ISLAMABAD: The Cabinet Committee on Energy (CCoE), which is scheduled to meet on Monday (tomorrow), is likely to approve the long-awaited Refinery Policy 2021, as Petroleum Division has altered its first draft in accordance with the recommendations of Minister for Planning, Development and Special Initiatives Asad Umar.
On August 20, the draft policy came under consideration in the CCoE, which had directed the Petroleum Division to review the policy with reference to specific points/observations highlighted by the forum and submit the revised draft policy for its consideration after incorporating viable recommendations.
Accordingly, Petroleum Division reviewed the CCoE' s observations and following modifications have been made in the draft policy: (i) upfront utilisation of incremental tariff protection revenue was previously provided in the Policy from January 1, 2022, however, under the new proposed arrangement this amount can only be used after award of EPC contract by the respective refineries expected to start by 2024 (Sub-section 9.2.3.9 of the Policy); and (ii) OGRA will monitor the generation of incremental revenue to be deposited in a special reserve account by each refinery under a separate bank account to be opened in NBP and ensure its utilisation for the purpose of the up-gradation/expansion of the refineries, on proportionate basis of the incremental revenue and refinery's contribution (under the principle of Sub-section 9.2.3.9 of the Policy).
Oil refining policy may be approved by CCoE on Friday
In order to simplify the governance arrangements, the mechanism of hiring of joint external consultant, amendments in force majeure clause was amended. Previously, bank guarantee worth Rs 500 million per refinery was required till financial close. As a precaution, this has been extended till commissioning of the project (COD). The form and features of guarantee will be subject to acceptance by Ministry of Energy (Petroleum Division (Sub-section9.2.3.11 of the Policy).
On August, 20, 2021, during the CCoE meeting, Ministry of Maritime Affairs pointed out that the business of Single Point Mooring (SPM) pertained to it and a policy related to SPM was presently being deliberated upon by the stakeholders.
It was further pointed out that fiscal incentives, proposed in Pakistan Oil Refining Policy 2021, would be at the cost of Sea Ports, therefore Ministry of Maritime Affairs did not recommend such incentives proposed in the draft policy.
Incentives proposed for refineries in new policy 'blocked' by ministers
The CCoE directed the Petroleum Division to review the policy with reference to following specific points/observation highlighted by the forum: (i) availability of upfront tariff protection incentives to the existing refineries for upgradation; (ii) simplification of monitoring /governance mechanism suggested for utilizationof the proposed tariff protection incentives to minimize the role of government; and (iii) treatment of the tariff protection incentives during the period from July 1to December 31, 2021.
According to sources, there is a possibility that the CCoE will also approve the new Circular Debt Management Plan (CDMP) prior to sharing it with the International Monetary Fund (IMF) and World Bank. A summary on payment to Independent Power Producers (IPPs) 2002 is also expected to be placed before the CCoE as Implementation Committee (IA) headed by the Finance Minister has approved it.
However, an undertaking will be obtained from Nishat Chunian that if excess amount is determined over and about Rs 8.6 billion as determined by NAB and IPPs Committee, then it has to pay.
Other items on the CCoE agenda are as follows: (i) proposed revision to Cabinet approved plan for closure of power plants (Gencos); (ii) ADB funded Advanced Metering Infrastructure (AMI) in Iesco, Lesco etc; (iii) policy direction for operation of RLNG plants out of merit; (iv) monthly report sheet of power plants operated out of merit (primarily for security constrained economic dispatch); and (v) comparison/ review of Terms of Reference (ToRs) of CCoE and Charter of ECC.
Copyright Business Recorder, 2021