ISLAMABAD: The government on Friday amended Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules 2016 to settle a two-year old dispute between the oil and gas regulator and the oil industry over fee structure and licensing.
The Oil and Gas Regulatory Authority (Ogra) and the Oil Companies Advisory Council (OCAC) had reached an out-of-court settlement over the fee structure and licensing conditions in June 2017, but the oil industry had declined to pay annual fee due to inability of Ogra to get the enabling rules notified.
The amendments to the 2016 rules were to be approved by the federal cabinet on the request of Ogra and the Petroleum Division but the relevant authorities of the regulator failed to move the case for almost 10 months. A hurried approval process from the cabinet was set in motion by the Ogra chairperson before the tenure of the previous government came to an end.
A formal Statutory Regulatory Order (SRO) was issued on Friday to ensure recovery of dues from the oil industry before the close of current fiscal year on June 30. Under the notification, the regulator is expected to recover an annual fee of about Rs170m including one-time licence fees of about Rs50m upfront.
Under the SRO, the term of licence for the oil-related companies in all sectors (refining, blending, transportation, storage and marketing) has been doubled from 15 to 30 years with a fee of Rs2.5m per licence while annual fee structure has been set on the basis of market size and throughput sales.
Under the rules, all these entities irrespective of their size and sales will pay a fixed licence fee of Rs2.5m (instead of original Rs2m) but the term of licence would now remain effective for 30 years instead of 15 years.
In addition, all the companies will now be required to pay fixed annual fee instead of previously application 0.005pc of their sales. Pakistan State Oil will be required to pay the highest annual fee of Rs24m.
The OMCs having more than 16 million tonnes of throughput will be required to pay Rs24m, which would be charged at Rs22m for annual throughput of 14-16 million tonnes.
The annual fee for oil marketing companies would gradually reduce by Rs2m each for annual throughput of two million tonnes each.
The smaller companies with less than one million tonnes would pay annual fee of Rs3m.
The refineries with throughput of 6m tonnes and above would pay Rs11m annual fee that would gradually reduce by Rs2m each for every 2m tonnes lower throughput.
Pipeline companies would pay Rs5m annual fee for more than 6m tonnes of throughput and scale down Rs2m for two million tonnes lower throughput.
In addition, oil blending facilities, grease and reclamation plants would pay an annual fee of Rs100,000 to be linked with consumer price increase while lubricant marketing companies will be required to pay 0.005pc of their gross sales as annual fee.
Likewise, the storage facilities would pay Rs100,000 annual fee while oil testing facilities would pay Rs500,000.
For first year of operations, the fee shall be payable on projected financial data which shall subsequently be adjusted on actual data.
In March 2006, the regulation of Mid and Downstream Oil Sector was transferred to Ogra from the petroleum ministry under which some powers were retained by Director General (Oil), some were transferred to Ogra and some powers were to be jointly exercised.
Since Ogra was regulating the Oil Sector under Pakistan Petroleum (Refining, Blending and Marketing) Rules 1971 which covered only licensing for establishing new Oil Marketing Companies (OMCs) and construction to Lube Oil Blending and Reclamation plants.
Under section 41 (1) of the Ogra Ordinance, the regulator, in consultation the provincial governments and the petroleum ministry after the 18th amendment, drafted the Pakistan Oil (Refining, Blending, Transportation, Storage and Marketing) Rules, 2016 which were notified on January 22, 2016.
Ogra said the new rules 2016 will also help in providing level playing field through enforcement of Technical Standards by carrying out 3rd party inspections to ensure safety/integrity of oil installations.
Published in Dawn, June 23rd, 2018