ISLAMABAD, May 30: The government has decided to put on hold the privatization of Pakistan Petroleum Limited (PPL) for one to two years to accentuate its financial strength as a result of 140 per cent increase in gas price.

Official sources told Dawn that the proposal was put before the privatization board by the ministry of petroleum. It stated that the company should be allowed to reap the benefits of dismantling of its gas purchase agreement (GPA) and three-year tariff rationalization plan.

The tariff rationalization plan was approved by the federal cabinet last year and first instalment of around 12 per cent increase was implemented with effect from March 1, 2001. The next round of gas tariff increase would take place on September 1, 2002, as part of six-monthly price increases.

“The government believed that it would be premature to start straight away (PPL’s) privatization process. The public offer of PPL shares be deferred for 1-2 years so that the company could establish its recognition after the government’s decision on dismantling of GPA,” said official documents.

The largest gas producer in Pakistan, PPL is still providing around 45 per cent of total gas supplies in the country. The sale of 51 per cent of its shares are expected to fetch as much as $1.5 billion if the company was allowed to base its financial position on new tariff formula, official sources said. The Privatization Commission officials did not like to be quoted on the subject.

The government had planned to sell 51 per cent of PPL to an investor who could assume management control. PPL, the oldest and the largest exploration and production company in the country, was incorporated in June 1950.

PPL inherited all the assets and liabilities of the Burmah Oil Company Limited and commenced business on July 1, 1952. At the time, the government held 29.4 per cent shares in PPL, with 70 per cent being held by Burmah Oil and the balance by the private Pakistani shareholders.

In 1982, Burmah Oil sold 6.1 per cent of its shares to the International Finance Corporation and in 1997 sold its remaining shares to the government of Pakistan. Consequently, the government became owner of 93.3 percent of shares, with the remainder being held by the International Finance Corporation (6.1 per cent) and small investors (0.6 per cent).

The major part of the gas comes from the Sui gas field, which has been in production for about 46 years. In addition to the Sui field, PPL produces gas from its Kandhkot gas fields. It is the operator of the Adhi gas and condensate field where it holds 39 per cent working interest.

PPL is also the operator in Block-22 with 35 per cent working interest where production of gas commenced in December 2000. PPL has working interest in Qadirpur gas field, the third largest producing field of the country. PPL also has working interests in Mazarani gas field (Operator — PPL), Miano and Sawan gas fields, which are under appraisal and development.

In addition, PPL has working interests in six onshore exploration blocks, two of which are PPL operated and three offshore blocks.