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ISLAMABAD: The federal government has decided to renew Sui Mining Lease (Sui ML) between Government of Balochistan and Pakistan Petroleum Limited (PPL) for 10 years starting from June 1, 2015 to May 31, 2025 against firm amount of Rs 36 billion and contingent amount of Rs 24 billion, totaling Rs 60 billion, well-informed sources told Business Recorder.

The Council of Common Interests (CCI) in its meeting held on January 29, 2024 directed the Petroleum Division to decide on the renewal of Sui Mining Lease (Sui ML) favorably and submit a summary in the upcoming ECC for its approval as a special dispensation for the province of Balochistan.

Sharing the details, sources said, Sui ML was granted to Pakistan Petroleum Limited (PPL) for a period of 30 years from June 1, 1955 under Pakistan Petroleum (Production) Rules 1949 (Rules 1949) which was subsequently extended for another 30 years from June 1, 1985 to May 31, 2015. Rules 1949 were silent about the way forward. There was a legal requirement for putting an arrangement in place for continuity of gas production from Sui field. In the larger national and public interest, Petroleum Division extended the Sui ML on same terms and conditions as an interim arrangement.

The Government of Balochistan (GoB) raised its concerns over said extension of lease without their involvement. Accordingly, the GoB was engaged in discussions which culminated in execution of Memorandum of Agreement (MoA) on May 20, 2016 between Ministry of Energy (Petroleum Division) and GoB.

The objective of MoA was to define the procedures for collaboration necessitated by the Parties in order to extend the Sui Gas Lease. Salient features of MoA were the conversion of Sui ML in Sui Development & Production Lease (Sui D&PL), wellhead price increased to 55% of Policy 2012 price, 10% lease extension bonus, financial obligations as per Policy 2012, etc.

The GoB, however, refused to sign the Petroleum Concessions Agreement (PCA) and other documents whereas PPL did not make payments of the lease extension bonus and other obligations, which have accumulated over the years. Meanwhile, financial position of PPL was adversely affected due to the circular debt and outstanding payments from the Sui companies, thus, disabling PPL to clear all its outstanding liabilities.

Thereafter, the former Prime Minister on June 9, 2023 constituted the Committee on the matter, which was required to submit its recommendation within fifteen days to the Federal Cabinet for consideration. After detailed deliberation, the Committee recommended that PPL pay Rs.12 billion in respect of Lease Extension Bonus (LEB) out of total commitment of Rs. 54 billion, on or before June 30, 2023.

The remaining payment will be paid on the agreed schedule whereby the payments would be cleared till May 25, 2025. The matter was discussed and summary was withdrawn as there was no firm commitment that GoB will give concurrence on the PCA and D&PL after the payment of Rs 12 billion.

In view of the existing scenario, Petroleum Division has recommended payment of Rs 36 billion of which Rs 12 billion will be paid at signing of D&PL/PCA, Rs 3 billion each for Q 3 and Q 4 2023-24, Q 1, Q 2 and Q3 of 2024-25 and Rs 9 billion in Q 4 of 2024-25.

However, according to contingent plan, Rs 24 billion will be required. The grant total will be Rs 60 billion. The Petroleum Division shall grant a D&PL and sign Sui Field PCA with M/s PPL for ten years from June 1, 2015 to May 31, 2025 before the first payment of Rs 12 billion.

Future arrangement beyond May 31, 2025 will be decided within the validity period of D&PL in accordance with the applicable petroleum rules.

However, contingent payments will be made subject to improved collections by PPL from Sui Companies on proportionate basis and increase in gas price for consumers.

Copyright Business Recorder, 2024

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