The cabinet considered and approved a summary submitted by the erstwhile Petroleum & Natural Resources Division on November 21, 2016 for approval and signing of an Inter Government Agreement (IGA) between the Republic of Azerbaijan and Government of Pakistan on "Cooperation in the Field of Energy" which includes the following areas of Cooperation: (i) Development of supply and trading opportunities of crude oil, oil products, Liquefied Natural as (LNG) and Liquefied Petroleum Gas (LPG), providing joint construction of terminals and storage for LNG, LPG and other hydrocarbons; (ii) encouraging investors to work together for promotion of projects of mutual interest including Exploration and Production (E&P) in the petroleum sector; and (iii) supply of LNG in relation to power projects and to other consumers.
Petroleum Division further stated that accordingly PSO negotiated a Term Sale and Purchase Agreement for Petroleum Products with State Oil Company of Azerbaijan (SOCAR) under the umbrella of the IGA.
The copy of the draft Fuel Supply Agreement (FSA) was sent to DG (Oil) whose comments have been duly incorporated in the draft Agreement. Law and Justice Division has vetted the said Term Sale and Purchase Agreement for Petroleum Products from a legal point of view and advised that Agreement may be approved by the Board of Directors of PSO before formal execution.
PSO has said that their Board of Directors in its meeting dated April 21, 2018 had approved the Term Sale and Purchase Agreement for Petroleum Products for execution, subject to approval of the ECC by invoking Rule 5 of Public Procurement Regulatory Authority Rules 2004. Rule 5 of the Public Procurement Regulatory Authority (PPRA) Rules, 2004 regarding International and Inter-Governmental Commitments of the Federal Government provided "Whenever these rules are in conflict with an obligation or commitment of the Federal Government arising out of an international treaty or an agreement with a State or States, or any international financial institution, the provisions of such international treaty or agreement shall prevail to the extent of such conflict".
Petroleum Division further argued that the Term Sale and Purchase Agreement for petroleum products between SOCAR of Azerbaijan and PSO is being undertaken under the Inter-Governmental Agreement signed between the Government of Azerbaijan and Government of Pakistan, therefore, approval of the ECC of the Cabinet is required for exemption under Rule 5 of the PPRA Rules to approve commercial arrangements by PSO.
During the course of discussion, Commerce Division observed that the proposal had not been shared with them for their input. Furthermore, the PPRA also observed that exemption from Rule 5 of the PPRA Rules 2002 needs to be recommended by the PPRA before it is considered by the ECC. It was, therefore, suggested that the matter should be referred to the PPRA for proper examination, before a decision is taken in the matter.
After a detailed discussion, the ECC deferred the matter with the direction that the sponsoring Division should undertake the following actions before the matter is re-submitted to the ECC for its consideration: (i) as a major quantum and value of import is involved, the Commerce Division should be consulted for eliciting its input in this regard; and (ii) take up the matter with PPRA for seeking exemption under rule 5 of the PPRA Rules, 2004.
The ECC further noted the incongruence between the provisions made in rule 5 of the PPRA Rules, 2004 and the provision of SRO No. 719(1)/2011 of July 18, 2011 and advised PPRA to reconcile the instructions/rules in this regard.
