Oil industry seeks extension in permission to import petroleum products on CIF basis to ensure continuity of supplies

ISLAMABAD: The oil industry has asked the State Bank of Pakistan to extend for two months or “until market conditions stabilise” the permission for the import of petroleum products on cost, insurance and freight (CIF) basis — an arrangement under which buyers assume the responsibility of import costs and final delivery following the arrival of commodities at the destination port.

The request was made by the Oil Companies Advisory Council (OCAC) — an association of more than three dozen oil companies and refineries — to SBP Governor Jameel Ahmad in a letter on Monday, with around two weeks left for the 60-day relaxation to end.

It was allowed keeping in view the petroleum import challenges under the prevailing geopolitical conditions, following the OCAC’s call highlighting the difficulty in obtaining adequate marine and war-risk insurance cover.

Marine insurers have either withdrawn or sharply increased war-risk coverage for ships operating in the Persian Gulf and the Strait of Hormuz due to the US-Israel war on Iran.

The letter to SBP, seen by Dawn, referred to OCAC’s previous appeal made in view of the “extraordinary geopolitical situation in the Middle East”. It said the subsequent permission by the SBP for CIF-based imports for 60 days had been instrumental in enabling refineries and oil marketing companies (OMCs) to secure cargoes under highly challenging market conditions.

However, it said, “the situation in the region remains volatile with no meaningful de-escalation or restoration of normal shipping and insurance conditions. The constraints highlighted earlier — particularly the limited availability and exorbitant cost of marine and war-risk insurance, coupled with continued reluctance of shipowners and suppliers — still persist. Freight rates and war-risk premiums continue to remain elevated, and the operational challenges in executing imports under cost and freight arrangements have not eased.”

The letter stated that the validity of SBP’s circular allowing CIF-based imports of petroleum products was set to expire on May 10.

Meanwhile, it said, “the oil industry anticipates considerable challenges in sustaining uninterrupted supply chains if the current relaxation is continued at this stage”.

“In view of the ongoing certainty and to ensure continuity of fuel supplies critical for national energy security — especially in light of upcoming seasonal demand — it is earnestly requested that the temporary permission for CIF imports of petroleum products (crude oil, refined petroleum products, base oil and allied materials) may kindly be extended for a further period of two months, or until market conditions stabilise,” the letter said.