Petroleum Division unsatisfied with HUBCO undertaking for ENI sale

ISLAMABAD: The Petroleum Division is not satisfied with the undertaking provided by Hub Power Holding Limited (HUBCO) regarding the transfer of the entire share capital of Eni Pakistan Limited to Prime International Oil & Gas Company Limited (PIOGCL), Profit learnt on Monday.

According to sources, following the provision of an undertaking by HUBCO regarding the sale of entire share capital of Eni Pakistan Limited to PIOGCL which is a consortium of Hub Power Holding Limited (HUBCO) and Eni Employees Buy Out Group (EBO Group), the petroleum division has sought opinion from the Securities and Exchange Commission of Pakistan (SECP), Ministry of Finance, and Ministry of Law & Justice over the undertaking.

In a letter to Chairman SECP, the Petroleum Division has asked to clarify whether Companies Act restricts companies to provide undertakings to another company regarding financial support for future operations or otherwise.

The division informed SECP chairman that ENI Pakistan Limited is disposing its entire share capital to PIOGCL. And in order to establish the financial strength of sponsor of PIOGCL regarding future operations of petroleum exploration licenses and development and production leases, Petroleum Division asked Eni Pakistan Limited to provide an undertaking from HUBCO that in case PIOGCL falls short of meeting financial obligations in respect of running of operations in future, HUBCO will provide for such financial support.

In response, petroleum division’s letter said HUBCO has stated that they can provide support to PIOGCL including EBO’s share with regard to acquisition price, however, have not provided such undertaking regarding future operations as according to them giving such open-ended undertaking regarding future operations is against the Companies Act 2017. 

“SECP may also like to advise us as to what could be a foolproof mechanism to make M/s HUBCO obligated to provide requisite funding if required due to any financial inability of EBO Group,” read petroleum division’s letter.

As per sources, HPHL has submitted an undertaking with the petroleum division that lacks the required unconditional financial support of PIOGCL for obtaining the assets of ENI Pakistan. Upon this, the petroleum division has sought opinion from the Securities and Exchange Commission of Pakistan, Ministry of Finance, and Ministry of Law & Justice, said sources.

Sources further said that serious questions have been raised over the sale of assets of ENI Pakistan to PIOGCL for only $16.4 million dollars while ENI Pakistan keeps oil and gas reserves worth approximately $407 million dollars.

They said that Pakistan Petroleum Limited (PPL) has also asked not to release the bank guarantee of ENI Pakistan for offshore Indus Block C, adding that it is essential to determine the actual worth of ENI Pakistan’s assets in the country by a foreign firm as the determination of actual worth of its assets can benefit the country’s national exchequer in billions while actual determination will be helpful in running the operations of ENI’s oil and gas reserves in a safe manner. 

"Technical and legal departments of petroleum division have also raised several questions over not keeping bank balance of Rs5.5 billion by the PIOGCL which will be required for shutting down the operation ENI Pakistan upon complete depletion of the oil and gas reserves as an audit of PIOGCL accounts has made it clear that PIOGCL does not have the required funds for running the operations of ENI Pakistan’s oil and gas reserves," said sources.

It is pertinent to mention that ENI Pakistan Limited had earlier entered into sale purchase agreements (SPAs) dated 08-03-2021 with PIOGCL in respect of sale of the entire share capital and in order to effectuate the subject change of effective control of shares from M/s Eni to PIOGCL, M/s ENI had requested the government for its consent under the applicable petroleum rules.

Following to this request, the Petroleum Division’s Directorate General of Petroleum Concession (DGPC) in a letter sent on April 1, 2022, to the managing director (MD) of ENI had asked to provide an undertaking of M/s HPHL in favour of PIOGCL that in case PIOGCL falls short of meeting its financing with regards to acquisition price of $16.4 million and running ENI blocks operations in future ostensibly to make sure HUBCO will unconditionally provide all such financial support to PIOGCL, including ENI Employee Group’s share.