Default on payments: Exploration company seizes working interest of partner

ISLAMABAD: Petroleum Exploration (Private) Limited (PEPL) has seized working interest of its partner, Frontier Holdings Limited, in Badin-IV south block, causing some delay in signing of a gas sale and purchase agreement with a gas utility.

The issue was taken up in a high-level meeting chaired by the director general gas of the Ministry of Petroleum and Natural Resources last month.

PEPL also asked the Directorate General of Petroleum Concessions (DGPC), which works under the Ministry of Petroleum, to assign it the Frontier Holdings’ working interest, though its partner termed the request illegal.

PEPL is the operator of Badin-IV south block where natural gas has been discovered recently at three places - Ayesha-I, Ayesha North and Aminah fields.



The government has already allocated gas to be produced from Ayesha-I to Sui Southern Gas Company (SSGC) for which a sale and purchase agreement was being negotiated with PEPL.

However, during the meeting, SSGC told PEPL that it would not be able to strike the sale and purchase agreement as one of the holders of working interest in Badin-IV south block had informed it about the dispute. In this scenario, SSGC said, the execution of the agreement would be unlawful.

The gas utility also said a planned pipeline connecting the Ayesha field to the utility’s transmission network at Golarchi was not economically feasible, therefore, it could not be laid.

Responding to SSGC’s arguments, a representative of PEPL said it seized the working interest of Frontier Holdings because of default on payments by the latter and the move was in line with provisions of the Petroleum Concession Agreement and the Joint Operating Agreement. Consequently, PEPL requested the DGPC to assign it the seized working interest.

Following the request, DGPC Deputy Director Ghulam Munir told the exploration company that they had referred the matter to the Law Division for its advice and further action would be taken after that.

In the meeting, the director general gas pointed out that the dispute was between the two partners - PEPL and Frontier Holdings - and according to provisions of the Petroleum Concession Agreement and Joint Operating Agreement, the government only dealt with the operator appointed by the joint venture. Therefore, he insisted, the process of finalising the gas sale and purchase agreement should not come to a halt.

After deliberations, it was agreed that SSGC and PEPL would continue to hold discussions to finalise a draft of the agreement, which may be formally executed after resolution of the row by the DGPC.

Meanwhile, it was pointed out that carbon dioxide (CO2) content in the combined stream of gas from the three fields in Badin-IV south block was a little less than 4%, which was higher than the prescribed limit of 3%. In this case, the producer will be required to seek exemption from the authority concerned.

PEPL, however, was of the view that CO2 content in the gas currently being received at Golarchi was already higher than 4% and injection of its gas with less than 4% CO2 would not have any adverse impact on the gas quality.

It said SSGC was receiving about 80-85 million cubic feet of gas per day (mmcfd) at Golarchi whereas PEPL would be injecting only 20-22 mmcfd from its three fields.

Published in The Express Tribune, August 6^th, 2016.

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