Page 117 - Pakistan Oilfields Limited - Annual Report 2021

S.No. Key Audit Matters How the matter was addressed in our audit
(iii) Litigation with respect to conversion of TAL
Block petroleum concession to Petroleum
Policy 2012
(Refer note 23 to the financial statements) Our audit procedures in relation to the matter,
The Ministry of Energy (Petroleum Division) amongst others, included the following:
issued a notification dated December 27, 2017
(SRO) which required that the Supplemental • Inspected Petroleum Concession Agreement
Agreement already executed in respect of TAL (PCA) and Supplemental Agreements signed
block for conversion of petroleum concession with the Government of Pakistan;
from Petroleum Exploration and Production • Checked SRO issued by the Ministry of Energy;
Policy 1997 to Petroleum Exploration and
Production Policy 2012 shall be amended • Checked relevant clauses of Petroleum
(within 90 days) to include Windfall Levy on Exploration & Production Policy 2012 for
Oil and Condensate (WLO), failing which the applicability of WLO;
working interest owners will not remain eligible • Discussed the matter with directors,
for gas price incentive as per Petroleum Policy management and internal legal department of
2012. The impugned notification was issued
after the approval of Council of Common the Company;
Interest (CCI) dated November 24, 2017. • Obtained confirmation from the Company’s
The Company challenged the said notification external legal advisor and checked legal opinion
in the Islamabad High Court and the matter is obtained by the Company and the order issued
pending before the Court in principle on the by the Islamabad High Court;
ground that an already executed arrangement • Evaluated technical ability of the internal and
cannot be retrospectively altered unilaterally. external legal advisors used by the Company;
The Honourable Court has restrained the
Government for any action under the • Assessed the matter under applicable
impugned notification and to maintain status accounting frame work; and
quo. Company’s contention is duly supported • Assessed the appropriateness of disclosures
by the legal advice on the matter. made in the financial statements in respect of
The supplemental agreement was signed this matter.
under the conversion package where gas
price was enhanced and WLO was not
applicable. The impugned SRO, by giving
retrospective effect, amounted to taking away
the vested rights already accrued in favour
of the Company. As per the legal opinion
Government has no authority to give any law
or policy a retrospective effect.
The Company has not recognised the revenue
(net of sales tax) to the extent of Rs 16,196
million since inception to June 30, 2021 on
account of enhanced gas price incentive due
to conversion from Petroleum Policy 1997 to
Petroleum Policy 2012 and will be accounted
for upon resolution of this matter.
We considered this as key audit matter due
to the significant amounts involved and
significant judgments made by management
regarding the matter.

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