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ISLAMABAD: The National Accountability Bureau (NAB) has swung into action by taking notice of the much-touted yet questionable US$5 billion furnace oil purchase agreement of Pakistan State Oil (PSO) with Bakri Trading Company Pakistan (Pvt.) Ltd (BTCPL), said official sources.
ccording to a NAB official, PSO had awarded the contract to BTCPL without open tendering in violation of the Public Procurement Regulatory Authority (PPRA) rules. “Oil supply is the lifeline of Pakistan’s economy. The award of an oil supply contract to a small trading company without competitive bidding has posed a serious security and strategic risk to the economy,” he said. “The NAB has asked PSO to submit for review its agreement with the BTCPL so that we can assess whether it is flawed or not.”
However, according to the copy of the agreement available with The News, PSO awarded the contract directly to the BTCPL without issuing any tenders. The agreement is valid for a period of five years and may be extended after the expiry of this period. Under the agreement, PSO will purchase 1.4 million tons of furnace oil from the BTCPL annually. In case PSO refuses to buy furnace oil from the BTCPL, not only will it have to pay for the cost of oil but also the damages incurred.Moreover, the BTCPL will not be liable to continue to provide furnace oil in case of war or internal strife. Significantly, under the agreement, both parties are to jointly examine the quality of furnace oil. According to the ministry officials, this shows neither party is in favour of transparency and they fear the said clause may end up encouraging corruption. Meanwhile, any dispute between the two parties is to be resolved through the initiation of legal proceedings in Karachi.
According to an official at the Ministry of Petroleum and Natural Resources, the accord is not only faulty but also damaging to the country. “The PSO has wrongly stated in the agreement that BTCPL is the only company having a blending oil facility whereas the fact is that PSO is the only company to have an oil blending facility in Pakistan,” he said. “Thus, PSO high-ups have diverted their business to a small and unknown trading company, despite having 82 percent share of the total Pakistani oil market. And to make things worse for the people of Pakistan, the BTCPL has been given the right to fix the price of HSFO based on a loose formula as per the clause 8 of the agreement.”
On November 10, 2012, Transparency International wrote a letter to the prime minister and demanded cancellation of the contract. The allegations levelled by the TI have since been confirmed by the Securities and Exchange Commission of Pakistan and PPRA. Further, the PSO’s board has also taken a strong notice of the faulty and damaging agreement with the BTCPL.
ccording to a NAB official, PSO had awarded the contract to BTCPL without open tendering in violation of the Public Procurement Regulatory Authority (PPRA) rules. “Oil supply is the lifeline of Pakistan’s economy. The award of an oil supply contract to a small trading company without competitive bidding has posed a serious security and strategic risk to the economy,” he said. “The NAB has asked PSO to submit for review its agreement with the BTCPL so that we can assess whether it is flawed or not.”
However, according to the copy of the agreement available with The News, PSO awarded the contract directly to the BTCPL without issuing any tenders. The agreement is valid for a period of five years and may be extended after the expiry of this period. Under the agreement, PSO will purchase 1.4 million tons of furnace oil from the BTCPL annually. In case PSO refuses to buy furnace oil from the BTCPL, not only will it have to pay for the cost of oil but also the damages incurred.Moreover, the BTCPL will not be liable to continue to provide furnace oil in case of war or internal strife. Significantly, under the agreement, both parties are to jointly examine the quality of furnace oil. According to the ministry officials, this shows neither party is in favour of transparency and they fear the said clause may end up encouraging corruption. Meanwhile, any dispute between the two parties is to be resolved through the initiation of legal proceedings in Karachi.
According to an official at the Ministry of Petroleum and Natural Resources, the accord is not only faulty but also damaging to the country. “The PSO has wrongly stated in the agreement that BTCPL is the only company having a blending oil facility whereas the fact is that PSO is the only company to have an oil blending facility in Pakistan,” he said. “Thus, PSO high-ups have diverted their business to a small and unknown trading company, despite having 82 percent share of the total Pakistani oil market. And to make things worse for the people of Pakistan, the BTCPL has been given the right to fix the price of HSFO based on a loose formula as per the clause 8 of the agreement.”
On November 10, 2012, Transparency International wrote a letter to the prime minister and demanded cancellation of the contract. The allegations levelled by the TI have since been confirmed by the Securities and Exchange Commission of Pakistan and PPRA. Further, the PSO’s board has also taken a strong notice of the faulty and damaging agreement with the BTCPL.
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