ISLAMABAD: In response to growing difficulties in securing petroleum imports due to ongoing geopolitical tensions, the State Bank of Pakistan (SBP) has permitted the import of crude oil and petroleum products on a CIF (Cost, Insurance and Freight) basis for a period of 60 days to help ensure uninterrupted fuel supplies.
According to a circular issued by the central bank on Wednesday night, the temporary measure came into effect from March 11 in view of the prevailing situation and the critical importance of crude oil and petroleum products for the country’s energy needs.
The circular was issued to presidents and chief executive officers of all authorised foreign exchange dealers, directing them to ensure immediate compliance with the new arrangement.
The decision follows a request from the Oil Companies Advisory Council (OCAC), which had urged the government, the SBP and the Oil and Gas Regulatory Authority (Ogra) to allow imports with advance war-risk insurance for at least two months as shipping companies were reluctant to supply cargo under current conditions.
OCAC noted that securing adequate marine and war-risk insurance had become extremely difficult due to the escalating conflict in the Middle East, particularly in the Persian Gulf and the strategic Strait of Hormuz.
The difficulties became evident after a spot tender floated by Pakistan State Oil (PSO) on the Gallop trading platform for petrol, high-speed diesel (HSD) and jet fuel (JP-1) cargoes under C&F (Cost and Freight) terms received no bids.
Under the existing regulatory framework, refineries and oil marketing companies (OMCs) are generally required to import petroleum products on a C&F basis, where the supplier arranges freight to the destination port while the buyer bears the responsibility for insurance, including war-risk coverage.
However, with insurers either withdrawing coverage or sharply raising premiums due to the ongoing conflict involving Iran, Israel and the United States, oil companies faced major obstacles in arranging insurance for cargo shipments.
According to OCAC, freight rates for vessels operating in the Gulf region have increased nearly fourfold, while war-risk insurance premiums for voyages through the region have surged dramatically, making tanker chartering increasingly difficult and expensive.
The industry body warned that the prevailing conditions had significantly reduced the willingness of shipowners, insurers and suppliers to move cargo through the region.
Given the risk to Pakistan’s fuel supply chain, OCAC requested that a temporary blanket allowance be granted for petroleum cargoes — including crude oil, refined petroleum products, base oil and related materials — for up to two months.
Under the CIF arrangement, the supplier is responsible for arranging both freight and marine insurance, including war-risk coverage, as part of delivering cargo to the destination port, easing the burden on Pakistani importers during the current crisis.
Story by Khaleeq Kiani
