Page 171 - Pakistan Oilfield Limited - Annual Report 2022

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Annual Report 2022

22.1 On August 28, 2015, the Company signed the Supplemental Agreement with the Government of
Pakistan (the Government) for conversion of TAL Block Petroleum Concession Agreement (PCA)
signed under the 1997 Petroleum Policy to Petroleum (Exploration & Production) Policy 2012
(Petroleum Policy 2012). Price regimes prevailing in Petroleum Policy 2007, Petroleum Policy
2009 and Petroleum Policy 2012 shall be applicable correlated with the spud date of wells in the
respective policies starting from November 27, 2007 and for future exploratory efforts under the
above mentioned block. The conversion package included Windfall levy on Natural gas only. Draft
statements specifying sums aggregating US $ 34,213 thousand (Rs 3,393,389 thousand) till June
30, 2015 due to the Company in respect of Mamikhel, Maramzi & Makori East discoveries in TAL
block were submitted to the Government on December 8, 2015. On October 9, 2017 Oil and Gas
Regulatory Authority (OGRA) issued gas price notifications of the subject arears.

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 June 30,
2022 amounting to Rs 19,658,634 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 19,041,773 thousand and sales tax of
Rs 3,237,101 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 3,237,101 thousand (June 30,
2021: 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".