Pakistan and Saudi Arabia have agreed to operationalize the $1.2 billion Saudi Oil Facility as soon as possible.
Minister for Economic Affairs Division Omar Ayub Khan and Saudi Ambassador Nawaf bin Saeed Al-Malkiy had a meeting in Islamabad on February 3, 2022. They reached the agreement of initiating a $1.2 billion Saudi Oil Facility at the meeting.
Earlier, Pakistan and Saudi Arabia signed the $1.2 billion financing agreement for petroleum imports in November last year. The agreement was signed by the Saudi Fund for Development (SFD) and the Economic Affairs Division of Pakistan.
Moreover, According to the Financing Agreement:
Saudi Arabia will extend the financing facility up to $100 million per month for 1 year. Pakistan can purchase petroleum products on a deferred payment basis.
The Saudi Ambassador assured Pakistan of continued support at all levels. They want to further strengthen the bilateral economic cooperation between Pakistan and Saudi Arabia.
After the signing, the SFD has opened a new head of account.
Earlier, Saudi Arabia agreed to provide $4.2bn economic support to Pakistan in June 2021. That economic package included a $3bn foreign exchange deposit in Pakistan’s account and $1.2bn in oil supplies at the rate of $100 million per month at an interest rate of 3.8%. It was just 0.6% higher than the last oil supplies Pakistan bought.
Cause of Delay in Saudi Oil Facility (SOF)
The sources informed that the finance ministry had to provide sovereign guarantees on oil supplies. This procedure is often time-consuming.
Moreover, According to the sources:
The designated entities of the two countries had to sign a subordinate commercial purchase agreement. The agreement was time-consuming as it needed assessment by the law division.
The designated entities in Pakistan and Saudi Arabia are Pakistan State Oil, Pak-Arab Refinery Limited (Parco) and National Refinery Limited (NRL), and Saudi Aramco.