ISLAMABAD: Finance Minister Ishaq Dar on Thursday declined a gas price restructuring plan for Mari Petroleum Company Limited (MPCL) which could not be implemented through an agreement between two majority shareholders.

After a detailed briefing by retired Lt-Gen Nadeem Ahmad, Managing Director of MPCL, the minister did not agree with the proposal and desired the company and the petroleum ministry to present a workable solution for company’s growth and valuation in the capital market.

The finance minister said that successful companies adopt market-based business models and protect rights of shareholders. He appreciated the desire of the company to increase investment in exploration side.

He said about 20 per cent shareholding of the company belonged to general public and private sector shareholders and it was not fair to conclude a deal between two majority shareholders — the government and the Fauji Foundation.

He said as finance minister he would encourage a forward looking business model for the company and desired that a revised business plan should be finalised that would be evaluated on merit.

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The MPCL chief informed the minister about the company’s working model, operational capacity and level of efficiency as it recently transformed from Mari Gas to Mari Petroleum.

He said the well success ratio of Mari Petroleum in its hydrocarbon exploration has been 1:1.4 which was extremely optimistic when compared with success ratio of other international companies in Pakistan 1:3.3 and almost 1:7 around the world.

He said the company recently discovered over 5,000 barrels per day from Jhelum and it was likely that more discoveries will be made in this region. The managing director discussed various issues pertaining to oil and gas exploration in the country.

The company is seeking an end to cost plus gas pricing formula by shifting to market-based petroleum policy gas rates to unlock its limitations to invest more aggressively in exploration and production.

The company at present has a limited financing facility of about $40 million for exploration expenses which the company believed should be increased to $120m.

The MPCL through the petroleum ministry has already moved a summary to the Economic Coordination Committee (ECC) of the cabinet seeking an end to cost-plus formula that offered it $0.73 per mmbtu compared to prices of $6 and $8 per mmbtu enjoyed by other exploration firms.

Mari Petroleum had originally demanded the market price of $6 per mmbtu under the Petroleum Policy of 2012 but finally reached an agreement with Pakistan Petroleum Limited for a gas price of $2.15 per mmbtu under the Petroleum Policy of 2001.

Mr Nadeem Ahmad believed that unless its price and investment limits were unlocked, the company’s existing natural assets would gradually decline and deprive federal and provincial governments of over Rs54 billion annual revenue.

For this to achieve, the MPCL has also agreed to give up about Rs10bn worth of reserves with the government by converting them into preference shares without changing the voting rights of the existing board of directors.

The petroleum ministry and the MPCL have also agreed that the company will undertake exploration, appraisal and development work in Mari and other fields with the help of its own resources, including revenues from other fields and will tackle all the associated risks.

Revenues from other gas pricing agreements outside the Mari field will no more be credited to the company.

Published in Dawn, July 11th, 2014