Page 180 - Pakistan Oilfields Limited - Annual Report 2021

S.No. Key Audit Matters How the matter was addressed in our audit
(iv) Litigation with respect to conversion
of TAL Block petroleum concession to
Petroleum Policy 2012
(Refer note 26 to the consolidated financial
statements)
The Ministry of Energy (Petroleum Division) Our audit procedures in relation to the matter,
issued a notification dated December amongst others, included the following:
27, 2017 (SRO) which requires that the • Checked relevant clauses of Petroleum
Supplemental Agreement already executed Exploration & Production Policy 2012 for
in respect of TAL block for conversion of applicability of WLO;
petroleum concession from Petroleum
Exploration and Production Policy 1997 to • Discussed the matter with directors, management
Petroleum Exploration and Production Policy and internal legal department of the Group;
2012 shall be amended (within 90 days) to • Obtained confirmation from the Group’s
include Windfall Levy on Oil and Condensate external legal advisor and checked legal opinion
(WLO), failing which the working interest obtained by the Group and the order issued by
owners will not remain eligible for gas price the Islamabad High Court;
incentive as per Petroleum Policy 2012. The • Evaluated technical ability of the internal and
impugned notification has been issued after external legal advisors used by the Group;
the approval of Council of Common Interest
(CCI) dated November 24, 2017. • Assessed the matter under applicable accounting
The Group has challenged the said notification frame work; and
in the Islamabad High Court and the matter • Assessed the appropriateness of disclosures
is pending before the court in principle made in the consolidated financial statements in
on the ground that an already executed respect of this matter.
arrangement cannot be retrospectively
altered unilaterally. The Honourable Court
has restrained the Government for any
action under the impugned notification and
to maintain status quo. Group’s contention
is duly supported by the legal advice on the
matter.
The supplemental agreement was signed
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 Group. As per the legal opinion
Government has no authority to give any law
or policy a retrospective effect.
The Group 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.
178 PAKISTAN OILFIELDS LIMITED