“We have almost finalised the details of the agreement with Saudi Arabia at the technical level,” the source said, adding that the remaining issues will be sorted out by the second week of January.
Once the draft has been agreed at the technical level, it will be signed by the ministers of both countries.
The first meeting on the deal at the technical level was held in Islamabad in October.
As per proposed agreement, Pakistan will receive up to $3 billion worth of oil with payment deferred for 365 days in the first year of the agreement in 2018.
The Saudi Fund for Development will act as a third party in the agreement.
How the deal works
Pakistan based refineries will place orders with Saudi Aramco, government owned company for supplying crude oil.
Pakistan has a long term contract with Aramco for supplying 110,000 barrels per day (bpd).
Of these, Pak Arab Refinery Ltd (Parco) has a quota of 60,000bpd while the remaining quota of 50,000bpd is allocated to National Refinery Limited (NRL).
Both Parco and NRL will place orders for import with Aramco.
The Saudi Development Fund will pay in dollars to Aramco.
However, these refineries will deposit an equivalent amount in Pak rupee with State Bank (SBP) here in Pakistan.
The SBP will begin repayments to the Saudi Development Fund 12 months later, with monthly payments.
For example, the January 2019 payment will be made in January 2020.
This arrangement will be in place for a period of three years, with oil imports worth $9bn.
Saudi Arabia had earlier extended a similar special package to Pakistan soon after the nuclear tests of 1998, following which the country faced international sanctions.
Between 1998 and 2002, Pakistan received $3.5bn (Rs190bn at the exchange rate at that time) worth of oil from Saudi Arabia on deferred payment, a major part of which was converted into grant and never repaid.
Deferred oil facility with UAE
According to the source, talks with UAE government are in an advanced stage for a similar agreement of up to $3bn. The conditions attached to deal will be similar to those agreed with Saudi Arabia.
Currently, Pakistan based refineries are importing crude and petroleum products from Abu Dhabi National Oil Company (ADNOC) under a long-term contract.
The quantum of imports stands at 75,000bpd.
However, in case of extra demand, Pakistan can also import oil through open tender from UAE.
As per the agreed contract, Parco imports 39,000bpd crude oil, followed by 29,000bpd by Pakistan Refinery Ltd and 6,500bpd by NRL.
According to the source, the UAE government has not yet nominated a third party for the payment to Adnoc.
However, it is expected to finalise such an arrangement next month, according to the finance ministry official.
At the moment, no formal agreement on deferred oil facility with UAE has yet been exchanged.
In the year 2017-18, Pakistan’s fuel imports both oil and LNG reached to $16bn despite fall in oil prices owing to rising consumption in the transport sector.
The overall, liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14,017.8 million.
Net reserves held by banks amounted to $6,560.5m.