TRANSFERRING OWNERSHIP OF PPL TO BALOCHISTAN
Oct 27 - Nov 02, 2008
The ownership of Pakistan Petroleum Limited (PPL) to Balochistan could become a source of revenue to the cash-strapped province, which is rich in oil and gas resources. The PPL is the country's largest exploration and production company, which has been dominating the arena of oil and gas exploration for many decades in the province. It is the operator of the country's oldest Sui gas field in Bugti tribal area.
The federal government had taken over more than 63 per cent shares of the PPL from Barmah Oil Company in 1997 to raise its ownership to about 94 per cent. Later, it decided to privatize the company but the Balochistan Assembly adopted a resolution asking the federal government to give its ownership to the province. Since then, Balochistan has been demanding of the federal government to transfer entire ownership of the PPL to the province on the ground that the provincial energy resource had kept on feeding the country's energy requirements since independence.
The PPL has been on the privatization list with continued postponements since 1998 under a covenant with the World Banks International Finance Corporation (IFC), which has about seven per cent shareholding in the company. The PPL had been included among three other major public sector entities in the 'priority privatization programme' for listing on the international market through Global Depository Receipts (GDRs) in the meeting of the Privatization Commission board. PPL's annual sales revenue touches the figure of Rs20 billion. It produces more than 300,000 million cubic feet of gas and more than 240,000 barrels of oil per year, besides substantial annual production of condensate, liquefied petroleum gas and other minerals.
Sui is still the single largest gas field in Pakistan. At present, the Sui Gas Field produces around 800 MMscf of natural gas daily from 87 wells completed during 50 years of production. It is the pioneer gas-producing field. The quantum of natural gas production from Sui gas field is a vital source of huge foreign exchange savings for the country as the same would have been spent on the import of energy had the gas reserves, in abundance not been discovered. As the consumption of Sui gas increased manifold, the pressure depleted to a level of 45 bars. PPL installed a most sophisticated state-of-the-art compressor station costing the company million of dollars. At present, the Sui Field Gas Compressor Station stands tall and works at 99.9 percent efficiency level. Sui Southern Gas Company Limited (SSGCL) to purify gas produced from Sui Gas Field operationalized the Gas Purification Plant (Plant) at Sui.
In 1952, the company discovered a huge natural gas field at Sui in Bugti tribal area. It was the seventh largest gas field in the world and the biggest in Pakistan at that time. From that day the natural gas got name and fame as 'Sui gas' all over the country. Drilling at Sui well No. 1 commenced on 10th October, 1951 by Burmah Oil Co. (Pakistan Concessions) Ltd. Natural gas was encountered at a depth of around 4000 feet. However, in search of oil, drilling was continued to final depth of 10049 feet. Commercial exploitation of the field began in 1955. Since then the Sui Field has been meeting a significant amount of the Pakistan's energy requirements.
Some technical and legal issues were involved in the strategic sale of PPL's majority shareholding. A significant issue was the formal transfer of PPL shares to the Balochistan government. The federal government however did not accept the Balochistan's demand regarding the ownership of PPL. About two years ago, the federal government reduced its share in the company by 15 per cent through initial public offering (IPO) and planned to sell 51 per cent shares along with management control of the PPL. The plan was later put on the back burner because of structural lacunae in the gas pricing mechanism that also delayed the sale of Sui Southern and Sui Northern Gas companies. Critics blame the former government of chief minister Jam Yousaf for softening its stand on the issue, as
The federal government agreed to provide 'reasonable shareholding' to Balochistan in the PPL. An agreement in principle has reportedly been reached between the federal and provincial governments to allow 15-20 per cent shareholding to Balochistan along with proportionate representation on its board of directors to end a long-standing provincial claim over the company.
The critics say that 15-20 per cent shareholding in PPL would not bring the larger benefits to the province and it would not duly compensate it. The province has consistently been in the financial throes despite having a rich energy resource. The gas reserves discovered in Sui were to the tune of 9.625 trillion cubic feet. The biggest gas reserve at Sui has been a real asset for the economic development of the country. The deterioration of law and order in Sui in January 2005 led to the countrywide gas load-shedding for many days, as the damaged gas plants at Sui were to be repaired. Millions of households faced gas shortages in the country after the main gas plant was hit during clashes between security forces and tribesmen in Sui. The southern region, along with the northern, was facing a 110 MCF gas shortage daily. SNGPL was facing a daily gas shortage of 480 million cubic feet (MCF), compared to its 1,750 MCF daily production under normal circumstances. The ownership of PPL should be transferred to the province. It would be a right decision in the given political situation of the province.
In the prevailing energy scenario of the country, the foreign investors may avail the opportunities in energy sector to exploit the Balochistan's tremendous indigenous resources. What is most discouraging however from investment point of view is the prevailing security problem in the province. It is worth mentioning that Uch Power Plant in Balochistan has repeatedly been attacked with rockets during past two years. The nationalist parties resent over the Islamabad's firm control over the way the province's economy is managed. On the other hand, the perception of a rapid economic progress poses a threat to centuries-old feudal status of tribal chiefs under which they have been enjoying power and exploiting the people. It is also a proven fact that the use of military might has been ineffective in bringing about a political or social change in a society. The only way out from the current Balochistan crisis is developing the province economically.