A special meeting of the Board of Directors (BoD) of Pakistan State Oil (PSO) has decided not to accord exclusivity to any company for selling up LPG filling stations at existing petrol dealerships. At a meeting held on Monday, the board approved a negotiated agreement signed with Petrosin at Rs 7.03 per kg for 400 stations to be established within five years.
Earlier, PSO had received an offer of Rs 6 per kg of LPG as its commission from Associated Group. PSO in an open solicitation had demanded Rs 8 per kg as commission. After negotiations and upon a detailed breakdown, an agreement was concluded with Petrosin. PSO currently has 3,400 outlets in the country.
The company will have to bring its existing dealers to conclude the agreements as the sellers of LPG at its dealerships. Around Rs 80/90 million of investment is required at each LPG site. Every vehicle presently running on compressed natural gas (CNG) will be required to change the valve at the top of cylinder at a cost of Rs 500. The aim is to significantly reduce consumption of fuel in the country.
Both LPG and diesel are imported items. According to expert forecasts, LPG prices are expected to come down on the international market, while diesel prices are likely to witness an upward trend. PSO has received letters of interest from other international parties to enter into an arrangement with Pakistan''s largest state-owned oil marketing conglomerate.
HIGHLIGHTS OF PSO LPG AUTOGAS STATION ESTABLISHMENT AGREEMENT
-- Term of Main Agreement is 10 years.
-- Term of separate Tripartite Agreement of each Autogas Station is 05 years.
-- Performance review after 5 years of the Main Agreement.
-- PETROSIN to source and transport LPG supplies to PSO LPG Autogas Stations.
-- Concerned PSO Dealer offered first right to invest, establishes and operate Autogas Station. If refused, Autogas Station can be established and operated by PETROSIN.
-- LPG Kit and Cylinder Conversion Centre may be established by Autogas Station Operator.
-- PETROSIN supplies for Dealer sites to continue for 6 months if the Main Agreement terminates.
-- Dealer / PETROSIN (LPG Operator) not authorised for any 3rd party investment / operation.
-- PSO & PETROSIN to jointly develop co-branding campaigns through print, electronic, outdoors and other mediums.
-- LPG Operator to arrange comprehensive insurance policy alongwith the third party risk coverage at each PSO LPG Autogas Station.
-- End selling price of LPG at PSO LPG Autogas Stations to be determined on weekly basis or any other appropriate frequency. However, in case any government agency to determine and announce such price, the same shall prevail.
-- PSO and its Dealers will be given a cumulative guaranteed royalty / income at the following rates which shall further distribute between both:
-- LPG Operator shall guarantee the above payments on a minimum sale of 5 MT per day per Autogas Station, irrespective of the actual sales volume at the said Autogas Station. However, a relaxation period (for such guaranteed volumes) of 12 months shall be applicable on either of the following sets of LPG Autogas Stations:
-- All LPG Autogas Stations commissioned within one year of issuance of initial NOC from OGRA (ie NOC granted for the very first station); (OR)
-- First 200 LPG Stations commissioned; Whichever comes earlier
-- During such Relaxation period, royalty / income shall be paid on actual volumes sold at each Autogas Station.
-- If payment is not made within the stipulated period, late payment charges @ 6 months KIBOR + 2% per annum of total outstanding amount shall be levied on the defaulting party.
-- PETROSIN to provide security deposit of Rs 500,000 per Autogas Station to PSO for its self-operated PSO Autogas Station.
-- PETROSIN also to provide a separate security deposit of Rs 500,000 to PSO for each Dealer Operated PSO Autogas Station.
-- Dealer to also provide security deposit of Rs 500,000 to PSO for his self-operated PSO Autogas Station.
-- Main Agreement is of non-exclusive nature.
-- Terms of the Main Agreement to be a minimum benchmark for any similar business arrangement in future.

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Volumes of LPG Sold         For Dealer Operated       For Petrosin Operated
(5 MT per day per outlet)          Sites                              Sites
                                 US Cents                          US Cents
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5 MT                               7.03                                2.81
5 MT                               8.00                                3.20
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