Page 221 - Pakistan Oilfields Limited - Annual Report 2021

NOTES TO AND FORMING

PART OF THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2021

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. The case came up for
hearing on June 12, 2019 but was adjourned on the request of legal counsel of the Government.
The Islamabad High Court had fixed March 19, 2020 as next date of hearing, but the hearing was
cancelled due to preventive measures taken in the courts amid Coronavirus. The case again came
up for hearing on March 17, 2021 before the Honourable Chief Justice of Islamabad High Court,
who passed the order for appearance of Secretary Petroleum (Gas Division) on April 20, 2021. The
Islamabad High Court did not fix the case on April 20, 2021 due to Covid-19 SOP being observed in
Islamabad High Court, Islamabad. 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 June 30,
2021 amounting to Rs 16,196,113 thousand will be accounted for upon resolution of this matter
(including Rs 13,949,495 thousand related to period since inception to June 30, 2020). Additional
revenue on account of enhanced gas price incentive of Rs 18,949,452 thousand including sales tax
of Rs 2,753,339 thousand received from customer on the basis of notified prices has been shown
as “Other liabilities” under “trade and other payables”. Sales tax of Rs 2,753,339 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
within “sales tax refundable” in “advances, deposits, prepayments and other receivables”.

ANNUAL REPORT 2021 219