Oil, gas companies: Govt to seek provinces’ consent before privatisation

Matter will be taken up in meeting of Council of Common Interests.

ISLAMABAD:

The government is gearing up for privatisation of all oil and gas companies after seeking consent of provinces in an upcoming meeting of the Council of Common Interests (CCI) in line with the programme agreed to with the International Monetary Fund (IMF).

According to sources, the decision on the sell-off has been formally conveyed to the managements of oil and gas companies including Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL).

“Comments of energy companies regarding privatisation have also been sought, which will be tabled the next meeting of the CCI,” an official told The Express Tribune. These companies will give presentations to stock markets as well on share float.

“OGDC management gave a presentation to the Lahore stock market on Thursday about floating more shares, possibly 26%, to woo potential investors,” the official said.

The previous PPP government had also planned to sell OGDC, the country’s largest oil and gas explorer, to the private sector to fetch funds to ease financial constraints. The Privatisation Commission had proposed that the company’s stake should be offered to an international oil and gas company.

A senior state official said the government was mulling over different options for privatising oil and gas companies and a strategy was being evolved.

First, some shares of listed energy companies can be floated on the stock market, second, a strategic investor may be invited to purchase 26% shares along with management control like the way PTCL was privatised and third, privatisation of energy companies in one go.

Private investors already hold some shares in OGDC, SSGC and SNGPL, but the government wants to reduce its stake further.

Talking to The Express Tribune, an energy expert said the government might find it tough to sell shares in state-run companies to the private sector because of a poor regulatory regime.

“Government should undertake a study and improve the regulatory regime in order to safeguard the interest of consumers,” he suggested and said different gas prices were prevailing, underscoring the need for amendments to pricing policies before privatising energy companies.

He was of the view that a campaign should be launched to encourage people to pick up shares in energy companies.

He said the government should split the transmission and distribution system of gas companies and create small distribution companies. It should have control over the transmission system and the distribution system should be handed over to private companies to control and reduce losses.

“As Pakistan is pushing ahead with gas import projects like the Iran-Pakistan pipeline and liquefied natural gas imports, it should exercise control over the transmission system considering it as a strategic asset,” he suggested.

There are also plans to privatise power distribution companies where losses have gone up to 45%, adding to the circular debt as well as shortage of electricity. A huge volume of electricity disappears during distribution to consumers allegedly due to collusion between officials of power companies and criminals involved in power theft.

The previous government had also attempted to outsource operations and maintenance of power distribution companies to cope with the losses. However, strong protests by employees of the Water and Power Development Authority (Wapda) forced the government to back down.

The PPP also tried to unbundle the gas distribution companies – SNGPL and SSGC – by establishing more than 20 small companies to overcome the problem of theft. In this case, legal complications stood as a major hurdle in implementation of the plan.

Published in The Express Tribune, September 13^th,  2013.

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