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Express Tribune
25-05-2025
- Business
- Express Tribune
Petroleum dealers threaten strike
Petroleum Division said that it had received an application from Mari Petroleum Company for approval of Declaration of Commerciality and Field Development Plan for Hilal and Iqbal discoveries. PHOTO: file The Pakistan Petroleum Dealers Association (PPDA) has rejected the proposed amendment to the Petroleum Act of 1934 that gives additional powers to the civil bureaucracy to monitor petroleum dealers and threatened a nationwide strike. PPDA Chairman Abdul Sami Khan on Saturday addressed a press conference at the Karachi Press Club alongside other officials, including association leader Malik Khuda Bakhsh. Khan said that the federal government's amendments to petroleum laws are unacceptable and that the association will adopt a strict stance against changes to the Petroleum Act of 1934. He said the amendments would grant additional powers to assistant commissioners (ACs) and deputy commissioners (DCs) rather than the regulator, the Oil and Gas Regulatory Authority (OGRA). "A meeting with the petroleum minister is scheduled for Monday, May 26, to discuss the proposed amendment. If our demands are not met during the meeting, we will proceed with a nationwide strike," he said. He acknowledged the need for legal changes to curb petroleum smuggling but expressed concern that fuel dealers would end up being unfairly targeted. "Despite assurances from the government, petroleum margins have not been increased for several years," he added. Malik Khuda Bakhsh said that under the proposed amendment to the Petroleum Act, ACs and DCs would have the authority to investigate any issues involving fuel stations. He said a fuel pump caught fire in the Shah Faisal area of Karachi and it was later discovered that the license had been issued by a DC. "This is an outdated law, and such powers should rest with a regulator like OGRA," he argued. Another association member, Raja Waseem, said that such extensive powers should not be handed to the bureaucracy. "Decisions made behind closed doors involve only oil marketing companies (OMCs), while we, the dealers, are excluded," he said.
Business Recorder
21-05-2025
- Business
- Business Recorder
‘Discrepancies in OGDCL real-time data': Concerns mount about accuracy of royalty payments to provinces
ISLAMABAD: Concerns about the accuracy of royalty payments to provinces are mounting due to discrepancies in the Oil and Gas Development Limited (OGDCL)'s real-time production and sales data. This issue is exacerbated by the absence of a verification mechanism within the Petroleum Division, potentially allowing the company to benefit from unaudited data. This was revealed in the Public Accounts Committee (PAC)'s sub-committee meeting which examined the Ministry of Energy (Petroleum Division) Audit Report 2010 and 2013-14. Seven new exploration blocks: OGDCL secures provisional award In one case, audit identified short payment of royalty of Rs467.47 million due to difference to quantity of oil produced, saved and sold (refined product sale). Audit highlighted that there was variation in figures of raw production available with Director General (PC) Petroleum Division and figures of sales actually declared by the OGDCL for payment of royalty. Further, the DG (PC) has not record of crude oil and gas actually sold and no mechanism in place to authenticate the figures of production and sale of crude oil and gas. The PAC has directed the ministry to 'ensure the collection of royalty on value of oil and gas actually saved (refined products) as required under the law instead of on value of oil and gas sold'. The audit official pointed out huge difference between crude oil supplied and sold by OGDCL. Moreover, field production of crude oil is reported after considering the basis sediment and water drainage, so the treatment of the same at the refinery is not justifiable. The auditor observed in the audit para that DG PC did not take notice of difference between petroleum products produced and saved and sold by OGDCL. Due to this difference of 373,977 barrels OGDCL evading royalty, the government was deprived of revenue worth Rs467.47 million approximately. According to the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948, read with Rule 36 of Pakistan Petroleum (Exploration and Production) Rules, 1986, holders of a lease shall pay a royalty at the rate of 12.5 percent of the wellhead value of the petroleum produced and save. OGDCL Managing Director Ahmed Hayat Lak asked the audit to read out Rule 37 and Rule 36 of Pakistan Petroleum (Exploration and Production) Rules, 1986, which provide clarification in the matter. The audit official rejected the argument of the OGDCL management which says, 'Quantity of dispatch was taken out of which certain quantities had to be deducted and reconciliation was produced. The reduction in quantity due to drainage of water losses/conversion factor requires more supporting documents for verification of facts'. Acting DG (PC) Kashif Ali explained that main difference is due to the various factors such as production is always reconciled with the receipt of refinery at temperature and transport losses. On other hand, Petroleum Division has yet to implement its concession management system which was installed in 2009. In the office of DG (PC), concession management system remained dormant and was not helpful in systematic provision of data. 'Millions of rupees were spent for development of the software but the purpose was not being served i.e. to compile the record in the systematic manner,' the audit official said. This system was devised to keep information and record updated regarding each E&P Company relating to its activities and other obligations. Secretary Petroleum Momin Agha and DG (PC) explained that they again hired the services of contractor LMKR in January 2025 to manage petroleum concession agreement, petroleum sharing agreement, license and lease deed, information relating to operator, status/payable of royalty, rent production bonus, training funds and other obligation. Audit official stated no progress on implementation has been seen in last four months following signing of the contract. Copyright Business Recorder, 2025
Express Tribune
21-05-2025
- Business
- Express Tribune
Increase in petroleum levy in the offing
Listen to article The government has decided to make a massive increase in petroleum levy up to Rs90 per litre on the sale of oil products, which will be collected from consumers. "The federal government, in exercise of powers conferred under Section 8 read with Section 3(1) of the Petroleum Products (Petroleum Levy) Ordinance, 1961, authorises the Petroleum and Finance Divisions to make adjustments – with the approval of the prime minister — in the rate of petroleum levy on petroleum products, up to a maximum of Rs90 per litre, to ensure timely fortnightly revisions in petroleum prices," the Economic Coordination Committee (ECC) said in a recent meeting. At present, the consumers are paying Rs78 per litre in petroleum levy on petrol and Rs77 per litre on diesel. During previous decisions relating to revision in petroleum prices, the federal government had decided to redirect the collection of petroleum levy to subsidise electricity consumers and finance road and canal projects in Balochistan. The decision was taken while discussing matters pertaining to sales tax on refineries and oil marketing companies (OMCs). The Petroleum Division briefed the forum that petroleum products (Mogas, diesel, kerosene oil and light diesel oil) had been classified as "exempted" under the Finance Act 2024. As a result, the refineries and OMCs incurred the cost of input sales tax (Rs34 billion for financial year 2024-25), which could not be recovered through product prices, which are regulated and fixed by the Oil and Gas Regulatory Authority (Ogra). A proposal to levy 3-5% sales tax on motor spirit (MS or petrol) and high-speed diesel (HSD) was developed in consultation with the oil industry, Finance Division and Federal Board of Revenue, but it could not be implemented due to the lack of agreement with the International Monetary Fund (IMF) on reducing the tax rate. It is worth noting that the standard general sales tax (GST) of 18% on MS and HSD will result in a price rise of around Rs45 per litre, which is not desirable. Any changes to the tax rate will require prior consultation with the IMF as well as approval of parliament. Besides the sales tax issue, the OMCs and petroleum dealers requested an increase in their margins on MS and HSD. In that regard, Ogra recommended an increase of Rs1.13 and Rs1.40 per litre in margins of OMCs and dealers, respectively, to ensure the sustainability of oil supply chain. Ogra's recommendations were reviewed and certain amendments were suggested in a summary. To partially address the financial issues faced by refineries, OMCs and dealers, the Petroleum Division proposed that since petroleum products (Mogas, diesel, kerosene oil and LDO) were exempt from sales tax during the current financial year, the unadjusted sales tax of refineries and OMCs (estimated at Rs34 billion) from July 2024 to June 2025 may be compensated through the inland freight equalisation margin (IFEM). The amount may be recovered over 12 months. It said that for FY26, a 3-5% sales tax on the above-mentioned fuel products may be imposed through the Finance Act. However, if the products remain exempt from sales tax, the unadjusted tax may again be compensated through the IFEM as a fallback option to keep the oil supply chain sustainable. Ogra will develop a mechanism for adjusting GST claims and ensure effective utilisation of digitisation costs, along with implementation timelines, within one month of approval. The full cost of digitisation will be borne by the OMCs across the supply chain, including the retail outlets. The Petroleum Division briefed the ECC that based on those proposals the indicative impact on MS and HSD prices would be Rs1.87 per litre for sales tax adjustment. It was also proposed to increase margins for OMCs by Rs1.13 per litre and for dealers by Rs1.12 per litre. The ECC considered a summary titled "Settlement of financial issues of refineries and OMCs" and agreed that the unadjusted FY25 sales tax of OMCs and refineries may be compensated from May 16, 2025 through the IFEM (which was estimated at Rs34 billion and would be verified by Ogra). The amount will be recovered until the end of FY26. The proposal for the imposition of 3-5% GST on petroleum products shall be considered along with other tax-related proposals for inclusion in the upcoming Finance Bill.
Business Recorder
15-05-2025
- Business
- Business Recorder
Minister informs NA: Reko Diq project to generate over $75bn in free cash flows
ISLAMABAD: Federal Minister for Energy (Petroleum Division) Ali Pervaiz Malik said that Reko Diq Project will be the largest Western investment in Pakistan and is forecasted to generate more than $75 billion in free cash flows over the current life of mine plan which is nearly 37 years. In written reply to a question to the National Assembly on Thursday, the minister said that total volume and estimated value of Reko Diq (RD) is; Phase-I production starting 2028: Targeting 300,000 oz/annum of gold and 200,000 tons/annum of copper. He said that Phase-2 production is starting 2034: 500,000 oz/annum of gold and 400,000 tons/annum of copper. He said that these numbers are based on real cash flows, which are conservative. He said the nominal free-cash flows assuming a standard commodity price escalation may yield to more than $100 billion of cash flows. Barrick's Reko Diq project in Pakistan aims new financing The minister said that project structure with 25 per cent share of Balochistan besides taxes and royalty provisions, ensures that a significant share of the economic benefits of the project will flow to Pakistan, with the majority of those amounts paid to the Government of Balochistan. He said the key fiscal terms for the project include (among others) are: - five per cent royalty payable to the Government of Balochistan, one per cent net smelter return payable to the Government of Pakistan. He said that 0.5 per cent export processing zone surcharge. To ensure that Balochistan is receiving benefits during the development and construction phases, the minister said that advance royalty payments to the Government of Balochistan were made by the Project Company in year 1 ($5 million) and year 2 ($7.5 million) and will be made in year 3 and thereafter until commercial production ($10 million per year), for a maximum total amount of advance payments of $50 million. The minister said that according to the bankable Feasibility Report, the key development phases are: Phase-1 construction: 2025 – 2028, Phase-1 Production: 2028, Phase-2 construction: 2028 – 2033, Phase-2 production: 2034 He said that adequate measures and steps have been ensured and taken for environmental safeguards, community development and employment opportunities besides local business opportunities. He said that $5.3 million has been spent in education, health, skills training, and clean water access since 2022. He said that construction phase: one per cent of all construction capital (estimated at approximately $57 million for Phase 1 and $33 million for Phase 2 based on the updated feasibility study); $10 million has already been paid toward this commitment in advance to Government of Balochistan. About the operating phase of the project, the minister said that 0.4 per cent of annual revenue during every fiscal year commercial production estimated at approximately $25 million per year. He said that major local employment: 7,500 jobs during peak construction; 4,000 jobs in the long term. Currently, 77 per cent of RDMC employees are from Balochistan. He said that various steps taken to ensure maximum possible benefit to the people of Balochistan include royalty at five per cent of revenue (net smelter revenue) goes to the Government of Balochistan. He said that an advance royalty arrangement has been made, providing total of $50 million until production commences in 2028, after which regular royalty payments will begin. The minister said that 75 per cent of employees in the project are from Balochistan. 4,000+ long term jobs and 7,500+ people during peak construction will be employed. He said Reko Diq Mining Company (RDMC) is governed by a board chaired by the chief secretary of Balochistan, with the secretary Mines and Minerals as a member, alongside representatives from federal state-owned enterprises (SOEs) and Barrick. The board meets quarterly to oversee project progress and ensure transparency, he said.
Business Recorder
15-05-2025
- Business
- Business Recorder
Senate body approves Off-the-Grid (CPPs) Levy Bill, 2025
ISLAMABAD: Despite opposition from industries in Khyber Pakhtunkhwa, the Senate Standing Committee on Finance approved a government bill – Off-the-Grid (Captive Power Plants) Levy Bill, 2025, on Thursday. Senator Anusha Rehman presided the meeting of the committee held here on Thursday in the Parliament House. The bill will also be moved in the National Assembly Standing Committee on Petroleum Division on Friday (today). Off-the-grid levy on gas-based CPPs: Govt moves copy of proposed bill in Senate Member Committee from Khyber Pakhtunkhwa Mohsin Aziz strongly opposed the bill, labelling it 'anti-Pakistan' and stated that it would lead to the closure of industries after they were previously encouraged to install captive power plants due to a lack of electricity in the country. The chairperson of the committee, Anusha Rehman, countered Senator Aziz's arguments, suggesting his stance appeared to oppose cheaper electricity. Senator Aziz denied this. Senator Rehman then noted that Senator Aziz, being online, his vote would not be counted. Senator Manzoor Kakar expressed his support for the bill, calling it 'very good,' and Senator AnushaRehman echoed this sentiment, highlighting the prime minister's promise to reduce electricity costs. Earlier, Petroleum Secretary Momin Agha briefed the committee on the bill, stating that its purpose is to reduce the burden of capacity utilisation and ultimately lower electricity prices for the general public. He informed the committee that a five percent levy was immediately imposed after the issuance of the ordinance, with the rate set to increase to 10 percent from July 2025, 15 percent in February 2026, and 20 percent in August 2026. Additional Secretary Finance explained that captive power plants were initially asked to shut down, leading companies to seek legal recourse. Consequently, the government decided to impose a levy instead of enforcing closure. He noted that out of 5,500 industrial connections, 1,100 have captive power plants, and these industries are currently operating on normal tariffs. Petroleum Division officials informed the committee about the increasing gas prices for captive power plants, rising from Rs2,750 per MMBTU in February 2024 to Rs3,000 in June 2024 and Rs3,500 in February 2025. On Wednesday, the government had moved a copy of the bill that provides for imposing an off the grid levy on natural gas based captive power plants in Senate session. Deputy Prime Minister Ishaq Dar, in his additional official capacity as Leader of the House in Senate, had moved the bill on the maiden day of the Senate's 350th session. Dar moved the bill in the Senate, which was referred to the Senate Standing Committee on Finance and Revenue. Copyright Business Recorder, 2025
