KARACHI: Mari Petro­le­­um Company Limited (Mari) disclosed on Wednes­day that the Economic Co­­ordination Committee (ECC) of the Cab­inet had approved the propo­sal for dismantling of the company’s Gas Pricing Agre­em­ent (GPA) and its replacement with market related formula.

The company secretary at Mari, Assad Rabbani in­­for­med the stock exchanges that the broad parameters of the ECC’s approval for amendment in Mari GPA included the following: The present cost plus wellhead gas pricing formula to be replaced with a crude oil price linked formula in line with the formula all­owed to Pakistan Petrol­eum Limited which provides a well­head gas price of $2.17/mmbtu [as reference crude price (RCP) of $110/BBL] to be gradually achieved in five years starting from July 1, 2014.

“At the currently prevailing crude oil price of $85 a barrel, the resultant wellhead price would be $1.87/ mmbtu at RCP of $110 a barrel ($1.59/mmbtu at RCP of $85 a barrel) over the period of 10 years.”

The amendment went on to explain that the government would not provide exploration funds of $40 million per ann­um being allowed presently. Mari will be undertaking its exploration, appraisal and development activities within and outside Mari Field from its own generated resources including revenues from oth­er fields and would bear all the risks associated therewith without any direct or indirect subsidy from the government.

And finally, for the next 10 years, dividend distribution would continue to be in line with present formula and profit would be reinvested for exploration and development activities in Mari as well as outside Mari field.

The above amendments would however be subject to the following: One that Mari would declare a specie dividend in the form of non-voting, non-cumulative, redeem­­able preference shares amou­nting to Rs9.67bn as quid pro quo. Profit rate on preference share capital would be linked with one year Kibor prevailing on the last working day of each financial year plus 3pc.

The said preference shares would be redeemed by Mari Petroleum in 10 years’ time in the form of cash to the preference shareholders.

Secondly, Mari Petroleum would convert Rs0.92bn, appe­aring as government investment for seismic unit, into preference shares in terms of Section 86 of the Companies Ordinance, 1984 and third, Mari would implement the proposed scheme after obtaining requisite approvals from shareholders, SECP and other regulatory bodies.

“The company is required to submit a revised GPA to inco­rporate the above framework,” Mari said in its anno­uncement, adding that the ECC had also approved that till formal execution of GPA, Oil and Gas Regulatory Aut­h­­o­rity would be advised to provisionally notify the wellhead gas price under the new pricing framework.

Published in Dawn, December 11th, 2014