02Jun, 23 June 2, 2023

ISLAMABAD: Prime Minister Office has demanded clarification from the petroleum division regarding non-cancellation of license, unauthorized show cause notice withdrawal against M/s Heritage Oil & Gas Limited (HOGL) without government approval and resolution of unsettling issues plaguing the Zamzama North Block.

In a letter, the PMO raised concerns about the breach of work commitments by the existing operator, M/s Heritage Oil & Gas Limited (HOGL), and asked the petroleum division to submit a revised summary at the earliest.

The letter from the PMO outlined several key points that require clarification and resolution. Firstly, the PMO sought an explanation for the failure to invoke provisions for the revocation of the license under the 2001 Rules and the Petroleum Concession Agreement (PCA) despite a clear and continued breach of work commitments by HOGL and its joint venture partners since 2010.

Secondly, the PMO questioned the withdrawal of a show cause notice against HOGL without the approval of the Federal Government, despite a Supreme Court order in the Mustafa Impex case. The order, which interpreted the role of the Federal Government, was issued after the show cause notice but the withdrawal was approved more than three years later, making the Petroleum Division’s stance untenable. The PMO called for an explanation and sought approval for the ex post facto regularization of the unauthorized withdrawal.

Furthermore, the PMO highlighted the transfer of the exploration license from M/s High Carbex American Energy Corporation Inc. to M/s Al-Haj Pakistan Enterprises Limited, the current operator. The PMO requested that the technical and financial capability of both the current and proposed operators be included in the summary for the Economic Coordination Committee (ECC) of the Cabinet.

The PMO also expressed concerns about the proposed transfer of a 33% working interest to M/s Spud Energy Pvt. Ltd. (SEPL), citing a history of defaulting on payment obligations to the government. The PMO called for a clear opinion on SEPL’s technical and financial capability to be included in the summary for ECC consideration.

Lastly, the PMO emphasized the need for an appropriate mechanism to secure rental obligations that are currently subjudice. The summary for ECC should incorporate or suggest a suitable mechanism for addressing this issue.

The Petroleum Division had previously sought the Prime Minister’s consent for granting an extension to the exploration license at Zamzama North Block. However, concerns have been raised as the operator, HOGL, has failed to drill a single well over the past many years. The block has significant potential, with seismic data acquired, but the operator has yet to fulfill its exploratory commitments.

It is relevant to note here that the Zamzama North exploration licence expired in December, 2010, after which further extension was not granted due to the fact that the company was unable to fulfil the minimum work commitment within stipulated time frame as required by the industry laws.

Subsequently the company was served a notice, followed by a “Show Cause Notice” to remedy the default. Finally, the company was also given the opportunity of “Personal Hearing” over the said licence and the notice was withdrawn while a conditional consent was granted that HOGL shall be entitled for grant of extension for a period of two years with effect from issuance date of extension letter by the government subject to compliance of certain conditions.

Raising concerns over the withdrawal of the Show Cause Notice, the sources also earlier claimed that the notice cannot be withdrawn on the Block without approval of the Cabinet – this has been done illegally because all of the cases for revival have been approved by Cabinet.

Further alleging that Heritage Oil has not fulfilled the provisions given in the conditional extension while extension and assignment cannot be granted in Zamzama North Block unilaterally as the same process of approval of ECC and Cabinet was not carried out for withdrawal of show cause notice.

The Block needs to fall under revocation and can only be revived after clearance approval from Cabinet. The proposed assignee in this case along with the proposed operator is Al-Haj. Al-Haj has allegedly been part of a dubious transaction wherein it took over Premier Oil’s assets in Pakistan – this approval of transfer of assets and interests was not given by either Secretary, Minister, ECC or Cabinet as the approval was allegedly done at the level of the then Additional Secretary Sher Afghan which is strictly against the law, said sources.

Sources further said that in 2019, 11 Exploration Licences were revoked on account of non-performance and were issued Revocation Licences. However, the then Director General Petroleum Concessions Qazi Muhammad Saleem Siddiqui excluded Zamzama North Block from this list even though the Block was awarded in 2006-07 and no work has been done in the Block while now this Block is currently being assessed by DGPC for extension and regularisation.

It is pertinent to mention that the issues raised by the PMO highlight the need for transparency, accountability, and adherence to contractual obligations in the energy sector. The revised summary from the Petroleum Division will provide further insights into the future of operations in the Zamzama North Block and the actions to be taken to address the concerns raised.

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