FIA starts enquiry into Mari Petroleum scam

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ISLAMABAD: Pakistan Muslim League-Nawaz (PML-N) government has allegedly caused gigantic loss worth Rs 600 billion to the national exchequer through changing the gas pricing formula of Mari Petroleum Company Limited and FIA has initiated an enquiry into the matter, it was learnt reliably.

Available copy of official document transpires that Federal Investigation Agency (FIA), after Panama scandal, has initiated an enquiry into a big and unbelievable scandal of ruling PML-N government. And, an enquiry has been registered at FIA Corporate Crime Circle Lahore regarding missing/embezzled shares of the government worth billions of rupees in Mari Petroleum Company Limited (MPCL).

FIA has obtained Mari Gas Well Head Price Agreement 1985 and record pertaining to additional expenditures by the federal government in 2001. Similarly, the FIA has obtained record pertaining to shareholding from Securities and Exchange Commission of Pakistan (SECP). “Further, record from MPNR (ministry of petroleum and natural resources) regarding additional investments made by the GOP, details of explorations, increase in assets of Mari Petroleum and record pertaining to the dismantling of Mari Gas Wellhead price agreement is still awaited,” said document.

According to the document, federal government while setting aside its Rs 30 billion worth investment in Mari Petroleum Company had dismantled a cost-plus well-head gas pricing formula the company (Mari Petroleum Company) in July 2014. And, this change in the gas pricing formula had resultantly caused an estimated whopping loss of Rs 600 billion to the national exchequer, while three billion shares owned by the federal government were not transferred and the private shareholders earned benefits worth in billions of rupees with zero investment.

In July 2014, the economic coordination committee (ECC) of the federal cabinet had changed cost plus well-head gas pricing formula and linked it with crude oil price of $ 84 per barrel resultantly the price of Mari Petroleum Company’s gas has increased to Rs 483 per Million British Thermal Unit (MMBTU) from Rs 85/MMBTU. At present, the present market value of per unit MPCL share is ranging between Rs 1450 to Rs 1500.

As per document, Mari gas agreement was dismantled without evaluating the value of reserves and assets generated/ build at the cost of federal government investment. The investment in exploration activities was allowed with the condition that the benefit will go to GPA, however, the government investment was not protected while dismantling the Mari gas price agreement. “Trillions of rupees have been shifted to 80 per cent non-investors in the shape of transfers of value reserves/assets build through GOP investment,” said document.

The document further said that investment of $ 300 million, if converted will be more than Rs 30 billion, meaning by 3 billion shares required to issue in favour of GOP and since the present market value of per unit MPCL share is ranging between Rs 1450 to Rs 1500.

“Share reflects the worth of valuation of reserves/strength of the company. In this way, GOP/GoS deprived of approximately Rs 4500 billion or value of reserve/assets build at the cost of GOP/GoS’s investment, said the document.

Well-informed sources disclosed that the ECC had approved the revision in the gas pricing formula of Mari Petroleum on the recommendation of the then petroleum minister Shahid Khaqan Abbasi who as federal minister for petroleum and natural resources miserably failed in protecting the interests of the gas consumers. They said the government had made an investment in Mari Petroleum Company with the amount additionally collected from the gas consumers of the country. However, change in the gas pricing formula of Mari Petroleum had caused loss to federal government and provinces as the provinces had suffered a heavy loss of Rs 65 billion under the head gas development surcharge. They also said that senior officials of petroleum ministry including former additional secretary who is currently employed at Mari Petroleum, and two DGs including Director General (Gas), Director General PC whose sons are also working with Mari Petroleum Company and an employee of Mari Petroleum who most often sits at Petroleum House had played the main role in the change of gas pricing formula of the Mari Petroleum Company. They also said that investment in Mari Petroleum Company was made through the pockets of gas consumers and due to which the numbers of reservoirs of oil and gas owned by Mari Petroleum Company were increased and financial position of the company strengthened and as a result the price of each share of the company has gone to Rs 1500 from Rs 300 per share. And, private shareholders of 18.21 per cent also got billion rupees worth benefit with it.

According to sources, petroleum ministry officials have informed the Prime Minister that FIA inquiry might put him in deep trouble and to those officials who are about to retire from the service/job. These officials had asked the premier to get the FIA inquiry permanently closed through Interior ministry.

In 2001, the company was allowed by the government to undertake exploration, appraisal and development activities outside Mari field and made additional investment of $ 20 million per annum or 30 per cent of annual gross sales revenue whichever is less with condition that all the revenue from new oil/gas field will be credited to GPA. Starting from January 2012, the ceiling of $ 20 million was enhanced by $ 5 million every year to gradually achieve the revised limits of $ 40 million per annum over a period of four years i-e by January 2015. Thus an amount of $ 300 million was allowed for investment outside Mari through enhancing wellhead gas price.

From July 2014, cost plus Mari wellhead gas pricing formula was replaced with a crude oil price linked formula at crude oil price of $ 85/BBL, the resultant wellhead price would be $ 1.87 MMBTU in the 5th year with the condition that MPCL will undertake its exploration, appraisal and development activities within and outside Mari field from its own generated resources including revenue from other field and will bear all the risk associated therewith without any direct or indirect subsidy from government. It was also decided that for next ten years, dividend distribution would continue to be in line with present formula and profits will be re-invested for exploration and development activities in Mari as outside Mari field.

When contacted with a spokesman of Mari Petroleum Company Limited to get official stance of the company, Pakistan Today was told that the spokesperson was on leave and would not be able to submit an official version. After various attempts to get in touch, the hone was switched off permanently.

It is worth mentioning that the federal government had approved cost plus gas pricing formula on December 22, 1984, and 18.20 per cent shareholding of Mari Petroleum Company were owned by the federal government, while two state-owned companies owned 60 per cent shares and 21.18 per cent shares were in the possession of private shareholders. Prior to 2001, the investment of federal government was Rs 16 crore and 7 lakh, while the investment of two state-owned companies was Rs 55 crore and private shareholders investment was at Rs 2 crore.  More, the country needs no need of further loans to run the country’s economy if 3 billion shares with an approximate value of Rs 4500 billion of MPCL were transferred to the federal government because the total outlay of the federal budget for fiscal year 17-18 is Rs 4.75 trillion.

The Mari Petroleum Company Limited (MPCL) previously Mari Gas Company Limited (MGCL) is principally engaged in drilling, exploration, production and sale of oil and gas in Mari area. The wellhead gas price given to the company is on a cost-plus basis as defined the Mari Gas Well Head Price Agreement (MGPA) dated December 22, 1984, signed between the government and the company. The government had 18.3 per cent shares in the company.