically enter and inspect oil companies’ storage facilities.
The cabinet directed the Petroleum Ministry to form joint raiding teams comprising representatives of the Petroleum Division, the Ogra, the FIA, and the district administrations.
The teams shall inspect all petrol depots/storage. They have all authority to enter any site. Anyone found involved in hoarding the commodity will face full force of the law, including arrest and forced release of such stores.
Any company found not maintaining the mandatory stocks and supplies to its outlets, as per their license, “shall” face punitive actions, including suspension and cancellation of license and heavy fines.
The Ministry of Energy informed the cabinet, that while in June 2019 total supplies were 650,000 metric tons, while supplies arranged for June 2020 were 850,000 metric tons. The Cabinet urged the public not to engage in panic buying. The stocks that are being hoarded will be identified and ensured to be available in the market and action taken against hoarders.
The prime minister directed the Minister of Petroleum and the Ogra to ensure that every Oil Marketing Company (OMC) maintains 21 days’ stock to meet its license conditions.
Sources said that the cabinet also approved action against those named in the sugar crisis inquiry report.
The federal cabinet, endorsing the decisions of the Economic Coordination Committee (ECC), has approved the privatization of the Pakistan Steel Mills with some instructions.
Prime Minister Imran Khan said that in the privatization of the Pakistan Steel Mills, securing national interests as well as benefit of the workers, should be kept in consideration.
Earlier, the government had approved the dismissal of 9,350 employees of the Pakistan Steel Mills with a collective payment of Rs20 billion.
Copyright Business Recorder, 2020
OGRA HOLDS SIX OMCS RESPONSIBLE FOR PETROLEUM SHORTAGE
The Newspaper’s Staff Reporter Updated 12 Jun, 2020
ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) on Thursday held six major oil marketing companies (OMCs) responsible for petroleum shortage across the country and imposed on them a cumulative fine of Rs40 million.
The authority also issued fresh show-cause notices to Askar Petroleum, Byco Petroleum and BE Energy for similar violations of rules and licence conditions, resulting in petroleum shortage.
Under six separate notifications, Ogra disposed of the proceedings under show-cause notices issued to these OMCs after finding their point of view unsustainable. It held that the companies were found in violation of the licence conditions and they had insufficient stocks.
As such, the regulator imposed a fine of Rs10m each on Shell Pakistan and Total Parco Pakistan Limited (TPPL). Interestingly, Petroleum Secretary Asad Hayauddin is the chairman and director of the TPPL board. The regulator also imposed Rs5m fine each on Puma Energy, Gas and Oil Pakistan and Hascol Petroleum.
An official said the responsibility also lied on the petroleum division, particularly additional secretary policy, director general oil and the relevant wing of Ogra for not being vigilant over the emerging shortages.
Imposes cumulative fine of Rs40m for violating licence conditions
The OMCs are required to deposit the fine within 30 days and can seek review of the Ogra orders after payment of 50pc fine also within 30 days. The companies have also been asked to improve the supplies to their outlets immediately otherwise further fine could be imposed on continued contravention of the rules.
The regulator found that OMCs under the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016 and Ogra Ordinance, 2002, were obligated not to abandon any regulated activity, as a part or whole, resulting into discontinuation of supply of petroleum products or its sale in any area without the prior written consent of the regulator.
Rule 69 of the Pakistan Oil (Refining, Blending Transportation, Storage and Marketing) Rules, 2016, empowers the regulator to impose a fine on its licensees on contravention of Rules and Ogra’s directives and decisions.
In addition, in light of the directions of the Ministry of Energy, issued from time to time, the companies were repeatedly directed by the regulator to ensure availability of products at retail outlets to avoid any discontinuation of supplies in the country. However, the companies reportedly abandoned the regulated activity of marketing by either discontinuation of supplies or provision of insufficient supplies at their retail outlets which also caused serious inconvenience and unrest in the masses.
Based on its show cause notice, response received and hearing held, Ogra blamed these companies for serious petrol shortage in the country. The regulator in exercise of the power conferred under Rule 69 of the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016, and under Section 6(2)(p) of the Ogra Ordinance imposed penalties on breach of Rule 53(x) of the said Rules.
Meanwhile, Shell Pakistan said the petrol shortage in the country was due to unprecedented increase in demand during May which even the energy ministry could not foresee. He said the 20-day storage was currently limited to Karachi and could be extended to Punjab and Khyber Pakhtunkhwa by the end of this year after the pipeline was completed.
Speaking to media through a video conference on Thursday, Habib Haider, manager external communications of Shell Pakistan, said that petrol demand more than doubled last month compared to the sales in March, and nobody including the refineries, ministry, Ogra or the oil companies could understand it.
He downplayed the show-cause notice against oil companies alleging that hoarding by the companies and petrol stations caused the current petrol shortage.
“When the prices are going down there is no sense to hold the stocks, actually people would dump off the costly stocks as fast as they could to cut losses,” Mr Haider said, adding that the energy ministry had restricted all imports for April and directed all the oil companies to lift oil from the local refineries, but the refineries too were not prepared for the massive increase in demand in May.
Published in Dawn, June 12th, 2020
IHC ISSUES NOTICES TO PSO, OGRA ON OIL COMPANY’S PETITION
The Newspaper’s Staff Reporter Updated 19 Jun, 2020
ISLAMABAD: The Islamabad High Court (IHC) on Thursday issued notices to the Ministry of Petroleum, Pakistan State Oil (PSO), Oil and Gas Regulatory Authority (Ogra) and the Federal Investigation Agency (FIA) on a petition filed against the crackdown on oil marketing companies (OMCs) ordered by Prime Minister Imran Khan after reports of ongoing shortage of petroleum products across the country.
Last week, the federal cabinet took a serious notice of the artificial shortage of petroleum products across the country and Prime Minister Imran Khan directed the petroleum division and Ogra to ensure supply of petroleum products across the country within 48 to 72 hours.
The prime minister had also ordered authorities to take strict action against those responsible for creating the artificial shortage that had been causing serious problems to the masses.
Zoom Petroleum (Pvt) Limited, a subsidiary of the Mehar Group of Companies (Pvt) Limited, has filed the petition against the Fuel Crisis Committee and the ongoing crackdown on the OMCs allegedly responsible for the massive fuel shortage in the country.
Crackdown over ongoing shortage of petroleum products
IHC Chief Justice Athar Minallah heard the petition.
In the petition, the petitioner requested the court to set aside the Ministry of Petroleum’s June 8 and 9 notifications, announcing tough government action against all OMCs for creating artificial shortage of petroleum products in the country.
Zoom Petroleum (Pvt) Limited further requested the high court to stop the government from taking any action against the company until final adjudication of the case.
According to the petition, the inquiry committee had on June 12 summoned the chief executive officer of Zoom Petroleum (Pvt) Limited and charged him with hoarding and black marketing of petroleum products.
On June 9, the government initiated an inquiry against the OMCs allegedly involved in triggering the fuel crisis and constituted the Fuel Crisis Committee.
Published in Dawn, June 19th, 2020
CONSUMER GROUPS OPPOSE MOVE TO HIKE GAS PRICES BY 110PC
Khaleeq Kiani Updated 25 Jun, 2020
ISLAMABAD: Strongly opposing a petition for almost 110 per cent higher gas rates, various stakeholders on Wednesday demanded rather substantial reduction in prices in line with drastic fall in international oil prices.
The Oil & Gas Regulatory Authority (Ogra) had called a public hearing on the request of Sui Northern Gas Pipelines Limited (SNGPL) which is seeking almost 110pc increase in prescribed prices for fiscal year 2020-21. The hearing was presided over by Ogra Chairperson Uzma Adil Khan.
The SNGPL has sought an increase of Rs622.94 per mmbtu (million British thermal unit) effective from July 1 to meet its estimated revenue requirements of financial year 2020-21. In addition, the company also demanded Rs102 per unit cost of imported gas (LNG) to be transferred to consumers.
The representatives of CNG Owners’ Association and All Pakistan Textile Mills Association (Aptma) objected to the huge increase in gas prices. Both parties said the gas prices were required to be reduced to pass on the benefit of lower international oil rates to consumers since the producer prices of gas were directly linked to global oil prices.
‘Impact of fluctuation in dollar price should not be shifted to consumers illegally’
The company in its revised petition demanded that average prescribed gas price be set at Rs1,287.19 per mmbtu against the current prescribed gas price of Rs664.25 per mmbtu while the cost of RLNG provided to domestic consumers should also be recovered at the rate of Rs102 per unit.
The All Pakistan CNG Association (APCNGA) and Aptma rejected the move, stressing that such a massive increase in cost of gas would kill the fragile economy.
Aptma Executive Director Shahid Sattar said that SNGPL should not be allowed to cover its losses from the LNG business. The gas company is spending too much money on the Board of Directors meetings and burdening the consumers for it, he added.
The Aptma representative proposed that SNGPL should maintain a separate account for LNG and indigenous gas business, stressing that any increase in gas rates at this stage would have devastating impact on industry and business.
APCNGA Central Chairman Ghiyas Abdullah Paracha said the earlier price hike was also illegal which must be reversed as the energy prices were retreating across the world but the gas prices were not being reduced in Pakistan. According to Clause 7 of the Ogra Ordinance, the government can increase or reduce the price of natural gas after Cabinet’s approval, he said.
“The government must issue policy guideline to Ogra under Rule 21 of the Ordinance before the public hearing which was not issued until June 24, therefore, Ogra’s determined gas tariff could be applicable from July 1. Clause 8A of the Ogra Ordinance empowered only the regulator to fix the tariff of gas for retail consumers which cannot be changed by the government,” he added. However, he said, the government can impose developmental surcharge and taxes.
Paracha said that the price determined by Ogra will be final. He noted that in June 2019, Ogra determined the price of gas at Rs637 per mmBtu but the tariff was pushed up to Rs1,283 for the CNG sector which was illegal and therefore it should be reversed.
He said the price of local gas was linked to crude and high sulfur furnace oil which had come down by 35pc to 50pc. He said gas rates should be reduced by 40pc as the prices of LPG, flare gas, petrol, diesel and furnace oil had dropped.
The Ministry of Petroleum — through a letter on March 10 — directed the gas companies to reduce UFG losses from 6.3pc to 4pc, cut profit from 20pc to 15pc, reduce depreciation by 1pc and cut transmission and distribution losses but the directives were not followed, Paracha argued.
He informed the meeting that imported LNG is being provided to different sectors without securing payment and the entire burden is being shifted to consumers of natural and imported gas.
Ogra chairperson observed that reduced oil price in the international market can result in a reduced price of gas, noting that the impact of fluctuation in the price of dollar should not be shifted to consumers illegally.
Published in Dawn, June 25th, 2020
THREE CHINESE HYDEL PROJECTS GET ECC APPROVAL AFTER A ONE YEAR WAIT
Khaleeq Kiani Updated 26 Jun, 2020
ISLAMABAD: In fast moving developments, the Economic Coordination Committee (ECC) of the Cabinet on Thursday approved important revisions to the terms on which three hydropower projects, worth more than $5 billion in total, are being executed by Chinese companies.
The meeting, presided over by Adviser to PM on Finance and Revenue Dr Abdul Hafeez Shaikh also reduced regulatory duties on six categories of smuggling-prone items and approved technical supplementary grants to various agencies and ministries.
The ECC on April 8 agreed to the demand from the Chinese firms for up to seven per cent foreign exchange loss after resisting it for almost a year.
The Cabinet Committee on Energy, led by Planning Minister Asad Umar approved on June 20 the signing of implementation agreements on two of these three projects — Kohala and Azad Pattan — with an estimated cost of $3.758bn.
Within days, yet another summary was moved by the Power Division titled “Revised Standard Security Package Documents” for these three projects — 1,124MW Kohala Hydropower Project, 700MW Azad Pattan Hydropower Project and 640MW Mahl Hydropower project — all based on Jhelum river, Azad Kashmir. The cumulative generation capacity of three projects is estimated at 2,464MW.
In the case of the Kohala project, the documents were signed in PM’s presence shortly after the ECC approval on Thursday.
All three projects are being developed on built, own, operate and transfer basis by the Private Power & Infrastructure Board (PPIB). The 1,124MW Kohala and 700MW Azad Pattan projects are included in and processed under the China-Pakistan Economic Corridor Energy Project Cooperation agreement signed on Nov 8, 2014 by the two countries.
The Kohala project is to be located on River Jhelum in Azad Jammu & Kashmir being developed by the Kohala Hydropower Company Private Limited with China Three Gorges Corporation (CTG), International Finance Corporation of the World Bank and Silk Road Fund. The project’s average 30-year tariff is estimated at 7.85 cents per unit with total project cost of $2.4bn.
Likewise, the Azad Pattan project is also to be located on Jhelum river on the dual boundary of AJK and Punjab being developed by Azad Pattan Power Pvt Limited with China Gezhouba Group Company Limited as sponsor. The 30-year tariff for this project is estimated at 7.07 cents per unit, with project cost of $1.35bn.
The third project — Mahl Hydropower – is also to be located on river Jhelum on combined boundary of AJK, Punjab and Khyber Pakhtunkhwa. The project is being developed by Mahl Power Company Ltd with CTG and Trans Tech Pakistan.
These projects are now also covered under the 2002 Power Policy incentives, concessions and protections for which revised standard security package documents are being signed. These documents include Pakistan government’s implementation agreements, GOP guarantees, power purchase agreements, water use agreement which are signed by government of AJK/Punjab/KP, National Transmission & Despatch Company, Central Power Purchasing Agency, PPIB etc.
The ECC also decided in favour of reduction in regulatory duty on the smuggling-prone items including fabric, sanitary ware, LED/TVs, padlocks, blankets, electrodes etc.
The meeting also approved Rs5.323bn technical supplementary grant for five proposals. These included Rs4.313bn grant for employee-related expenditure by the Interior Division, Rs900 million for adjusting pays and allowances of the National Commission for Human Development employees, Rs52.70m for the Revenue Division, Rs39.22m for the Pakistan Rangers and Rs18.53m for the Islamabad administration for taking measures to control and fight the Covid-19 pandemic.
Published in Dawn, June 26th, 2020
GOVT SET TO START TALKS WITH IPPS FOR RELIEF IN PPAS
April 13, 2020
ISLAMABAD: The PTI government is quite serious to start next week renegotiations of Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs) with positive mode seeking relaxations based on mutual agreement, but not with the intent to harassthem as PPAs are supported by sovereign guarantees.
To this effect, a committee headed by Federal Energy Minister Omar Ayub Khan, comprising other members of Federal Minister for Law and Justice Barrister Dr Muhammad Farogh Naseem, Special Assistant to Prime Minister on Coordination of Marketing & Development of Natural Resources Shahzad Syed Qasim, Secretary for Law Muhammad Khashish-ur-Rehman, Secretary Finance Naveed Kamran and Secretary Power Division Irfan Ali, has been notified by the government. The said committee will start the crucial talks.
“Yes, a six-member committee has been notified to start parleys with IPPs seeking some relaxations in PPAs based on mutual agreements as the government side does not want to harass the electricity producers as the PPAs are backed with the sovereign guarantees and government does not want to violate them unilaterally,” Secretary Power Division Irfan Ali told The News.
“We have already held talks in an amicable atmosphere with nine IPPs seeking settlement agreement after London Court of International Arbitration (LCIA) gave award in the favour of said IPPs. Though the agreement is not signed, but the talks are held in an enabling atmosphere. Now the government will hold talks with all IPPs which were installed under 1994, 2002 and 2015 power policies.”
However, a senior official of the Power Division when contacted for more details said that the committee members will first meet and brainstorm as to what factors are causing hike in the tariff and will also know if there is a room to change the PPAs legally and what the law of land and international law says about it. When asked if there is any example of changing the PPAs through renegotiation with IPPs in any country, he said that at present he doesn’t know, but in a country like Pakistan, masses and all sectors of economy are now sick of high tariff, which contributes a lot in the hike of input cost.
The factor of capacity payments is the main reason for hike in the tariff. The main issue is that the government has to pay about Rs900 billion to IPPs in the head of capacity payments in the current financial year and in 2025, the capacity payments will increase to Rs1,500 billion. The situation that emerged after COVID-19 spread has also multiplied the financial miseries for masses and all sectors of economy.
Now it is high time to seek an amicable solution to all financial miseries being caused because of the high tariff in the country. “We may focus on Return on Equity (RoE) and guaranteed Rate of Return with US dollar Indexation and many other areas from where the maximum relaxations could be attained and more importantly top officials of PPIB (Private Power Infrastructure Board) will give their technical input in identifying the arrears in PPAs of all IPPs for negotiations.”