ISLAMABAD, July 4: A private petroleum company with an investment share of around $7 million is seeking to acquire the management of a $3.5 billion oil and gas field from state-run OGDCL.
If formalized, this would be the country’s first ever “hostile take over” of an oil and gas field by a private firm that would deprive the Oil and Gas Development Company Limited of its operatorship of the field despite a shareholding of over 85 per cent.
Background discussions with the government officials and interview with the president of the private firm, Zaver Petroleum Limited (ZPL), suggest that the take over bid of Shakardara, the first ever and only oil and gas field in the NWFP, is in the advanced stage.
The joint venture partners have so far invested a total of $60 million and the government has approved an investment work plan of another $60 million to start commercial production of the field by next year. A total of over $100 million equivalent investment share is that of the OGDCL.
Shakardara field with estimated oil reserves of around 100 million barrels and gas reserves of around 15 million cubic feet is valued at $3.5 to $4.5 billion at the current international oil price at $25 per barrel.
While the chief executive secretariat is currently engaged in frantic consultations to avoid an ugly situation the company believed “it had to secure its rightful return on investment” what may come.
Acting head of Government Holdings Limited (GHL) and senior joint secretary of the petroleum ministry Mansoor Zubair said he had heard about notice sent by the ZPL to replace OGDCL as operator of the field but could not add anything on that. Maj Gen Pervez Akmal, Managing Director of OGDCL did not comment on the subject despite repeated contacts by Dawn since early this week.
OGDCL with 85 per cent shareholding is the operator of the field, followed by ZPL with 10 per cent and five per cent shares are owned by Government Holdings Limited (GHL), a holding company with 100 per cent government holdings.
Chanda-I was discovered in early 1990’s while discovery of Chanda-II was announced by President Pervez Musharraf in early 2000.
Official sources privately allege that the ZPL was pressuring the government to convert $50 million investment work plan of its sister US-based Orient Petroleum Inc (OPI) in a Mirpur Khas block in Sindh to another prospective petroleum block. Two wells of OPI in that block went dry last year and the company sacked over 100 employees including its British chief executive.
OPI and ZPL hired around a half-a-dozen senior officials of the petroleum ministry two months back after securing their long leave from the government service and would report back to their parent ministry on completion of leave.
Shahid Sattar, president of the ZPL, denied any link between the two investments and accused the OGDCL of violating the joint venture (JV) agreement. ZPL sources said that the company was rather mobilizing eight rigs to drill more wells in Mirpur block.
Sattar said the company had sent a notice to replace the operator on June 6, 2002 and the OGDCL was required to cure the default within 15 days. “They did not even bother to call the operating committee meeting of the joint venture. They could have overruled the ZPL objections because of their majority, had they been wise enough to follow the rules and procedure”, he said.
He told Dawn that OGDCL, being operator of the field, was causing unnecessary delays to declare commercial production of the field and had submitted a development plan to the government without approval of the JV-partners.
The company has now sought appointment of the independent arbitrators under the Arbitration Act of 1940, official sources also confirmed. Shahid said that the company had moved the civil court and hoped to secure a stay order in a day or two on implementation of the development plan approved by the petroleum ministry.
He said that once the operating committee meeting is convened after the notice to replace the operator, the existing operator was disqualified to vote and the second majority shareholder automatically becomes the operator, in this case being the ZPL.
The delay is causing around $100,000 per day loss to the joint venture including $10,000 per day to ZPL with 10 per cent shareholding. As a result, the country is losing $200,000 per day excluding taxes because $100,000 per day local oil production is equivalent to $300,000 per day of oil import, he estimated.
He said that the petroleum ministry had also approved the development plan despite the fact that it was not approved or signed by the JV-partners. Under the JV-agreement, he said, the development plan is required to be approved by the operating committee, represented by all the partners according to their shareholding.
The OGDCL sources, however, said that being the majority shareholder and operator of the field they were entitled to prepare the development plan. They said that a meeting of the operating committee has been convened for July 8, 2002 to consider ZPL’s notice for change of operator.
Shahid Sattar said that ZPL had offered to lay a pipeline from Shakardara to Dhurnal for onward transportation to Attock Refinery for refining but OGDCL wanted to shift an old plant from another field which was not only impossible in view of OGDCL’s capabilities but was the main cause of delays.