ISLAMABAD: The Director General Petroleum Concession (DGPC) has issued a stern warning to Spud Energy Pty Limited (SEPL) over its alleged involvement in the illegal sale of gas to unlicensed company Konnect Gas Pvt Ltd (KGPL).
Shockingly, the country’s largest Exploration and Production (E&P) company, Oil & Gas Development Company Limited (OGDCL), which is listed on all three Stock Exchanges of Pakistan as well as on the London Stock Exchange, while having a joint venture with SEPL in Sara & Suri gas fields has so far maintained silence regarding the illegal sale of gas to an unlicensed entity, KGPL.
DGPC in a letter dated 26th October, 2023 to Chief Executive Officer (CEO) of SEPL said that the response to the accusation regarding illegal sale of natural gas by SEPL as ‘unsatisfactory’ and instructed the company (SEPL) to rectify the breach to avoid legal action in accordance with the applicable rules.
“Whereas, the comments submitted by M/s SEPL vide its letter dated October 20, 2023, in response to the notice issued pursuant to Rule-68(a) of the Rules, 1986, do not adequately redress the concerns of the Authority and are deemed as unsatisfactory,” said DGPC letter to CEO of SEPL, a copy of which is available with Pakistan Today/Profit, adding,” Now, therefore, in accordance with the notice served pursuant to Rule-68(a) of the Rules, 1986, to M/s SEPL, the company is once again instructed to remedy the breach. If M/s SEPL fails to satisfy the Authority, the office of DGPC will initiate action against the company in accordance with applicable PCA/Rules.”
The issue came to light following formal complaints submitted by House of Magna Cum Laude (HoMCL) on September 12, 2023, and Transparency International Pakistan (TIP) on October 2, 2023, and confirmation of M/s Konnect Gas Pvt Ltd (KGPL) as an unlicensed entity by OGRA vide its letters dated September 9 and October 6, 2023. These complaints alleged that M/s KGPL, a subsidiary of Jura Energy Corporation, and an affiliate of M/s Spud Energy Pty Ltd (SEPL), does not have a valid license to undertake any regulated activity and M/s SEPL was illegally selling gas to M/s KGPL, an unlicensed entity. And, the Oil and Gas Regulatory Authority (OGRA) confirmed KGPL’s unlicensed status through its (OGRA) letters, dated September 9 and October 6, 2023, which explicitly stated that “Konnect Gas Pvt Ltd is not a licensee of OGRA to undertake any regulated activities.” Similarly, SEPL and KGPL has been accused of various violations, including the illegal sale of unprocessed gas, illegal sale of unprocessed gas from expired leases, illegal sale of unprocessed gas as an environmental hazards, and illegal sale of unprocessed gas to end consumers through Compressed Natural Gas (CNG) stations, endangering lives of the people. Furthermore, SEPL has failed to fulfill royalty, area rental, training fund, and social welfare obligations while the company while has also neglected to submit production reports regularly.
It is also learnt from the DGPC letter to CEO of SEPL that despite these serious allegations and OGRA’s confirmation, SEPL’s response, provided on October 20, 2023, was found to be insufficient and unsatisfactory. Consequently, the DGPC, through a letter to the CEO of SEPL, reiterated its instruction to rectify the breach promptly. Failure to comply with the directive would result in the initiation of legal action against SEPL in accordance with the applicable rules and regulations.
As per DGPC letter, M/s SEPL was required to carry out all operations in accordance with good oil field practices and good oil industry practices and to obtain all necessary licenses /NoCs from relevant authorities, to have minimal impact on the environment, and to have due regard for safety and other factors. However, M/s SEPL is allegedly involved in serious breach of all of the above.
When contacted with OGDCL to secure its stance on the alleged illegal supply of gas to unlicensed KGPL from Sara & Suri gas fields, an official of OGDCL said that Sara Suri Gas Field is a Joint Venture between Spud Energy Pvt. Ltd. (SEPL) and Oil & Gas Development Company Limited (OGDCL) with working interest of 60% and 40% respectively. OGDCL said the supply of gas arrangements to M/s Konnect Gas (affiliate of SEPL) are covered under a GSPA (gas sales and purchase agreement) signed between the parties for supply of contractual quantity @ 1.3 MMSCFD.
The OGDCL, in its response to the queries of Profit, also admitted that OGRA vide letter dated August 18, 2023 issued instruction to all E&P Companies regarding supply of Flare Gas only to the OGRA’s Licensed Companies. In this regard, all E&P Companies had replied through PPEPCA to OGRA with copy to DGPC that supplying Flare Gas to the buyers as per Utilization of Flare Gas (FG) Guidelines 2016, “we understand that there is no restriction on the E&P Companies for sale of flare gas to a 3rd party except to ensure that the applicable HSE Rules, Policies and Industry Standard Practices are fully complied with”, said OGDCL, adding, that the objectives of the FG Policy 2016 were to discourage the flaring of gas and to incentivize the existing arrangements by encouraging the E&P Companies to avoid wastage and utilize every molecule of flare gas which were issued in pursuance to the provisions of PCA 9Petroleum Concession Agreement) duly signed by the E&P Companies with the President of Pakistan.
“In view thereof, supply of gas by SEPL to M/s Konnect is not illegal under the provisions of FG Policy 2016,” said OGDCL.
It is pertinent to mention here that caretaker Prime Minister Anwar ul Haq Kakar had earlier taken notice on the complaint of Transparency International Pakistan (TIP) regarding unauthorized third-party gas sale by Konnect Gas (Private) Limited to the Compressed Natural Gas (CNG) stations since 2020. And, the Prime Minister’s Office on 16-10-2023 had directed the Petroleum Division to furnish comments regarding TIP complaint at the earliest.
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