PESHAWAR: The Khyber Pakhtunkhwa government on Thursday claimed that the province had suffered a loss of over Rs45 billion revenue due the removal of the clause about “windfall tax” on oil from the federal government’s 2015 agreement with petroleum companies for exploration and production in Tal Block of Kohat district.

It demanded a formal inquiry into the matter for action against the culpable officials.

“The omission of the windfall levy on the oil clause from the supplemental agreement has resulted in substantial financial losses amounting to Rs45 billion to the KP government from 2012 to 2021,” provincial energy and power Himayatullah Khan informed minister of state for petroleum Musadik Malik in a letter.

He said the Tal Block was awarded to the MOL, Pakistan Petroleum Limited (PPL), Pakistan Oilfields Limited (POL), Oil and Gas Development Company Limited (OGDCL) and Government Holdings Private Limited (GHPL) under the Petroleum Policy, 1997, and those companies later applied for the “conversion to the Petroleum Policy 2012 through the supplemental agreement executed on Aug 28, 2015.”

He demands probe into agreement for action against ‘culpable’ officials

The minister, however, said contrary to the provisions of the Petroleum Policy, 2012, the windfall levy on oil clause was not included in the supplemental agreement.

“In an attempt to rectify this omission, the government of Khyber Pakhtunkhwa requested the federal government to move a Council of Common Interest summary. The Petroleum Division issued a notification on 27-Dec-2017, declaring that the clause pertaining to windfall levy on oil was to be considered a part of the executed supplemental agreements,” he said in the letter.

Mr Khan said the MOL and its partners, including PPL, POL, OGDCL and GHPL, challenged the notification in the Islamabad High Court in early 2018 and the case had been pending with the court ever since causing massive financial losses to both federal and government.

He demanded the formation of a committee to probe that “illegality” and take strict actions against the officials responsible for it.

The minister said the public sector companies OGDCL, GHPL and PPL should be directed to withdraw their writ petition from the Islamabad High Court and pay the windfall levy on oil to the federal and Khyber Pakhtunkhwa governments as required by the policy.

Official documents available with Dawn said the Petroleum Policy, 2012, provided for equal sharing of windfall levy on oil between federal and provincial governments when international crude oil prices went above the base price of $40 per barrel.

“This amount is to be divided in such a manner that 60 per cent of it will go to the crude oil block operator and while remaining 40 per cent will be divided equally between federal and provincial governments,” a document read.

It added that the Tal and Nashpa blocks in KP were awarded under the Petroleum Policy, 1997, while the joint venture partner companies called for the “conversion of their agreement to the Petroleum Policy, 2012, to get a higher gas price incentive.”

The document, however, revealed that contrary to the provision of the Petroleum Policy, 2012, windfall levy was omitted from the concession agreement signed by the KP government with the operator without consulting the provincial government costing a loss of Rs45 billion to the province from 2012 to 2021.

Published in Dawn, July 28th, 2023