When it comes to Pakistan, monopolisation works even for foreign companies, and the concerned authorities of the country find themselves helpless against diplomatic pressure. This time it happened when Kuwait Petroleum (KP) approached the government to keep intact its soft agreement with Pakistan National Shipping Corporation (PNSC) despite the losses the corporation incurred in this regard.
Diplomatic pressure
Official sources at the corporation told Profit that in order to work with Pakistan State Oil (PSO) the corporation opted for a soft agreement with one of the suppliers of PSO that is Kuwait Petroleum earlier this year. ‘KP agreed on $480 per metric tonne a voyage, and we did a total of eight voyages accordingly, out of one voyage the PNSC earned profit of up to $40,000,’ sources added. But when the international oil prices rose in the middle of the agreement, the corporation started incurring losses in voyages, sources added. “Consequently, the current administration of the corporation under the chairmanship of Saleem Ahmed Meenai sent a suspension letter of the soft agreement to the KP, but the supplier in turn approached the government and put huge diplomatic pressure on the corporation for keeping the soft agreement intact,” sources added. Sources further informed that now as a result of the pressure the corporation still has to work with KP on current negotiated prices which fall around $370 per metric tonne a voyage, yet they are feeling the brunt of the soft agreement with the supplier.
Import monopoly
Industry experts on similar notes have also demanded that diesel import of the country should not be monopolised by KP, and say for a matter of fact that the government should also use other channels like India for diesel imports, which would work to reduce the monopoly of KP. According to the figures India imports 5m tonnes of diesel, while Pakistan’s imports are 4.5m tonnes in terms of diesel, therefore, as experts suggest, we should at least start importing diesel from India to push KP to agree on better rates. Experts believe that diesel imports from India would be much cheaper due to low freight rates, but there should not be total dependency on India for obvious reasons. It is to be noted that oil import demand has remained strong in the current year, driven by higher demand for crude oil and petroleum products. Pakistan meets 80 per cent of its energy demand through oil imports. The oil bill for the first eight months of 2011 increased 34 per cent year on year to $10 billion, exceeding the sharp 27 per cent YoY increase in 2010. The country’s growing dependence on oil has increased its vulnerability to oil-price shocks; in many ways, the
Vulnerable rupee
Pakistani Rupee is even more vulnerable to a Balance of Payment crisis today than in 2008, when the currency depreciated by 28 per cent. Sayem Ali at Standard Chartered global research forecasts that oil imports in 2011 are likely to surpass $14 billion, more than the size of the entire $11.3 billion IMF bailout. It is pertinent to mention that in March this year PNSC had announced that an agreement would be signed between Kuwait Petroleum and PSO for supply of furnace oil for one year, but, according to the sources, nothing concrete was done in this regard. The agreement remained ‘soft’ on the part of the corporation and even that had a heavy bearing on the corporation due to the involvement of Pakistani government for keeping the agreement intact. Based on the annual report of PNSC for the year ended on June 30, 2011 the share of the corporation in Pakistan’s trade is 9,586,367 tonnes in 2011 which is 11 per cent of Pakistan’s total trade estimated at 87.34 million tonnes. While, out of the total crude oil import in Pakistan of around 7.2 million tonnes per annum, PNSC tanker fleet is catering to 6.5 million tonnes per annum. Thus almost all crude oil requirements of the country are met by PNSC alone.
