Nepal to allow private sector investment in petroleum refining, trading

The Nepalese government has decided to allow private investment in petroleum refining and trading, in a bid to end the monopoly of the state-owned Nepal Oil Corporation (NOC).
The government has formulated the Petroleum and Gas Transaction (Regulatory) Orders 2013 to enable the private sector entry into crude oil refinery and trading. The orders will come into effect after they are published in the Nepal Gazette.
As per the order, the minimum capital requirement for a private firm to install a petroleum refinery has been set at US$226.1 million.
According to Deepak Subedi, spokesperson for the Ministry of Commerce and Supplies, the government decided to give private sector oil refineries and businesses rights in order to create a competitive environment between private sector and the government, as happens in other sectors.
“As the government is bearing heavy losses in the petroleum business due to the lack of competition, entry of private investors in the sector will create a competitive atmosphere like in the telecom and other sectors,” Subedi said. “A few private firms have shown interest in the petroleum business. But the sector will gradually attract other players.”
Petroleum business in Nepal currently stands at US$1.097 billion annually. Demand is rising at an annual rate of 15-20%.
Consumer rights activists, even policy makers and planners, have been blaming frequent petroleum shortages on the existing supply monopoly.
Shambu Regmi, undersecretary at the ministry’s legal division, said the prospective private firms are required to produce their certificates to acquire licenses for oil trade and refinery.
The application fee for a refinery installation license has been set at US$5,654, while that for a petroleum business license has been fixed at US$1,131. The license fees have been fixed at US$11,308 and US$5,654, respectively.
The minimum capital requirement for refinery companies, petroleum trading firms, liquefied petroleum gas (LPG) importing firms and LPG bottling plants has been set at US$226.1 million, US$113 million, US$56.5 million and US$565,414, respectively. Private companies dealing in petrol, diesel fuel and kerosene should install a depot with a capacity of 20,000 kiloliters, while LPG bottling plants should have a stock capacity of 500 tons.
The Department of Commerce and Supply Management has been entrusted with the job of issuing the licenses for import and refinement of petroleum products. “The government will form a separate committee to regulate the companies to make them more transparent and service-oriented,” Regmi added.
Private traders have been given the autonomy to import oil from any countries, but they have to sign agreements with the respective countries.
(March 13, 2013)