Pakistan: Saudi oil facility yet to be operationalised

The Saudi government had agreed to provide $4.2bn economic support to Pakistan in June 2021 and then formally signed an agreement in November.

The economic package included $3bn foreign exchange deposit in Pakistan’s account and $1.2bn in oil supplies at the rate of $100 million per month at an interest rate of 3.8 per cent — higher than the previous rate of 3.2pc, reports The Dawn.

The interest rate on SOF is almost 1pc higher than that of 2.8pc by International Islamic Trade Finance Corporation, a subsidiary of the Islamic Development Bank, which is providing $4.5bn worth of three-year trade finance for oil, gas and fertiliser imports at the rate of $1.5bn per annum, the Pak newspaper reported.

Informed sources told Dawn News the finance ministry was required to provide sovereign guarantee on oil supplies which took time.

Also, the designated entities of the two countries — Pakistan State Oil, Pak-Arab Refinery Limited (Parco) and National Refinery Limited (NRL) and Saudi Aramco — were required to sign a subordinate commercial purchase agreement which also consumed time in vetting by the law division, they added.

Now the draft purchase agreement has been finalised by the two sides. PSO, Parco and NRL have also signed the agreement while Saudi Aramco has yet to sign it.

The two sides, official sources said, expect the mechanism to be finalised by the end of the current month to start first oil flows with the start of next month, reports The Dawn.

In this connection, Ambassador of Saudi Arabia to Pakistan Nawaf bin Saeed Al-Malkiy had a meeting with Minister for Economic Affairs Omar Ayub Khan on Thursday.

They “discussed ongoing development projects and new initiatives”, said an official statement. The minister appreciated the Saudi support in the priority development areas.

“During the meeting, it was agreed to operationalise the Saudi oil facility at the earliest,” the statement said as quoted by Dawn News, adding that the financing agreement worth $1.2bn for import for petroleum products was signed on November 29, 2021 between the Saudi Fund for Development (SFD) and the Economic Affairs Division of Pakistan.