Page 21 - Condensed Interim Financial Statements - For Nine Months Ended March 31, 2022

Notes to and forming part of the Condensed Interim
Financial Statements (Unaudited)
For the nine months ended March 31, 2022

On December 27, 2017, the Ministry of Energy (Petroleum Division) notified certain
amendments in Petroleum Policy 2012 which also included addition of following explanation
of conversion package:
“the conversion package shall include (i) price of Natural Gas for New Exploration Efforts (ii)
windfall levy on Natural Gas (iii) EWT gas production, pricing and obligations (iv) Windfall levy
on Oil & Condensate, only for PCAs converting from 1994 and 1997 Petroleum Policies and
(v) Financial obligations relating to production bonus, social welfare and training”.
"Under the said Notification, the Supplemental Agreements already executed for conversion
from Petroleum policies of 1994 & 1997 shall be amended within 90 days, failing which the
working interest owners will not remain eligible for gas price incentive. On January 3, 2018,
Directorate General Petroleum Concessions (DGPC) has required all exploration and
production companies to submit supplemental agreements to incorporate the
aforementioned amendments in Petroleum Concession Agreements (PCAs) signed under
1994 and 1997 policies, for execution within the stipulated time as specified above. "
Based on legal advice, the Company is of the view that already executed Supplemental
Agreement cannot be changed unilaterally, the Supplemental Agreement was signed under
the Conversion Package where gas price was enhanced and Windfall Levy on
Oil/Condensate (WLO) was not applicable, the impugned SRO by giving retrospective effect
amounts to taking away the vested rights already accrued in favour of the Company. The
Government has no authority to give any law or policy a retrospective effect. The Company
filed Constitutional Petition challenging the imposition of WLO on February 19, 2018 against
Federation of Pakistan through Ministry of Energy (Petroleum Division), Islamabad. The
Honorable Islamabad High Court after hearing the petitioner on February 20, 2018, directed
the parties to maintain the status quo in this respect. After multiple hearings, the case came
up for hearing on March 10, 2022 before the Honourable Chief Justice of Islamabad High
Court, wherein the Chief Justice directed the counsel for federation to submit a summary of
the issue date wise on next date of hearing and adjourned the case. The next date of hearing
has not yet been fixed by the court.
On prudent basis additional revenue (net of sales tax) on account of enhanced gas price
incentive due to conversion from Petroleum Policy 1997 to Petroleum Policy 2012 since
inception to March 31, 2022 amounting to Rs 18,757,516 thousand will be accounted for upon
resolution of this matter (including Rs 16,523,036 thousand related to period since inception
to June 30, 2021). Additional revenue on account of enhanced gas price incentive of Rs
21,294,475 thousand including sales tax of Rs 3,094,069 thousand received from customer
on the basis of notified prices has been shown under "trade and other payables". Sales tax of
Rs 3,094,069 thousand received from customer on the basis of notified prices is declared in
the monthly sales tax returns as well as duly deposited with Federal Board of Revenue by the
Company. The amount so deposited is shown under "advances, deposits, prepayments and
other receivables".

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