Ministry of Foreign Affairs has reportedly expressed reservations against Petroleum Division for not taking it on board at the time of drafting of Memorandum of Understanding (MoU) between Pakistan State Oil (PSO) and Saudi Aramco, well-informed sources in Petroleum Division told Business Recorder. This development was witnessed at a meeting of federal cabinet held on October 4, 2018 presided over by Prime Minister Imran Khan.
Saudi Arabia has sought acceptable rate of return based on size of the potential investment crude oil refining, marketing, distribution and related downstream sectors subject to applicable laws and regulations both in Pakistan and Saudi Arabia.
The Cabinet was informed that as a consequence of visit by the Prime Minister to Saudi Arabia, a high -powered Saudi delegation visited Pakistan and proposed a Memorandum of Understanding (MoU) for cooperation in the field of oil and gas through respective state-owned nominated commercial entities viz; Pakistan State Oil (PSO) from Pakistan and Saudi Aramco from Saudi Arabia.
A draft MoU was prepared and finalised by the representatives of Government of Pakistan and Saudi Arabia and had been vetted by the Ministry of Law and Justice.
In terms of rule 16(1) (h) of the Rules of Business 1973, approval of the Cabinet was solicited for signing of the MoU and cooperation between the governments of Saudi Arabia and Pakistan.
During the course of discussion, it was observed that both Saudi Arabia and the United Arab Emirates (UAE) were very eager to invest in Pakistan and there was a need that Pakistan should also respond in a prompt and encouraging manner.
It was also stated that the Ministry for Foreign Affairs had not been consulted at the time of drafting the MoU, which was a requirement under the Rules of Business, 1973. Furthermore, the government of Balochistan must also be consulted in the matter with particular reference to the allocation of gas to the proposed refinery.
According to the MoU, PSO and Saudi Aramco will conduct study investment opportunities in the refining/chemicals, distribution, marketing and related downstream sectors in order to evaluate the economic and technical feasibility of these opportunities in Pakistan while taking into account all logistical and regulatory factors including: (i) securing favourable investment incentives for an acceptable rate of return based on size of the potential investment; (ii) the allocation of appropriate lands to accommodate the initial investments and any potential expansions; (iii) the allocation of appropriate easement and entry rights to freely access the investment sites and freely transfer the feedstock and products to and from such site, including via roads, vessels, pipelines and any other means of transfer and transportation in the country; (iv) the allocation of appropriate tax exemption as per policy; (v) the allocation of natural gas as feedstock for refining activities at mutually agreed prices; (vi) facilitating obtaining adequate assurance that the necessary infrastructure for the success of any potential investment will be made available, including the ability to utilize existing and upcoming power and infrastructure developments; (vii) facilitating access to regional demand centres and marketing outlets; (viii) facilitate obtaining the requisite licences and government approvals to enter the refining, distribution and marketing sectors in all regions of the country as per applicable laws; (ix) encouraging the participation of third party investors in the proposed investment opportunities, subject to the approval of both parties; and (x) ensuring that the investments attract international financing at competitive terms.
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