Pakistan’s government is expected to ask friendly nations to invest in the country’s largest hydrocarbon explorer – Oil and Gas Development Company Limited (OGDCL) – in order to fetch a better price for the company.
Background discussions with officials privy to the development revealed that Pakistan could offer shares of the state-owned company to friendly countries like Saudi Arabia, the United Arab Emirates (UAE) and Qatar, which may offer attractive prices. Earlier, the strategy to divest the shareholding in OGDCL on the stock market had led to a sharp fall in share prices of the company.
Stockbrokers allegedly manipulated the OGDCL shares prices that fell to Rs117 per share from Rs216 when the Pakistan Muslim League-Nawaz (PML-N) government floated the company’s stocks in 2014. On November 8, 2014, the government scrapped the OGDCL’s transaction after international and domestic institutional investors subscribed to only half of the shares offered to them.
The government floated 311 million shares at a minimum price of Rs216 per share, but it received offers for only 162 million shares, or 52% of the total offer, at the conclusion of a three-day bidding process.
In February 2020, the Petroleum Division asked the Cabinet Committee on Privatisation (CCOP) to stop the OGDCL divestment process because of a steep fall in the company’s share price. The stock recovered slightly to Rs123.76, which was still 42% below the 2014 level of Rs216, when the PML-N government attempted to sell a stake in the company.
The CCOP had decided in August 2019 to divest up to 7% government shares in the company.
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Officials point out that the experiment of selling shares on the stock market had failed in the past and now the Special Investment Facilitation Council (SIFC) is striving to bring investors from different countries, especially Kuwait, Saudi Arabia, Qatar and the UAE.
If the government wants to sell its shares, it should search for strategic partner countries to fetch a better price as well as investment in OGDCL, they said.
Sources added that OGDCL had also been trapped in circular debt for a long time as its clients were unable to clear their outstanding dues, which could hurt plans for future investment in the company.
They urged the new government of PML-N to take immediate steps to address the circular debt issue, which would improve cash flow and encourage the company to expand oil and gas drilling activities.
Last month, the CCOP took up the matter again for divesting shares in OGDCL. It was proposed that the stake should be transferred back to the Petroleum Division from the Privatisation Commission (PC) as its sell-off did not materialise.
The CCOP, in its meeting held on May 21, 2021, had approved the proposal of the Petroleum Division which asked for not offloading the OGDCL shares. The federal cabinet ratified the CCOP decision on June 8, 2021.
PC receives dividends from its shareholding in OGDCL (322.46 million shares), when the company board announces payouts.
The dividend income is regularly sent to the Finance Division and so far approximately Rs21.49 billion has been remitted while Rs1.40 billion is lying with the PC.
Furthermore, the commission, from time to time, had been requesting the Petroleum Division to take over OGDCL shares, in light of CCOP’s decision of May 21, 2021.
The Petroleum Division, in a letter written on November 6, 2023, consented that OGDCL shares, which were in the name of PC, could be transferred to the division as divestment had not been allowed by the CCOP.
The PC board, in its meeting held on December 12, 2023, decided that approval of the CCOP may be sought for transferring OGDCL shares from the PC’s Central Depository Company (CDC) account to the Petroleum Division.
During the ensuing discussion, it was observed that OGDCL had been included in the Sovereign Wealth Fund, thus it would be appropriate not to transfer its shares to the Petroleum Division, as at some stage the shareholding would need to be transferred to the wealth fund.
An alternative view was that shares may be given to the Petroleum Division and the same, along with other shares of the company, may be transferred to the wealth fund, as and when required. It was suggested that the advice of the Law and Justice Division may be sought to enable the CCOP to make an informed decision.
The CCOP considered the summary submitted by the Ministry of Privatisation titled “Transfer of Oil and Gas Development Company Limited (OGDCL) shares lying with Privatisation Commission to the Petroleum Division” and directed the Ministry of Privatisation to seek legal opinion from the law ministry.
Published in The Express Tribune, March 24th, 2024.
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