Petroleum and Natural Resources Division has sought exemption from PPRA Rules for petroleum products deal with Azerbaijan on Government-to-Government basis, initiated by the PML(N) government, official sources told Business Recorder. Petroleum Division, in its proposal, has stated that Pakistan is currently facing a severe shortage of energy which is not only causing hardship for the people but is also inhibiting economic growth of the country.
In order to overcome the energy shortage, the Government of Pakistan is pursuing a number of energy infrastructure projects including setting up of an LNG services infrastructure, import of LNG and import of POL products.
On November 21, 2016, the then Cabinet considered and approved a summary submitted by the Ministry of Energy (Petroleum Division), erstwhile Petroleum & Natural Resources Division for approval and signing of an Inter-Government Agreement (IGA) between Azerbaijan and Government of Pakistan on "cooperation in the field of energy" which includes the following fields of cooperation: (i) development of supply and trading opportunities of crude oil, oil products, liquefied natural gas (LNG) and Liquefied Petroleum Gas (LPG), providing joint construction of terminals and storage for LNG, LPG and other hydrocarbons; (ii) encouraging investors to work together for promotion of projects of mutual interest including Exploration and Production (E&P) in the petroleum sector; and (iii) supply of LNG in relation to power projects and to other consumers.
The signing ceremony of the IGA was held at the Prime Minister's House on February, 28, 2017. Accordingly, PSO negotiated a Term Sale and Purchase Agreement for Petroleum Products with SOCAR under the umbrella of the IGA. Law and Justice Division has vetted the said term Sale and Purchase Agreement (SPA) for petroleum products from a legal point of view and advised that an agreement may be approved by the Board of Directors of PSO before formal execution. PSO has revealed that their Board of Directors in its meeting on April 21, 2018 has approved the Term Sale and Purchase Agreement for petroleum products for execution subject to approval of the ECC of the Cabinet by invoking Rule 5 of Public Procurement Regulatory Authority Rules 2004.
Rule 5 of the Public Procurement Regulatory Authority (PPRA) Rules, 2004 regarding International and Inter-Governmental Commitments of the Federal Government provides that "Whenever these rules are in conflict with an obligation or commitment of the Federal Government arising out of an International treaty or an agreement with a State or States, or any international financial institution, the provisions of such international treaty or agreement shall prevail to the extent of such conflict".
Petroleum Division argues that since the Term Sale and Purchase Agreement for Petroleum Products between SOCAR or Azerbaijan and PSO of Government of Pakistan is being undertaken under the (IGA) signed between the Government of Azerbaijan and Government of Pakistan, therefore, approval of the ECC of the Cabinet is required for exemption under Rule 5 of the PPRA Rules to approve commercial arrangements by PSO and allowing PSO to enter into a Term Sale and Purchase Agreement for Petroleum Products.