Deferred payment: Pakistan may ask Kuwait to extend credit facility on oil supplies

Pakistan may place a request before the government of Kuwait to extend credit facility on oil import on deferred payment from two months to one year for a three-year term effective from January 1, 2009 to December, 2011.
Sources revealed to the Business Recorder on Tuesday that the supply contract with Kuwait Petroleum Corporation (KPC) had been renegotiated by Pakistan State Oil (PSO) for a further period of three years from January 1, 2009 to December 31, 2011. Kuwait government had recently given an extension for a credit facility to Pakistan to import oil on deferred payment for 60 days for one more year effective from January-December 2009.
Advisor to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain had communicated a formal request to Kuwaiti Oil Minister to schedule a meeting in which a request would formally be placed before the Kuwait Oil Minister to extend credit oil facility to import oil on deferred payment from 60 to 360 days, said the sources.
The countrys total demand of diesel is about eight million tonnes and 4-4.5 million tonnes diesel costs around two billion dollars. At present, PSO is importing from Kuwait approximately three million tonnes high-speed diesel (HSD), costing around one billion dollars per annum.
Pakistan meets 82 percent oil requirement through imports and 18 per cent through domestic production. Pakistan is importing oil from Saudi Arabia, UAE and Qatar on deferred payments for 30 days and is currently importing oil from Kuwait for 60 days on deferred payment.
During the caretaker set-up last year, the government of Kuwait had extended the credit oil facility from 30 days to 60 days to Pakistan to import oil on deferred payment effective from January-December 2008. Under the said facility, Kuwait provided oil on deferred payments for 60 days instead of 30 days to Pakistan during the last calendar year.
The present government had also sought the extension in credit oil facility for 90 days, but Kuwait government extended it to 60 days, effective from January-December 2009. The government is expected to request the government of Kuwait to extend the credit oil facility further - from 60 to 360 days.
The Petroleum Advisor would place the request before the Kuwait Oil Minister during the upcoming meeting, sources said. During the caretaker government regime, the then Pakistani caretaker Petroleum Minister Ahsanullah Khan had requested government of Kuwait to extend the credit oil facility to 60 from 30 days on deferred payment in a letter addressed on December 11, 2007.
Kuwaiti Petroleum Minister and Chairman of Kuwait Petroleum Corporation Mohammad A. Al-Aleem had responded positively to this request on December 25, 2007 in which he communicated that Kuwait government had granted the credit facility of additional 30 days to import oil from Kuwait on deferred payment.
PSO is currently facing financial crunch due to circular debt and its receivables have surged to Rs 93 billion against power sector, Pakistan International Airlines (PIA) and price differential claims against the government.
Pakistan has faced a dramatic decline in oil reserves during the last financial year due to non payment of billions of rupees of price differential claims (PDC) to Oil Marketing Companies (OMCs) and the country is still grappling with the circular debt. The circular debt between the OMCs, oil refineries and power producers is leading to supply problems. The grant of further extension in credit oil facility by Kuwait government would facilitate import of oil in the country.