ISLAMABAD: Prime Minister Shehbaz Sharif has rejected a move by the Petroleum Division to auction liquefied petroleum gas (LPG) produced by stateowned entities (SOEs) in the absence of a legal and policy framework.

The prime minister suggested there should be a comprehensive policy change, backed by legal and regulatory framework, before any transaction is executed so that unnecessary controversies were avoided, an official told Dawn.

PM Shehbaz declined to approve any interim measures. As a result, the simultaneous auctions conducted by three major LPG producers in the public sector on Aug 10 would not go ahead, he added.

The approval of the bidding results was estimated to jack up LPG prices by at least 15 per cent on top of higher winter prices. The proposal would have linked the producer price of locally produced LPG to import parity and widened the margins allowed to marketing companies and distributors.

It would have had a net impact of Rs77, 000 per tonne, or around Rs900 for a domestic cylinder of 11.8kg.

Supply squeeze A domestic cylinder changes hands at around Rs5,000 against the OGRA`s notified maximum of Rs3,296, a premium of roughly Rs1,700, or 52pc. This is mainly due to supply squeeze on two fronts and the authorities` refusal to address the issue.

Land route volumes through Taftan border remain negligible, while LPG totalling over 25,000 tonnes is backed up at Rahimdan, near Gwadar. Each bowser now waits about a month to be decanted and cleared at the Gwadar terminal, a delay industry officials say has pushed freight costs from $100 a tonne to $400.

The closure of the Strait of Hormuz has curtailed imports, leaving Oman as the principal alternative source. Correspondence seen by Dawn suggests that the Foreign Office, at the Petroleum Division`s request, had approached Oman for cargoes from OQ Trading, the state-owned supplier.

Insiders suggest that before the petroleum authorities could make a timely decision, OQ Trading instead committed its available volumes to a single private buyer on commercial terms. This is feeding the black market and price escalation in the open market.

Informed sources said the storage at both LPG terminals at Port Qasim was full to capacity, meaning that the shortage was an artificial phenomenon given the fact that stocks should be on the daily reporting dashboard of the Oil and Gas Regulatory Authority (Ogra). Weak enforcement is also a cause, they added.

The sources said police had reported loaded LPG bowsers parked in some areas, creating security and safety risks on highways.

On the instructions of the petroleum division, the three SOEs carried out auctions on Aug 10 simultaneously. The highest bidder offered Rs205 million for supply of a lot over three years. One lot was of five tonnes a day.

The country`s total LPG requirement fluctuates between 1.4 and two million tonnes. More than half of it is imported.

Some existing LPG stakeholders, fearing loss of business and market competition, are already in the court against the bidding process on grounds that existing policies and rules provide no such arrangement.

The Petroleum Division and its entities are believed to have held multiple sessions with the Attorney General for Pakistan to push for speedy judicial proceedings.

Under the directives of Petroleum Minister Ali Pervaiz Malik, the four public sector entities Oil & Gas Development Company Ltd, Pakistan Petroleum Limited, Pak-Arab Refinery Company and Govt Holdings Pvt Limited were required to offer standardised lots of five tonnes each on pilot basis to replace `the existing quota-based system`.

The signature bonus adds close to 15pc on top of the last price notified by Ogra at around Rs3,296 per 11.8kg cylinder.ISLAMABAD: Prime Minister Shehbaz Sharif has rejected a move by the Petroleum Division to auction liquefied petroleum gas (LPG) produced by stateowned entities (SOEs) in the absence of a legal and policy framework.

The prime minister suggested there should be a comprehensive policy change, backed by legal and regulatory framework, before any transaction is executed so that unnecessary controversies were avoided, an official told Dawn.

PM Shehbaz declined to approve any interim measures. As a result, the simultaneous auctions conducted by three major LPG producers in the public sector on Aug 10 would not go ahead, he added.

The approval of the bidding results was estimated to jack up LPG prices by at least 15 per cent on top of higher winter prices. The proposal would have linked the producer price of locally produced LPG to import parity and widened the margins allowed to marketing companies and distributors.

It would have had a net impact of Rs77, 000 per tonne, or around Rs900 for a domestic cylinder of 11.8kg.

Supply squeeze A domestic cylinder changes hands at around Rs5,000 against the OGRA`s notified maximum of Rs3,296, a premium of roughly Rs1,700, or 52pc. This is mainly due to supply squeeze on two fronts and the authorities` refusal to address the issue.

Land route volumes through Taftan border remain negligible, while LPG totalling over 25,000 tonnes is backed up at Rahimdan, near Gwadar. Each bowser now waits about a month to be decanted and cleared at the Gwadar terminal, a delay industry officials say has pushed freight costs from $100 a tonne to $400.

The closure of the Strait of Hormuz has curtailed imports, leaving Oman as the principal alternative source. Correspondence seen by Dawn suggests that the Foreign Office, at the Petroleum Division`s request, had approached Oman for cargoes from OQ Trading, the state-owned supplier.

Insiders suggest that before the petroleum authorities could make a timely decision, OQ Trading instead committed its available volumes to a single private buyer on commercial terms. This is feeding the black market and price escalation in the open market.

Informed sources said the storage at both LPG terminals at Port Qasim was full to capacity, meaning that the shortage was an artificial phenomenon given the fact that stocks should be on the daily reporting dashboard of the Oil and Gas Regulatory Authority (Ogra). Weak enforcement is also a cause, they added.

The sources said police had reported loaded LPG bowsers parked in some areas, creating security and safety risks on highways.

On the instructions of the petroleum division, the three SOEs carried out auctions on Aug 10 simultaneously. The highest bidder offered Rs205 million for supply of a lot over three years. One lot was of five tonnes a day.

The country`s total LPG requirement fluctuates between 1.4 and two million tonnes. More than half of it is imported.

Some existing LPG stakeholders, fearing loss of business and market competition, are already in the court against the bidding process on grounds that existing policies and rules provide no such arrangement.

The Petroleum Division and its entities are believed to have held multiple sessions with the Attorney General for Pakistan to push for speedy judicial proceedings.

Under the directives of Petroleum Minister Ali Pervaiz Malik, the four public sector entities Oil & Gas Development Company Ltd, Pakistan Petroleum Limited, Pak-Arab Refinery Company and Govt Holdings Pvt Limited were required to offer standardised lots of five tonnes each on pilot basis to replace `the existing quota-based system`.

The signature bonus adds close to 15pc on top of the last price notified by Ogra at around Rs3,296 per 11.8kg cylinder.