ISLAMABAD: The Khyber Pakhtunkhwa government is seeking full protection of its constitutional share in the fresh oil and gas finds in its area and has been asking the federal government to rectify its defaults in the implementation of the 18th Amendment for more than a year now.

Sources told Dawn that the provincial government has repeatedly reminded the centre that the 18th Amendment guarantees a 50/50 split of shares in oil and gas resources to the federal and provincial governments. However, they assert that the constitutional share in a number of hydrocarbon blocks has not been transferred to them in over a year.

Also read: Sense of deprivation increasing in KP, Balochistan: minister

The federal government was entitled, under past petroleum laws, to have a minimum of 5 per cent shareholding in all petroleum exploration blocks, with powers to increase this shareholding in the case of hydrocarbon discoveries. The 18th Amendment, however, divided this shareholding between the federal and provincial governments.

Sources said the provincial government had written a number of letters and sent reminders to the centre as well as successful bidders, informing them of these constitutional and contractual violations. The provincial governments have already set up their oil and gas companies on the pattern of the Oil and Gas Development Company Limited (OGDCL) to assume mandatory provincial shares in all oil and gas exploration blocks.

Documents seen by Dawn indicate that Khyber Pakhtunkhwa Oil & Gas Company Limited (KPOGCL) chief executive officer Raziuddin has also written to the director general of Petroleum Concessions at the centre to say that the provincial holding company had not been given entitlements of the Kulachi Block (3170-8) and Baska North Block (3169-4), despite having signed agreements and issued notifications in March and June of last year, respectively.

In separate letters written earlier this month to companies Al-Haj Enterprises, Lasmo and Tallahassee, the provincial holding company has protested the inordinate delay in work and non-transfer of its shareholding.

Sources said these companies were in major default against their contractual obligations. For example, Al-Haj Enterprises was required to not only transfer five per cent shareholding to federal and KP holding companies, but was also obligated to conduct geological and geophysical studies, purchase seismic data and acquire 500km of 2D seismic data for two blocks. However, it had failed on all three counts.

The sources said the DG of Petroleum Concessions (DGPC) was under extreme pressure from a couple of cabinet members to waive these violations, despite legal complications.

Officials in the DGPC said the rising gas shortages required the government to stringently follow oil and gas firms to expedite their work to obtain maximum output or at least meet their contractual obligations. They said the DGPC was pursuing delinquent companies to meet various benchmarks for oil and gas discoveries.

A couple of weeks ago, such companies were served notices to remedy the breach of their agreements at the earliest or face revocation of their licences. It is also being ascertained how some companies were able to hoodwink the government in securing exploration licences without any past experience or expertise of oil and gas exploration, as required under the rules.

In a notice served on Al-Haj Enterprises, the petroleum ministry said the company had executed an exploration licence for Potwar South (Block 3271-6) and KP’s Baska North Block in February of last year with a work commitment of 701 and 759 work units, respectively, but had committed three major breaches of the agreement.

The notice said the company did not submit detailed credentials of its technical team for scrutiny of their competence. The company also did not hold technical and operating committee meetings for the block “which is a sheer violation of Article 4.1 of the Joint Operating Agreement”.

The notice said the company also failed to offer 2.5pc working interest to the government immediately after signing petroleum concession agreement and exploration licence as required under Pakistan Onshore Petroleum Rules 2013. “Therefore, the company has been found in material breach of the terms of agreement,” the notice said.

The notice to the Tallahassee Resources also found the Canadian firm in material breach of the terms of its agreement for not opening its registered branch office in Pakistan within 90 days as required under the law. The company was also given a licence in August 2014, with work commitments of 307 work units for Karak North Block in KPK.

Published in Dawn February 16th , 2015

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