The Oil and Gas Development Company Limited (OGDCL) is unlawfully selling liquefied petroleum gas (LPG) to Polgas, a subsidiary of Pakistan Oilfields, from Adhi and Pandori fields since 2000, it was learnt here on Thursday.
An internal department report, made available to Business Recorder, indicated that the manager joint venture raised the issue of illegal LPG sale to POL in one of its meetings early this month and demanded that the management should look into this case seriously to protect the company interest but it remained unheeded.
Sources said that some time in 2004, OGDCL tried to convince Pakistan Oilfields that getting 100 percent LPG from Adhi and Pandori Polgas was indulged in an unlawful activity and it should either be stopped or given legal cover.
The sources added that OGDCL received sharp reaction from Pakistan Oilfields and this put the issue on the back burner.
The sources maintained that the case again came to limelight when the manager joint venture raised the issue in one of the internal meetings early this month and expressed serious concern in this regard.
According to the sources, the manager joint venture mentioned in his presentations (a copy of it made available to BR) that POL was selling entire LPG produced from Pindori, including OGDCL''s and AOC''s share to Polgas (a marketing division of I''OL) through an agreement since November 2000.
The agreement was executed without OGDCL''s authorisation. OGDCL objected to POL''s decision and provided a legal opinion in this matter, further stating that Polgas being a marketing division of POL was not a legal entity and thus the agreement executed had no legal value.
OGDCL proposed to POL to form an independent company with the name of Polgas having 50 percent equity sharing between POL and OGDCL each. POL agreed in principle to the proposal and a draft share holding agreement was sent to POL in mid July 2005, which has not responded so far.
The presentation said: "It seems that as an after thought POL management is not interested in forming an independent marketing company with OGDCL, instead POL has sent a draft LPG sale and purchase agreement for the sale of LPG produced from Phases I and II of Pindori as well as Adhi fields, asking OGDCL to commit their entire 50 percent share to Polgas for a period of ten years extendable for another ten years on the same terms and conditions".
In this agreement, POL suggested that upon termination of the existing agreement the entire production of OGDCL from Adhi Phase I, currently being sold to Wakgas, Sungas and Capgas (subsidiary of Polgas) should be sold to Polgas only. "We feel that such a agreement is totally lopsided and devoid of any consideration for OGDCL."
With regard to Adhi Field, it said Adhi joint venture has Ogdcl''s 50 percent working interest, Pakistan Petroleum Limited 39 percent, and Pakistan Oilfields Limited (POL) 11 percent and it produces (Phase 1) crude oil 4000 BBLS/ day, gas 20 MMSCF/day, LPG: 70 M tonnes/day.
The LPG produced from Adhi field in Phase I is being sold to Wakgas, Sungas and Capgas (subsidiaries of Polgas).
The presentations indicated that Adhi field is capable of delivering extra quantities of petroleum and for that PPL (operator) proposed expansion of the existing LPG facilities through Phase II (currently under implementation). After expansion the field will be capable of producing the following quantities of petroleum:
The field is in phase 11, which would enhance its production. The presentation indicated that its total production after phase II would be as follow. NGL (condensate) 3300 BBLS/day, crude oil: 1850 BBLS/day, total 5150 BBLS/day, gas: 34 MMSCF/day, LPG: 115 M. tonnes /day.
It said that PPL proposed to JV partners (DCL and POL) that for the LPG produced from Phase II they have short listed the existing LPG companies and they intend to invite offers from these companies based on how much profit they are willing to share with the producer(s), which they receive by selling LPG at a higher price to the consumer. The company willing to offer the highest discount would be eligible to buy the LPG produced from Phase II.
According to the sources, POL in response to PPL''s call for meeting on November 8, 2005 proposed that Polgas be given the right to match the best offer received from the short-listed marketing companies. The PPL rejected the proposal saying "This right would provide an unfair edge to Polgas".
But POL did not bother any such denial. It continued to get 100 percent LPG from the field.
The sources said internal department recommended that POL should consider OGDCL''s proposal to establish an independent company with 50 percent equity each and then renegotiate the terms for buying LPG from Pindori field through Polgas. It added that in case POL did not respond to the proposal, OGDCL as a WI0 in Adhi field should go along PPL''s recommendation for disposal of its share of LPG from Phase II, which included renegotiating terms with LPG buyers of Phase I on the terms agreed for Phase II.