Page 22 - Condensed Interim Financial Statements - September 2023

Notes to and forming part of the Condensed Interim
Financial Statements (Unaudited)
For the three months ended September 30, 2023

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 Honourable 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 May 24, 2022 before the Honourable
Chief Justice of Islamabad High Court, wherein matter was adjourned till June 30, 2022,
however the same could not be heard and next date of hearing is yet to be announced.
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 September 30, 2023 amounting to Rs 26,888,736 thousand will be
accounted for upon resolution of this matter (including Rs 25,265,875 thousand related
to period since inception to June 30, 2023). Additional revenue on account of enhanced
gas price incentive of Rs 24,583,127 thousand and sales tax of Rs 4,196,372 thousand
received from customer on the basis of notified prices has been shown in "trade and
other payables". Sales tax of Rs 4,196,372 thousand (June 30, 2023: Rs 3,928,026
thousand) received from customer on the basis of notified prices is declared in the
monthly sales tax return as well as duly deposited with Federal Board of Revenue by the
Company. The amount so deposited is shown in "advances, deposits, prepayments and
other receivables".

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