OMAP raises concern over Ogra-proposed ‘take or pay’ clause

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LAHORE: The Oil and Gas Regulatory Authority (OGRA) has expressed serious concerns over the proposed clause by the Oil and Gas Regulatory Authority (OGRA) regarding the ‘Take or Purchase Agreement (SPAS) in Petroleum Sale, purchase contracts (SPAS).

In a letter to OGRA Chairman Masrwar Khan, OMAP Chairman Tariq Wazir Ali highlighted the potential threats related to the financial stability of oil marketing companies (OMCS), which are already facing several solutions.

Tariq Wazir highlighted the matter, urging Ogra to review the clause, which he said would benefit the refineries and large OMCs by backing the small players. He warned that such a move would further strengthen the monopoly control in this sector, stop the competition and discourage newcomers. As a result, petroleum supply in the country can damage the overall performance of China.

The letter also criticizes the proposed ‘taking or payment’ clause for failing to resolve the ongoing problem of refinery opportunism. The OMAP claims that refineries often manipulate supplies on the basis of expected prices or reduction, which produces financial instability for the OMC. When prices are expected, refineries are reluctant to supply products, and force OMCs to import expensive. On the contrary, when prices are expected to fall, the refineries are flooded in the market, causing financial loss to the OMCs. Tariq Wazir stressed that the exercise distorts the market and harasses fair treatment among stakeholders.

Additionally, the OMAP pointed out that the current pricing scene, with the expected drops in Mugas (12 PC) and HSD (8 pcs), makes the OMC unreasonable to expect inventory losses, while refineries avoid fluctuations in the market. He says the proposed clause, unfairly, changes the burden of fluctuations in prices to OMCS, and its already unstable the critical financial conditions.

The letter also raised concerns about the cross -border arrival of petroleum products, which significantly affected the demand for locally obtained products. The OMAP said that this uncontrollable has worsened the financial difficulties of the OMC, which has increased the urgent need for a fair and balanced regulatory framework to address these challenges.

Finally, the OMAP called for a regulatory mechanism to make the refineries accountable for their delivery promises and ensure the level playground for all stakeholders. Without such security measures, he warned, the proposed ‘taking or salary’ clause would only increase the current imbalance, which threatens the OMCs for financial elimination.

The proposed ‘tech or salary’ clause is expected to have significant implications on the liquidity and operational capacity of OMCS. Small and medium -sized OMCS, which usually work on a thin margin of limited working capital, are especially at risk of supply. Regardless of the market demand, forcing them to increase the default quantity will increase their financial exposure, increase the risk of default, disrupt supply, and potential costs from the market. Such results can damage the government’s goal of promoting competitiveness and eventually compromise with energy protection, leading to provision obstacles.

In current market conditions, OMCS can only work effectively on the basis of ‘tech and pay’, where product development is directly linked to market demand and financial capacity. This model protects OMCs from unnecessary financial risks, while ensuring that they can meet market needs without maximum use.

Given the gravity of the situation, the Oil Marketing Association of Pakistan (OMAP) has called on OGRA to adopt a more balanced and impartial approach.

1. The issuance of a comprehensive consultation meeting: It should include uniform representation of all stakeholders, including small and medium OMCS, before making a final decision on ‘carrying or paying’ clause.

2. Introducing a transparent implementation procedure: Regardless of price fluctuations, refineries should be held accountable to supply products in a timely and fair way in a timely and fair manner.

3. Prioritize long -term solutions: these delays include the allocation of the product, the distinguished pricing methods, and inadequate support for infrastructure, which the OMCs have faced for years.

4. Ensure competitive and fair market: Regulatory framework should promote competitiveness, promote the level of playground in relation to the safety of small players and supply of oil.

The OMAP is firmly convinced that the entire petroleum sector, which has been able to implement a ‘payment or payment’ clause, can have far -reaching consequences of the petroleum sector without resolving these critical concerns. The Association has requested an immediate meeting with OGRA to discuss these issues and find a more equal solution.