ISLAMABAD: With energy shortages aggravating, the government decided on Tuesday to take action against 11 ‘defaulting’ oil and gas companies for indefinitely delaying work commitments on exploration and production in 20 blocks in different areas of the country. The action may include revocation of their licences.

This was the main part of a testimony by a team of the Ministry of Petroleum and Natural Resources led by its minister Shahid Khaqan Abbasi to the National Assembly’s Standing Committee on Petroleum and Natural Resources. The committee approved with a majority vote the Gas Infrastructure Development Cess Act (GIDCA), despite opposition by two members, one from the Muttahida Qaumi Movement (MQM) and the other belonging to the Pakistan Tehreek-i-Insaf (PTI), and previously stuck down by the judiciary.

Director General Petroleum Concessions (DGPC) Saeedullah Shah informed the committee that some of the companies had been securing extension after extension on different grounds without fulfilling their contractual obligations. They got extensions for 14 years, although their initial terms were for three years.

Mr Shah said that in some cases extensions were granted for genuine reasons which were beyond the control of exploration and production companies.

He said that show-cause notices had recently been issued to 11 companies for non-implementation of their ‘work units’ as required under exploration agreements before their contracts were terminated. The companies include Paige Limited, RDC International, Nativus Resources, Techno Petroleum, Pyramid Petroleum, Tullow Developments, Dewan Petroleum, Al-Haj Enterprises, Tallahassee Resources Inc, Hydarbex Inc Oil and Gas Investments Limited and Petroleum Exploration Limited.

Petroleum Secretary Arshad Mirza said the petroleum ministry had started the process of terminating contracts of the defaulting companies and revoked the licence of one company which had been sitting on an exploration block for 12 years without any progress on ground.

He declined to name the company and said that let the last formality be completed for approval from the top. (The contracts are entered into and revoked finally on behalf of the president of Pakistan).

He said the process of revocation of licences would continue because indefinite rights could not be given without any contribution towards meeting the country’s energy needs. He said the DGPC had targeted 20 companies in the first step for longer delays and poor implementation on work programme.

Saeedullah Shah said the government had now prepared strict parameters for monthly and quarterly monitoring of the work programme and commitments, instead of waiting for three to four years to cancel exploration licences.

He said the present government had awarded a record 43 blocks and achieved 46 oil and gas discoveries in one year which was unprecedented. As a result, about 500mmcfd of gas and 32,000 barrels per day of oil had been inducted into the system. But unfortunately, he added, depletion of the existing gas fields was continuing with the same pace, resulting in no significant increase in overall gas production.

The committee decided to constitute a special committee to go through the entire record and identify if there were deviations from work commitments and make public the names of ‘black sheep’ slowing down hydrocarbon production.

GIDC ACT: The standing committee headed by Bilal Ahmed Virk of the PML-N approved the GIDC Act with majority. The MQM and PTI members opposed the “advance tax” on the grounds that there was no surety if it would ever be utilised for the purpose it was being imposed.

A senior official of the law ministry told the committee that the act had been first introduced by the PPP government in 2011 and enforced in 2013. He said the act had been challenged in various courts by the CNG sector and finally the Peshawar High Court declared it ultra vires of the Constitution and illegal. The decision was challenged by the federal government in the Supreme Court which upheld the PHC verdict.

He said the government had sought its review but then introduced an ordinance in September last year which was again challenged in various courts through 3,500 different cases. He said different courts had issued stay orders against its collection and a judgment of the Lahore High Court was expected on March 3.

Director General Gas Qazi Saleem said the government had so far collected Rs95 billion under the GIDC meant for financing infrastructure required for gas (besides LNG and LPG) imports from Iran and Turkmenistan.

Petroleum Minister Khaqan Abbasi said if the cess was not imposed future gas expansion projects could not be implemented and people’s problems would become more severe.

Finance Secretary Dr Waqar Masood Khan assured the committee that the amount collected so far and in future would be utilised only in projects already identified. So far no projects are in hand and the funds remain unused.

The members opposing the GIDC said the idea of advance tax for future projects was not appropriate and the government started imposing similar taxes for construction of dams without actually building them and, therefore, such practice should be discouraged.

Published in Dawn, February 25th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play