Petroleum Division clarifies news item

Reporter stands by his story

ISLAMABAD: Reference news item titled ‘loss of $50 million due to hampering production of cheaper gas’ appeared in The News & Daily Jang (in Urdu version) dated July 21, 2020, therein, it is to clarified that the allegation of loss is baseless and aimed to pressurise the officers for decision making in favour of E&P Companies.

Spokesperson has stated that as per guidelines, Messrs. AGR Tracs International was appointed for Ayesha field while Messrs. IPR International was appointed for Aminah and Ayesha North fields for independent 3rd party consultants through competitive bidding. The reports of consultants were reviewed by Explorationist and Financial Consultants, wherein they found shortcomings; a) Recovery factor was not in line with the other fields in the area, b) the economics of the fields were worked out on standalone basis and on full cycle basis including past cost. Since, the joint economics of the Ayesha, Aminah and Ayesha North fields calculated on conventional price of Petroleum Policy 2012 was positive on point forward basis, hence, these fields could not be declared as Marginal Fields. Marginal Fields Gas Prices is set in accordance with Petroleum Exploration & Production Policy 2012 with an additional premium of $0.25 MMBTU. Thus the marginal gas become expensive as compared to conventional gas. Accordingly, the Company’s contention of considering past cost, being sunk cost as per accepted principle of all economic studies which is being consistently being followed in all earlier precedents, was rejected.

To independently evaluate the issue, industry experts invited by the Division and it was concluded that all regulatory and administrative approvals are in place and the Company was under obligation to commence gas production from the fields. Decision in the matter of claim for incentives under Marginal/Stranded Gas Fields- Gas Pricing Criteria and Guidelines, 2013 has been taken on merits of case and cannot be attributed as a reason, in any manner whatsoever, for delay in commencement of gas production by the Company.

However, M/s PEL started gas supply to SSGC in February 2020. However, it is worth noting the M/s PEL has not installed amine plant to reduce CO2 in its gas supply and presently it is supplying gas with higher CO2 than approved specification by Ogra under a 6 months’ concession period allowed by SSGC. More so, M/s PEL has still not discharge its outstanding obligations on account of rent, social welfare programme, training exceeding $400,000 as required in the Petroleum Concessions Agreements and guidelines issued by respective federal and provincial governments.

Khalid Mustafa adds: In the rejoinder, Petroleum Division has failed to prove that national kitty did not suffer $50 million loss and built its case on illogical arguments. The 7-member committee headed by SAPM on Petroleum which met recently has clearly barred DGPC from using its arbitrary powers, rather advised it to act in future as per the report of third party findings and toe the spirit of the arbitrary powers in violation of the Marginal/Stranded Gas Fields- Gas Pricing Criteria and Guidelines, 2013. In last winter season when the gas crisis hit the country severely, Special Assistant to PM on Petroleum and Energy Minister came forward and managed the gas supply from Badin IV gas field that remained stalled for 7 months because of the questionable decision by the then DGPC.

Documents available with The News clearly say that that DGPC Mr Imran Ahmad disallowed the gas supply connection to the national system in the wake of a dispute of 25 cents per MMBTU. The Third Party in the light of gas pricing guidelines 2013 had advised the DGPC the price of gas from Badin-IV South Gas Field at $6.25 per MMBTU saying the said fields are Marginal Gas Fields, but DGPC Imran Ahmad and his consultant had disputed the 25 cents per MMBTU owing to which the gas supply to the national system has delayed inflicting loss of $50 million.

It is pertinent to mention that the people of area from where the gas hydrocarbons are produced get employment, the province get the royalty of 12.5 percent whereas the federal government manages the sales tax of 17 percent and in addition exploration and production company also pays the corporate tax and if all taxes are deducted the price of gas come to at $4 per MMBTU whereas the government was importing during period from June 2019 to January 2020 RLNG at the cost of over $10 per MMBTU.

For 7 months, the said cheaper gas couldn’t be utilized by the country and the during the period of 7 months government remained devoid of 17 percent GST, corporate tax, and provincial government also remained deprived of 12.5 percent royalty and the country stayed without the rollover impact of the said gas on country’s economy for 7 months. And more importantly, the government had to import costly RLNG to meet the gap between demand and supply on account of delay of supply of local gas from Badin-IV gas field.

The IPR International Limited Pakistan and AGR Traces International were assigned by the then DGPC Imran Ahmad as third party to assess the gas price of the said field prior to ink gas sales purchase agreement with the exploration and production companies. IPR International Limited Pakistan in the report declared the fields as Marginal Gas Fields and proposed the price of the gas at $6.25 per MMBTU, but DGPC refused to accept the report which was why the gas supply from the field to national grid delayed by 7 months as per the rejoinder, the gas supply after 7 month is connected to national grid in February 2020. In the clarification, there is no mention that the loss of $50 million incurred because of delay of supply of cheaper gas to the national grid is being probed by NAB. The anti-graft body sent questionnaires to Petroleum Division twice and is in process of examining the answers of Petroleum Division. More importantly the copy of the questionnaires sent to Petroleum Division by NAB is also with this scribe.

The last paragraph of the rejoinder is again the admission of the failure of DGPC as it is its duty to enforce the writ and implement the law of the land when exploration and Production Company is not reducing the COs content in the gas supply and not discharging its social and welfare obligations. The News stands by its story.