Money transfer: BP, UEG mount pressure on government to transfer ownership of assets

FBR expresses serious concern over transaction of money abroad due to tax liabilities: Minister for Petroleum.

ISLAMABAD:

Oil and Gas Explorer British Petroleum (BP) and United Energy Group Limited (UEG) are mounting pressure on the government to transfer ownership of BP’s assets through transfer of money abroad, a move opposed by the Federal Board of Revenue (FBR).

Orient Group Chairman Zhong Hongwei and Pakistani Ambassador to China will hold a high level meeting with Minister for Petroleum Dr Asim Hussain today (Friday).

Sources told The Express Tribune that FBR had expressed serious concerns over transfer of money between BP and UEG, over sale of BP assets abroad.

“As FBR has no money transfer record between BP and UEG and therefore has bound the Ministry of Petroleum to avoid transfer of ownership of BP assets to UFG,” sources said.

Sources claimed that in the past, BP had bought assets of a company in Pakistan, and money transfer was also made in the foreign country, which was also a cause of serious concern for the FBR.  “FBR maintains record of that group from which BP had procured assets due to transaction of money in foreign country,” a source claimed.

Minister for Petroleum Dr Asim Hussain said that there was no legal obligation to strike a deal abroad, but FBR said that transfer of money should be made in Pakistan due to tax liabilities.

He confirmed that FBR had expressed concern pertaining to the BP deal in the past. “However, there is no issue of UEG but the issue of money transfer rests with BP,” Hussain said.

Sources also claimed that UEG had urged the government to transfer rights of operator to a BP partner in Pakistan, a demand which was denied by the government.

A senior official of the Ministry of Petroleum ruled out any pressure and claimed that UEG had informed about a token money paid to BP.

In a statement issued on December 14, 2010, BP had announced that it had entered into an agreement to sell almost all of its exploration and production assets in Pakistan to UEG at $775 million.

Under the terms of the agreement, UEG was to pay BP a cash deposit of $100 million, with balance of proceeds due on completion of the sale.

According to the official, no new arrangements would be made, and UEG had emerged as the only new investor, after a deal with BP, saying that BP was accountable for past liabilities, while UEG would be responsible for future liabilities.

UEG will pay BP $775 million in cash for these assets, which  consist of nine producing and exploration blocks in Sindh and four offshore exploration blocks in the Arabian Sea.

The assets are held by BP Pakistan Exploration and Production Inc., BP Pakistan (Badin) Inc. and BP Exploration Alpha Ltd.

The sale of these interests in Pakistan is part of BP’s plan, announced in July 2010, to divest up to $30 billion worth of assets by the end of this year. Prior to the agreement to sell these assets in Pakistan, BP had sales agreements totalling approximately $21 billion.

The proceeds of this latest sale will be used by BP to increase the cash available to the group. Oil and Gas Development Company, Government Holding (Pvt) Limited and Orient Petroleum Inc are BP’s partners.

Published in The Express Tribune, June 17^th, 2011.