Legal Advice on Establishing an Oil Marketing Company in Pakistan

Licensing a New Oil Marketing Company

Establishing a new Oil Marketing Company (OMC) in Pakistan involves a comprehensive process governed by the Oil and Gas Regulatory Authority (OGRA). This article outlines the steps, requirements, and procedures necessary for acquiring a licence to set up a new OMC, ensuring compliance with the Pakistan Oil (Refining, Blending, Transportation, Storage & Marketing) Rules, 2016.

Minimum Investment Requirement

To establish a new OMC, a minimum investment of Rs. 500 million is required over a period of three years. This includes a minimum upfront equity of Rs. 100 million. This financial prerequisite ensures that the company has adequate resources to develop the necessary infrastructure for oil marketing .

Application Procedure

The application for a licence to set up a new OMC must be submitted using the format provided in Part J of Schedule I of the OGRA rules. The application must be accompanied by the following documents:

1. Certificate of Incorporation: Issued under the Companies Ordinance, 1984/Companies Act 2017, with Articles of Association indicating no affiliation with any existing oil marketing company operating in Pakistan.
2. Financial Competence Proof: Certification from a scheduled bank confirming the company’s capability to invest the required amount over the initial three-year period and the availability of upfront equity .
3. Technical Competence Proof: Profiles of personnel with experience in oil marketing, and any technical collaboration or franchise agreements with national or international oil industries, excluding existing OMCs in Pakistan.
4. Investment & Marketing Plan: A detailed plan outlining estimated sales (in metric tons), infrastructure development (including oil storages and retail outlets), storage capacity to cover at least 20 days of sales, and a transportation plan for petroleum products .

License Fee and Validity

The licence fee for establishing a new OMC is Rs. 2 million. Upon submission and verification of the required documents and completion of all formalities, OGRA will issue an initial licence valid for three years. During this period, the licencee must complete the oil storage infrastructure as outlined in their work program .

Commencement of Operations

The new OMC can commence marketing operations only after completing the oil storage infrastructure as per the submitted plan. This infrastructure must be inspected by a third-party inspector appointed by OGRA, and subsequent written permission must be obtained from the Authority .

Licensing an Existing Oil Marketing Company

Operating an existing Oil Marketing Company (OMC) in Pakistan also requires compliance with OGRA regulations. This article details the procedure for acquiring a licence to continue or expand operations of an existing OMC, ensuring adherence to the Pakistan Oil Rules, 2016.

Renewal and Application Procedure

Existing OMCs seeking to renew their licences or expand their operations must submit an application in the prescribed format along with the following documents:

1. Current Licence: A copy of the current licence issued by OGRA.
2. Operational History: Details of the company’s operational history, including sales, infrastructure developments, and compliance with OGRA regulations.
3. Financial and Technical Competence: Updated proof of financial stability and technical expertise, similar to the requirements for new OMCs.
4. Expansion Plans: If applicable, detailed plans for infrastructure expansion, including additional storage facilities and retail outlets .

License Fee and Validity

The licence fee for renewing or expanding an existing OMC is Rs. 2 million. The annual fee prescribed in the Pakistan Oil Rules, 2016, for OMCs is 0.005% of the gross sales. OGRA will issue the licence for a specific period, usually five years, subject to compliance with all regulatory requirements .

Compliance and Inspection

Existing OMCs must ensure continuous compliance with OGRA regulations, including regular inspections of their facilities. Any expansion or modification in the infrastructure must be reported to OGRA and subjected to inspection by a third-party inspector .

Securing a licence for a new or existing Oil Marketing Company in Pakistan is a detailed process requiring strict adherence to OGRA regulations. Ensuring proper documentation, financial and technical competence, and compliance with infrastructure standards is essential for obtaining and maintaining the licence. For further assistance, companies can contact Josh and Mak International for professional legal support and guidance throughout the licensing process.

FAQs on Establishing a New Oil Marketing Company in Pakistan 

Question: What is the minimum investment requirement for establishing a new Oil Marketing Company? Answer: The minimum investment requirement for establishing a new Oil Marketing Company is Rs. 500 million over a period of 3 years with a minimum upfront equity of Rs. 100 million.

Question: Is there any change in the criteria for a new Oil Marketing Company after the promulgation of the new Oil Rules? Answer: No, there is no change in the criteria for a new Oil Marketing Company after the promulgation of the new Oil Rules.

Question: What is the procedure to submit an application for establishing an Oil Marketing Company? Answer: An application for a licence to set up an oil marketing company to undertake the marketing of petroleum products can be made on the format set out in Part-J/K of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for licensing of New/ Existing Oil Marketing Companies’ under the tab of ‘Oil’.

Question: What is the licence fee for establishing a new Oil Marketing Company? Answer: The licence fee for establishing a new Oil Marketing Company is Rs. 2 million.

Question: After the submission of the application, for how long will the Authority grant a licence? Answer: After the completion of all formalities by the applicant, the Authority shall initially issue a licence for a period of three years, during which the licensee has to complete the oil storage infrastructure as given in the work program/plan in accordance with the laid-down technical standards.

Question: When can a new Company (i.e. licence holder for establishing a new Oil Marketing Company) start marketing petroleum products? Answer: After the completion of the oil storage infrastructure (as per its submitted plan), its inspection through OGRA’s appointed third-party inspector, and subsequent permission in writing by the Authority, the company can commence its marketing operations.

Question: What types of Lubricant Plants are being registered/licensed by OGRA? Answer: Three types of lubricant plants are being granted licences by OGRA: Blending, Reclamation, and Grease Plants.

Question: Are the Pakistan Petroleum (Refining, Blending & Marketing) Rules, 1971 effective or otherwise? Answer: The Federal Government has notified new Pakistan Oil (Refining, Blending, Storage, Transportation, and Marketing) Rules, 2016, which superseded the earlier rules. Currently, all licences are being issued under the new oil rules.

Question: What about existing lubricant manufacturing plants and importers? Do they have to apply for a fresh licence after the promulgation of the new Oil Rules? Answer: Yes, they have to apply for a fresh licence after the promulgation of the new Oil Rules, 2016.

Question: What is the general procedure/requirements of OGRA in acquiring a licence for a lube oil plant? Answer: The details are available on the website, along with the application forms, which can be downloaded from the link as ‘Application Form & Checklist for Licensing of New/Existing Lube Oil Blending/Reclamation/Grease Plant’ under the tab of ‘Oil’.

Question: What is the difference between a construction and an operational licence for a lube oil plant? Answer: After completing all formalities by the applicant for a new lube oil plant, the Authority initially issues a licence for construction for a period of one year, during which the licensee has to complete the infrastructure (Part-A of Schedule V of the new Oil Rules for a blending plant or Part-B of Schedule-V of the new Oil Rules for a reclamation or grease plant). After the satisfactory construction of the plant, a third-party inspector will be deputed to verify the conformity of works and for trial production of the plant. Upon a satisfactory TPI report, an operational licence for the plant is granted by OGRA for a period of five years.

Question: Can anyone import used oil for a reclamation plant? Answer: No, the import of used lube oil is banned under the Import Policy Order.

Question: From where can one buy base oil for lubricants/blending? Answer: Base oil can be sourced locally from National Refinery or through imports.

Question: How much is the licence fee for acquiring a licence from OGRA for a lube oil blending, reclamation, or grease plant? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for plants? Answer: The licence fee for an oil blending, reclamation, or grease plant is Rs. 50,000, whereas the annual fee is Rs. 100,000.

Question: What is the procedure to submit an application for establishing a Lubricant Marketing Company? Answer: An application for a licence to set up a lubricant marketing company can be made on the format set out in Part-L/M of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for Licensing of New/ Existing Lubricant Marketing Company’ under the tab of ‘Oil’.

Question: How much is the licence fee for acquiring a licence from OGRA for a Lubricant Marketing Company (LMC)? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for LMCs? Answer: The licence fee for a Lubricant Marketing Company (LMC) is Rs. 1 million, whereas the annual fee is 0.005% of the gross sales.

Question: Can a Lubricant Marketing Company (LMC) sell imported finished lubricants or can they only sell locally manufactured products? Answer: An LMC can sell both imported and local lubricants under the licence through their authorised distributors.

Question: What is the procedure to submit an application for the construction and operation of an Oil Refinery? Answer: An application for a licence for an Oil Refinery can be made on the format set out in Part-A/B/B1 of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for Licensing of New/ Existing Under Construction Oil Refineries’ under the tab of ‘Oil’.

Question: How much is the licence fee for acquiring a licence from OGRA for an Oil Refinery? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for it? Answer: The licence fee for an Oil Refinery is Rs. 2 million, whereas the annual fee is 0.005% of the gross sales.

Question: What is the minimum configuration requirement for an Oil Refinery? Answer: As per GOP policy, only semi-conversion or fully conversion refineries can be set up.

Question: What is the procedure to submit an application for a new Oil pipeline? Answer: An application for a licence to set up a new Oil Pipeline can be made on the format set out in Part-E of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for Licensing of New/ Existing/ Under Construction Oil Pipelines’ under the tab of ‘Oil’.

Question: How much is the licence fee for acquiring a licence from OGRA for an Oil Pipeline? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for it? Answer: The licence fee for an Oil Pipeline is Rs. 2 million, whereas the annual fee is 0.005% of the gross sales.

Question: What is the criterion for the issuance of a licence for an Oil Pipeline? Answer: Rule 25 of the Pakistan Oil Rules 2016 governs the issuance of a licence for an Oil Pipeline. This rule can be downloaded from the link as ‘Pakistan Oil (Refining, Blending, Transportation, Storage, and Marketing) Rules, 2016’ under the tab of ‘Rules’.

Question: What is the procedure to submit an application for the construction or operation of an Oil Storage? Answer: An application for a licence for an Oil Storage can be made on the format set out in Part-G/H/I of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for Licensing of New/ Existing/ Under Construction Oil Storages and to Undertake Storage of Oil in Non-Oil Storage Facility’ under the tab of ‘Oil’.

Question: How much is the licence fee for acquiring a licence from OGRA for an Oil Storage? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for it? Answer: The licence fee for an Oil Storage is Rs. 100,000, whereas the annual fee is Rs. 100,000.

Question: What is the procedure to submit an application for establishing or operating an Oil Testing Facility? Answer: An application for a licence for an Oil Testing Facility can be made on the format set out in Part-N of Schedule-I, along with the requisite documents. These documents can be downloaded from the link as ‘Application Form and Checklist for Licensing of New/ Existing Oil Testing Facilities’ under the tab of ‘Oil’.

Question: How much is the licence fee for acquiring a licence from OGRA for an Oil Testing Facility? Further, how much is the annual fee prescribed in the Pakistan Oil Rules, 2016, for it? Answer: The licence fee for an Oil Testing Facility is Rs. 500,000, whereas the annual fee is Rs. 500,000.