Eni's vessels, helicopters, drillship: PD seeks Cabinet's approval for clearance

Petroleum Division has sought the approval of the federal cabinet for clearance of vessels, helicopters and drillship of M/s Eni Pakistan Limited, well-informed sources told Business Recorder. M/s Eni Pakistan Limited along with its joint venture partners is planning on drilling an ultra-deep well in Offshore Indus-G Block (2265-1) called Kekra for the exploration of gas reservoirs. The project will be carried out around 290 kms off the coast of Sindh.
The drilling operations for the project are expected to commence this month and will be executed within a specific weather window, failing which the safety of the project may be compromised.
The vessels and helicopters for this project have arrived and are awaiting customs clearance. All major drilling and ancillary equipment will be imported in order to carry out the project which include following items along with their spare parts on a temporary basis, subject to re-export after completion of the project: (i) three Platform Supply Vessels (PSVs) [Gull, Grouse & Heron form Swire Pacific] and one (01) Fast Support Intervention Vessel (FSIV) [Surf Lestari from Bourbon]; (ii) two helicopters AW-139 [A7-GHN & A7-GHQ from Gulf Helicopter Company] and; (iii) one drillship [Saipem-12000 (would remain 35NM away from Karachi Port)].
The contractual relationship between JV partner and the government of Pakistan is governed by the production sharing Agreement and its amendments for Offshore Indus-G Block 2265. Article-XIII of the PSA stipulates application of SRO 678(I)/2004 dated 7th August 2004 and condition 7 of the said SRO specifically deals with petroleum sector companies.
The SRO stipulates that Eni is entitled to import and export of the equipment without the payment of customs duty and sales tax whatsoever. However equipment should not be re-exported upon expiry of the project, duties and taxes as per clause 1 of the SRO will be applicable.
Petroleum Division is of the view that based on this and with regard to specific dynamics of the project and equipment, M/s Eni has made the following submissions: (i) regarding the vessels and helicopters, the same would be imported on a temporary basis for around 3 months specifically for the project and would remain either on the water or mainly in the air, and based on the above set provisions of the PSA and SRO, the customs duties and taxes of any kind may not be levied against them and the same may be cleared by the customs authorities without payment of duties and taxes against a corporate guarantee valid for a period of two years. Further, supply vessels are an integral part of offshore drilling operations and these vessels are required to transport drilling material (casings, tubing, wellheads, etc), diesel, bulk material (drilling mud, cement, chemicals, etc) to the drillship as well as transportation of waste from the drillship to the onshore marine base. In case of emergency, these will also be used to transport personnel to and from drillship and; (ii) drillship would remain 35NM (nautical miles) away from Karachi Port at all times at the location of the project. The drillship is hence outside the limits of the 'Pakistan Customs Waters' as per the Customs Act, 1969 which describes the same as being 24 nautical miles from the low water line of the coast and would be parked within Pakistan's Exclusive Economic Zone' but not within Pakistan's "territory' or 'territorial waters', as territorial waters are also defined as extending up to 24 nautical miles from the low water line of the coast. Any kind of customs duty therefore is not leviable on the drillship.
Accordingly, M/s Eni requested for the issuance of following directions to the Federal Board of Revenue and Pakistan Customs authorities so that this project of national importance may go ahead as planned in January 2019 ;(i) to issue requisite clearance of the vessels and helicopters without levy of any duty or charge whatsoever including additional customs duty subject to a corporate guarantee being furnished and; (ii) to issue requisite clearance of the drillship without levy of any duty or charge whatsoever including additional customs duty.
Petroleum Division is of the view that this concession should not be restricted to M/s Eni but should also be extended to all production sharing agreement (PSA) with government of Pakistan for offshore petroleum exploration and production activities. The FBR would be required to amend suitably the SRO 678(I)/2004 dated 7th August 2004 and SRO 630 (I)/2018 of May 24, 2018.