Of Ogra, OGDCL and PSO - I

25 Jun, 2012

Looking at the purpose and function of Oil and Gas Regulatory Authority (Ogra), pathetic state of affairs of Oil and Gas Development Company Ltd (OGDCL) and the utterly poor performance of the circular debt-afflicted Pakistan State Oil (PSO), any petroleum professional, worth his or her experience, will go crazy, for, all these defy the basic principles of petroleum business, covering the entire gamut of both the up and downstream segments of the industry.
As a petroleum 'generalist' professional of sorts, with 'hands-on' experience of both the up and downstream segments of the industry and ex-corporate executive, having worked for two of the Fortune-500 companies, I have never been able to understand why Ogra was created at first place, what is its mandate, what purpose it serves other than being a glorified and institutionalised form of a "cartel" that fixes the prices of petroleum products for refiners, oil marketing and distribution companies, negating the very concepts of fair, free market and economy.
Ogra, as a regulator and a governmental functionary, regulates the petroleum business as opposed to regulating the business houses. It is sheer lunacy to regulate the business by fixing prices, margins, dealer commission and cost of product movement. The industry or the business houses are the ones who should be regulated for strictest abidance to the product quality requirements, safety rules, matters pertaining to tax regime, anti-trust and anti-cartel laws, issues relative to environment, ethical business practices, corporate laws, so on and so forth, to name some of the key elements to conduct business.
As for the product pricing, leaving aside the government taxes and levies, which should, most definitely be rationalised by Federal Board of Revenue, (FBR), under the aegis of the ministries of finance and petroleum, the matter of price build-up and consumer price should be the prerogative and domain of each of the producer and marketer. Each refiner and marketer should arrive at the selling or consumer price to be charged, from time to time, and not a so-called regulator that has no stake in the business. Needles to say that profit margins accrued should be defendable, for, it is obligatory on part of the seller not to gouge the consumer by taking him to the cleaner.
Price build-up and cost control mechanism are creative financial applications that are employed in the exercise, brings about both competitiveness and efficiencies for the ultimate benefit to the end user. Whatever legitimate oversight is required, this function can easily be transferred to the Directorate General of Oil under the petroleum ministry. The government can certainly do away with OGRA since between the Directorate General of Oil and Ogra, it is nothing but a case of double dipping and waste of resources!
Coming to OGDCL, it is a great asset, going down and rotting, for it is a public sector company, used for making illegal money via dubious contract awards, induction of incompetent and corrupt political proxy operatives and using it as a employment agency to favour relations, friends and cronies. OGDCL is grossly overstaffed and loaded with the 'dead wood' that should be thrown out. Much larger petroleum exploration and production, (E&P), companies in the private sector have significantly lower census than OGDCL on per barrel equivalent of oil criteria. OGDCL first needs to be rightsized, re-organised, re-engineered and inducted with accredited professionals and then should go international by way of forming joint ventures with a small equity and reasonable back-in options to create petroleum security for the country. Africa, Iraq and Central Asia are the places to look for joint ventures in addition to other prospective locations, besides aggressively pursuing domestic E&P activities. In this context, the government must resolve the Kohlu block stand off with the Marri-Bugti tribes by addressing the core issues of mutual interest and security of operations.

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