Questions will be raised on the scrapping of the transaction that was meant to sell 10 per cent shares in the Oil and Gas Development Company (OGDCL). Blames will be pinned on the government, which in turn would point the finger at the opposition.

The earliest statement by the government that “improvement in the economy” was the reason for the scrapping is clearly eyewash.

Money, time and effort and much-hyped road shows abroad have all come to naught. The book builders burnt the midnight oil and waited till 1.00 in the morning of Saturday for prospective foreign investors.

Apparently, not many turned up and the Cabinet Committee on Privatisation (CCoP) had to announce ‘postponement’ of the transaction to another (unspecified) date after a videoconference with Finance Minister Ishaq Dar in Dubai.

Two factors are obvious that could have forced the government to put off the sale, excluding the hounding by the opposition and the oil producing giant’s employees union.

Firstly, a steep fall in the price of Brent Crude in the international market. On Sept 8 this year, when the CCoP first announced that it would sell 322m shares in the OGDCL accounting for 10pc of the stake with the government, the price of Brent was $98.08 a barrel.

Read: Govt okays Rs216/share floor price for OGDCL

By the morning of Saturday, Nov 8, it had plunged to $83.36 a barrel, a scary fall of $14.72, or 15pc, in two months.

“The Brent price which many international oil experts believe would get worse before it gets better has already eroded 30pc profitability of oil exploration and production companies as the exploration costs would run high,” says investment banker Mir Mohammad Ali Khan.

Secondly, a sharp drop in the stock price of the company. The Privatisation Commission of Pakistan (PC) had set the ‘floor price’ at Rs216 per share.

The share in OGDCL, which traded at Rs270 on Sept 8, fell by Rs45 (17pc) at the close of market on Friday.

PC chairman Mohammad Zubair was eyeing $815m as receipts from the transaction. Due to slump in oil prices and dilution in OGDCL stock value, the sale would have fetched just $750m, a loss of $65m, or Rs7 billion.

Several economists and analysts believe that the government was right in putting off the sale. Mohammad Sohail, CEO of brokerage Topline Securities, observed that a postponement, however painful, looks to be a correct decision, instead of selling lesser number of shares, and that too at lower prices.

Senator Saeed Ghani says he is relieved. “We oppose privatisation in all its forms, particularly of such corporate that earns huge revenue for the country,” he told Dawn.

Economist Muzammil Aslam, MD Emerging Economic Research, thought that putting oil and gas exploration and production companies on sale was wrong in the first place.

He pointed out that in case of earlier sale of shares in Pakistan Petroleum Limited (PPL), the subscription to the extent of 92pc had emanated from local investors and just 8pc from foreign institutions.

Yet, the question that would haunt us all is: Who was responsible for causing delay of two months that spoilt the show?

Published in Dawn, November 9th, 2014