The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) has warned that the imposition of super tax could weaken the financial viability of exploration and production companies and undermine Pakistan’s long-standing efforts to attract foreign investment in the oil and gas sector.
In a letter addressed to the secretary of the Special Investment Facilitation Council, the association said investors would be reluctant to commit capital to high-risk, long-term upstream projects if agreed fiscal terms could be changed unilaterally. It said such investments were undertaken on the basis of fiscal stability assured under petroleum concession agreements.
The association argued that these agreements provide statutory protection and dispute resolution mechanisms, including international arbitration, and that applying super tax retrospectively would breach contractual commitments. It said altering fiscal terms after investments had been made would be economically unviable for companies operating under these agreements.
The warning comes as the Federal Constitutional Court hears appeals arising from judgements of the Sindh, Lahore and Islamabad high courts on the levy of super tax under Sections 4B and 4C of the Income Tax Ordinance, 2001, introduced through the Finance Act, 2015. The super tax was originally imposed to finance rehabilitation in areas affected by Operation Zarb-i-Azb.
In its letter, the association referenced past international disputes, including Reko Diq and Karkey, noting that alleged violations of legal protections had previously resulted in significant financial liabilities for Pakistan.
It cautioned that if the government proceeded with imposing super tax beyond rates specified in concession agreements, some member companies could invoke arbitration clauses. The association said potential liabilities could run into billions of dollars, adding pressure to public finances and affecting Pakistan’s standing with investors and international capital markets.
The association urged the SIFC to intervene and ensure that contractual and statutory obligations to E&P companies are honoured, warning that continued uncertainty could increase arbitration risks and discourage future foreign direct investment in the sector.
