Page 199 - Pakistan Oilfield Limited - Annual Report 2022

197
Annual Report 2022

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 25 to the consolidated financial
statements)
The Ministry of Energy (Petroleum Division) issued a Our audit procedures in relation to the matter, amongst
notification dated December 27, 2017 (SRO) which others, included the following:
required that the Supplemental Agreement already • Inspected Petroleum Concession Agreement (PCA)
executed in respect of TAL block for conversion of and Supplemental Agreements signed with the
petroleum concession from Petroleum Exploration Government of Pakistan;
and Production Policy 1997 to Petroleum
Exploration and Production Policy 2012 shall be • Checked SRO issued by the Ministry of Energy;
amended (within 90 days) to include Windfall Levy • Checked relevant clauses of Petroleum Exploration
on Oil and Condensate (WLO), failing which the & Production Policy 2012 for applicability of WLO;
working interest owners will not remain eligible for
gas price incentive as per Petroleum Policy 2012. • Discussed the matter with directors, management
The impugned notification was issued after the and internal legal department of the Group;
approval of Council of Common Interest (CCI) dated • Obtained confirmation from the Group’s external
November 24, 2017. legal advisor and checked legal opinion obtained
The Group challenged the said notification in the by the Group and the order issued by the Islamabad
Islamabad High Court and the matter is pending High Court;
before the Court in principle on the ground that • Evaluated technical ability of the internal and
an already executed arrangement cannot be external legal advisors used by the Group;
retrospectively altered unilaterally. The Honourable
Court has restrained the Government for any action • Assessed the matter under applicable accounting
under the impugned notification and to maintain frame work; and
status quo. Group’s contention is duly supported by • Assessed the appropriateness of disclosures made
the legal advice on the matter. in the consolidated financial statements in respect
of this 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 19,659 million
since inception to June 30, 2022 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.