ISLAMABAD: The Cabinet Committee on Privatisation on Thursday approved floor price of Rs216 per share for disinvestment of up to 10 per cent government shares in OGDCL through international and domestic capital markets.

The floor price was recommended by the Privatisation Commission to the cabinet committee. On Thursday, the commission notified to the stock exchanges in Karachi, Lahore and Islamabad the sale of 311,174,800 shares (7.5 per cent government holding in OGDCL) at minimum floor price of Rs216 per share, and through this sale, the government is expected to fetch an amount of Rs67.214 billion.

Finance Minister Ishaq Dar, who is currently in Dubai for talks with IMF, chaired the meeting through video link. As agreed with the Financial Advisory Commission (FAC), the book building process launched on November 5 will conclude on November 7.

A consortium comprising Citibank, Bank of America/Merill Lynch and KASB has been appointed to act as financial adviser for the transaction.It has been explained in the bidding documents that OGDCL is exploring for and developing commercially productive crude oil and natural gas reserves in various geographical areas of Pakistan where environmental conditions are challenging and costs can be high.

The cost of drilling, completing and operating wells is often uncertain. As a result, OGDCL may incur cost overturns or may be required to curtail, delay or cancel drilling operations because of several factors.

The document says that significant trade debts are owed to OGDCL by Pakistani oil refineries and gas companies to whom it supplies oil and gas products. The amount of trade debts outstanding and owed to OGDCL by these refineries and gas companies as at June 30, 2014, was Rs100,511 million.

About future prospects, the document states that OGDCL plans to continue increasing production growth, which will allow it to utilise its significant reserves base and capitalise on the current economic growth and energy demand in Pakistan. More specifically, it plans to increase its average net gas production from 1,173mmcfd in 2014 to 1,311 mmcfd in fiscal year 2015; and its average net oil production from 41,330 barrels of oil equivalent per day (BOEPD) in FY14 to 44,732 BOEPD in fiscal year 2015.

It intends to achieve this goal through its ongoing projects and increased capital expenditure on new development projects, which will create a foundation for long-term growth. OGDCL expects to achieve total average production of 280,736 BOEPD in FY15, and increase of 11pc compared to FY14 when it achieved total average production of 252,733 BOEPD, essentially as a result of its main development projects.

Meanwhile, Chairman of Privatisation Commission, M. Zubair said that the sale of OGDCL shares is not privatisation. It is simple offloading of shares. He said this in response to a press conference by Senator Raza Rabbani.

“This OGDCL transaction is not privatisation, this is simple offloading of shares,” said Zubair in a statement. He further clarified that there is no change in management and no separation of employees will take place as a result of this transaction. In fact employees of OGDCL and common Pakistanis would benefit from current offloading.

“We are going to offer special price at which employees and common Pakistanis can buy and take advantage,” he said.

Published in Dawn, November 7th, 2014