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Q: What is the legal basis for the registration of petroleum rights documents in Pakistan? A: The legal basis for the registration of petroleum rights documents in Pakistan is the Registration Act, 1908, which requires the registration of both moveable and immovable property, including petroleum rights documents.
Q: Are there specific provisions in the Registration Act, 1908 for petroleum rights documents? A: No, there are no specific provisions in the Registration Act, 1908 for petroleum rights documents, but they are required to be registered as documents concerning immovable property.
Q: What types of petroleum rights documents need to be registered under the Registration Act, 1908? A: Reconnaissance permits, exploration licenses, development and production leases, and assignment documents related to petroleum rights need to be registered.
Q: Are penalties for failing to register petroleum rights documents enforced in practice? A: Although penalties exist on paper, they are rarely enforced by district authorities, and the Ministry of Petroleum has never revoked a petroleum right for failure to register.
Q: Why is it important to register petroleum rights documents in a timely manner? A: Timely registration of petroleum rights documents is important to ensure legal compliance and avoid potential legal complications, even though penalties are not typically enforced.
Q: What must be done before executing petroleum rights documents in terms of stamping? A: All execution copies (originals) of petroleum rights documents must be stamped with adhesive revenue stamps of the government of Pakistan before execution.
Q: Where can adhesive revenue stamps be purchased, and how is their value determined? A: Adhesive revenue stamps can be purchased from stamp vendors at any courthouse, and their value is determined in accordance with the Stamp Act, 1899 (as amended).
Q: What is the stamp duty for Petroleum Concession Agreements, Production Sharing Agreements, and Reconnaissance Permits? A: These documents are subject to a stamp duty of Rs. 4.00 as they are considered agreements not specifically mentioned in sub-Article 5(A)-(c) of the First Schedule of the Stamp Act, 1899.
Q: How is stamp duty calculated for an Exploration License? A: The stamp duty for an Exploration License is Rs. 30.00 for the first Rs. 1000.00 of annual rent and Rs. 15.00 for every Rs. 500.00 or part thereof in excess of Rs. 1000.00 of annual rent. For a 1000 sq. km Exploration License, the stamp duty would be Rs. 12500.00.
Q: What are the annual rent rates for Exploration Licenses as per the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013? A: The annual rent for the initial term of three years is Rs. 1250.00 per sq. km, and Rs. 2500.00 per sq. km for each one-year renewal term.
Q: How is stamp duty calculated for a Development and Production Lease? A: The stamp duty for a Development and Production Lease is Rs. 30.00 for the first Rs. 1000.00 of the first ten years’ rent and Rs. 15.00 for every Rs. 500.00 or part thereof in excess of Rs. 1000.00. For a 100 sq. km Development and Production Lease, the stamp duty would be Rs. 187500.00.
Q: What is the annual rent for a Development and Production Lease according to the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013? A: The annual rent for a Development and Production Lease is Rs. 6250.00 per sq. km.
Q: What is required for the registration of petroleum rights documents after execution? A: Petroleum rights documents must be registered with the sub-district authorities (Sub-Registrar) of all sub-districts where the petroleum rights are located, in accordance with the Registration Act, 1908.
Q: What fee is associated with the registration of petroleum rights documents? A: A nominal fee, published in the official gazette by the concerned provincial government, is payable at the time of presentation of the petroleum rights document for registration.
Q: Who must present petroleum rights documents for registration? A: An authorized attorney of the company holding petroleum rights must personally present such documents before all concerned district authorities.
Q: Can the personal presentation of documents for registration be avoided? A: Yes, if a Special Delegation of Power of Attorney (for registration of documents) is issued and registered with the district authorities, the personal appearance of the company’s authorized attorney is only required for the registration of this Power of Attorney.
Q: What is required when an authorized attorney presents a General Power of Attorney for registration? A: The original General Power of Attorney, empowering the attorney to act on behalf of the company, must be presented, and if issued outside Pakistan, it must be authenticated for Pakistan.
Q: What is the authentication process for General Power of Attorneys issued outside Pakistan? A: The process involves notification in the issuing country, authentication by the company/corporation registration office, authentication by the foreign office of the issuing country, and authentication by the Pakistani Embassy or Consulate in that country.
Q: What is the fee for the grant or renewal of a permit under the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013? A: The fee is fifty thousand rupees.
Q: What is the fee for the grant or renewal of an exploration license? A: The fee is one hundred thousand rupees.
Q: What is the fee for the grant or renewal of a development and production lease? A: The fee is two hundred thousand rupees.
Q: What document must accompany the application for a petroleum right? A: Five copies of a map delineating the boundaries of the area applied for must accompany the application.
Q: Can multiple petroleum rights be granted to the same applicant? A: Yes, more than one petroleum right can be granted to the same applicant.
Q: What is required for a petroleum right to be assignable? A: The previous written approval of the Authority is required for a petroleum right or any working interest therein to be assigned.
Q: What must be included in an application for the approval of an assignment of a petroleum right? A: The application must be in writing, accompanied by a fee of one hundred thousand rupees for each assignee, and must include particulars of the proposed assignee.
Q: What factors does the Authority consider when dividing an area into blocks and zones? A: The Authority considers sizes, shapes, and other relevant factors to determine the division of an area into blocks and zones.
Q: What is the maximum size of an area for which a license can be granted? A: A license cannot be granted for an area exceeding twenty-five hundred square kilometres.
Q: What shape should the area for a license be? A: The area should be compact, bounded by straight lines, and marked with permanent physical boundaries as far as possible.
Q: What rights does a license holder have under the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013? A: A license holder has the exclusive right to undertake all activities related to reconnaissance and exploration within the license area, including drilling for petroleum.
Q: What is the initial term of a license for petroleum exploration? A: The initial term of a license is five years, divided into two phases: the first three years as phase-I and the next two years as phase-II.
Q: What work must be committed for entering phase-II of a petroleum exploration license? A: A firm exploration well or work units equivalent to a well of three thousand meters depth must be committed for entering phase-II.
Q: How many renewals can be granted for a petroleum exploration license? A: Up to two renewals can be granted, each for a term of up to one year, provided the work obligations and other obligations of the preceding term have been fulfilled.
Q: Can the term of a petroleum exploration license be extended for drilling an exploration well? A: Yes, the term can be extended for drilling an exploration well in progress, with the extension period considered part of the initial term or renewal.
Q: What is the part relinquishment schedule for a petroleum exploration license? A: Thirty percent of the original license area must be relinquished at the end of phase-I, twenty percent of the remaining area at the end of phase-II, and ten percent of the remaining area before the start of the second renewal.
Q: Can the relinquishment of the license area be retained? A: Yes, retention of the license area required to be relinquished can be allowed if additional work units equivalent to ten percent of the applicable percentage of the phase-I committed work units are undertaken.
Q: What is required for the extension of the term of a petroleum exploration license due to seismic and drilling services unavailability? A: Proof that seismic and drilling services are not readily available in the country must be provided before the Authority considers accepting or denying the request for extension.
Q: What additional work must be committed for an extension of a petroleum exploration license? A: Additional work equivalent to at least ten percent more than the minimum work obligation of the subsequent phase or renewal must be committed.
Q: What area relinquishment must be made for an extension of a petroleum exploration license? A: An additional accelerated area relinquishment equivalent to ten percent of the original license area must be made.
Q: What circumstances may justify the extension of a petroleum exploration license? A: Circumstances beyond control, such as law and order situations or unforeseeable events like floods or earthquakes, may justify the extension.
Q: What is required for an extension of a petroleum exploration license for a period beyond two years? A: Formal approval from the Economic Coordination Committee of the Cabinet (ECC) is required for extensions beyond two years.
Q: Can the coordinates of the area covered under a petroleum exploration license be revised? A: Yes, the coordinates can be revised if the geological structure extends into an adjoining free area, subject to the Authority’s approval.
Q: What can a license holder do after making a discovery of petroleum? A: The license holder can perform additional work to appraise the discovery, submit an appraisal program to the Authority, and potentially obtain renewal for appraisal and evaluation.
Q: Can flaring of gas be allowed during appraisal? A: Flaring of gas during appraisal can be allowed for a period not longer than thirty days if gas infrastructure is within a twenty-five kilometre radius, except under exceptional circumstances.
Q: What must be included in a request for approval of Extended Well Testing (EWT)? A: The request must include detailed technical justification, proposed duration, and a plan for the disposal of natural gas.
Q: What conditions apply to production during the EWT period? A: Production during the EWT period must comply with EWT pricing terms and the conditions applicable to leases, including payment of production bonus, royalty, and other obligations.
Q: What measures must be taken for facilities required for EWT? A: The facilities must be constructed and operated in accordance with good international oilfield practices.
Q: What can be undertaken after the declaration of commerciality and before the grant of a lease? A: Early commercial production (ECP) can be undertaken, subject to conditions and approval from the Authority.
Q: What is required for the disposal of petroleum during the ECP period? A: The request for ECP must include a plan for the disposal of petroleum during the ECP period.
Q: What retention period is allowed for significant natural gas discoveries? A: A retention period of up to five years is allowed for significant natural gas discoveries in specified zones, with possible extensions under certain conditions.
Q: What is required after completion of appraisal and evaluation work for a discovery? A: The license holder may submit a notice for declaration of commercial discovery to the Authority, along with a report.
Q: What is the impact of submitting a notice for declaration of commercial discovery? A: Submission of the notice does not result in accruing rights or privileges with respect to pricing and does not constitute acceptance of assumptions used for economic and financial viability.
Q: What must accompany an application for a lease after declaring a commercial discovery? A: The application must include a field development plan.
Q: How long is a lease for petroleum development and production initially granted? A: A lease is initially granted for up to twenty-five years, with possible extensions if commercial production continues.
Q: What must be included in a development plan for a petroleum lease? A: The development plan must include details on reserves, proposals for development and production, drilling and completion of wells, production and storage installations, transport and delivery facilities, production profiles, safety measures, environmental impact, organizational setup, and more.
Q: How often must reserves and production profiles be updated for a lease? A: Reserves and production profiles must be updated every five years from the date of approval of the field development plan.
Q: What right does a lease holder have in terms of petroleum transportation? A: A lease holder has the right to lift and transport petroleum from the lease area, subject to approval and conditions stipulated by the Authority.
Q: What is the rate of royalty on petroleum produced and saved? A: The royalty is twelve and a half percent of the wellhead value unless a higher rate is provided in the relevant PCA.
Q: How is royalty on petroleum paid to the provinces? A: The royalty is paid in cash or kind to the provinces to the extent of their share of hydrocarbons produced, with the option to choose between cash or kind resting with the province.
Q: When is royalty on petroleum payable? A: Royalty is payable monthly within forty-five days of the end of the month of production in question, with fines applicable for delays.
Q: What happens if royalty obligations remain unfulfilled for two consecutive months? A: The Authority may take action, including the potential revocation of the petroleum right.
Q: Who is responsible for the transportation of royalty petroleum? A: The holder of the petroleum right must arrange for the transportation of the royalty petroleum at the request of the Federal Government and at allowed transportation costs.
Q: What happens if the lease period expires without continued commercial production? A: The Authority may extend or renew the lease period if a committed work program acceptable to the Authority is submitted.
Q: What is required for the re-grant of a lease after the expiry of the lease term? A: The lease holder must agree to pay an amount equivalent to fifteen percent of the wellhead value of petroleum produced to the Federal Government, failing which the Authority may invite bids for the grant of a lease over the same area.
Q: How are bids evaluated for the grant of a lease after the expiry of the lease term? A: Bids are evaluated based on the signature bonus offered.
Q: What must a bidder provide at the time of bidding for a lease? A: A bid bond of ten percent of the offered signature bonus and a development plan must be provided.
Q: Is the Authority obligated to grant an extension for a lease? A: No, the Authority is under no obligation to grant an extension for a lease.
Q: What safety measures must be adopted during field development and production operations? A: Safety measures must include measures to deal with emergencies and protect the environment.
Q: What environmental measures must be included in the development plan? A: The development plan must include measures to prevent adverse environmental impact and for the general protection of the environment.
Q: How must the lease area for a discovery be laid out? A: The lease area must be laid out in straight lines between well-defined points and marked with permanent physical boundaries as far as practically possible.
Q: What must be done before a lease is granted in terms of survey expense? A: The applicant may be required to conduct a topographical survey of the land specified in the lease application at their own expense.
Q: How long can a petroleum exploration license be initially extended for drilling an exploration well in progress? A: The term can be extended for a period approved by the Authority on a case-by-case basis.
Q: What is the rent payable by a license holder for each square kilometre of the license area during the initial term? A: The rent is Rs. 3500.00 for the whole term of five years or Rs. 800.00 per year for each year of the initial term.
Q: What is the rent payable for each renewal or extension of the license? A: The rent is Rs. 5000.00 per square kilometre for each renewal or Rs. 2750.00 per year for each year of each renewal.
Q: How must the rent be paid by the license holder? A: The rent must be paid in advance of the period to which it relates.
Q: What is the maximum period for which a lease can initially be granted? A: A lease can be granted for a period not exceeding twenty-five years.
Q: What conditions apply to the renewal of a lease after the initial term? A: The lease can be renewed for a period not exceeding five years if commercial production is continuing, with a request for renewal submitted at least one year prior to the expiry of the initial term.
Q: Can the lease period be extended if commercial production is not continuing? A: Yes, the Authority may extend or renew the lease period if a committed work program likely to result in commercial production is submitted.
Q: What percentage of the wellhead value of petroleum must be paid to the Federal Government after the expiry of a lease period for renewal or re-grant? A: Fifteen percent of the wellhead value of petroleum produced must be paid to the Federal Government.
Q: What happens if an agreement for lease renewal or re-grant is not concluded? A: The Authority may invite bids from Exploration and Production (E&P) companies for the grant of a lease over the same area.
Q: What is required to be included in a development plan submitted with a lease application? A: The development plan must include information on reserves, development and production proposals, drilling and completion of wells, production and storage installations, transport and delivery facilities, production profiles, safety measures, environmental impact, organizational setup, contingency and abandonment plans, and more.
Q: How long does the Authority have to approve a field development plan? A: The Authority must approve the field development plan within ninety days from the submission of the original or revised plan or further information.
Q: What must a lease holder do after the approval of the development plan? A: The lease holder must carry out development and production in accordance with the plan, subject to approved modifications.
Q: How often must a lease holder update the reserves and production profile? A: The lease holder must update the reserves and production profile every five years from the date of approval of the field development plan.
Q: What must be included in the application for a petroleum right? A: The application must be in writing, accompanied by a fee, five copies of a map delineating the boundaries of the area, and any additional information requested by the Authority.
Q: Can multiple areas be covered by a single petroleum right application? A: No, a separate application must be made for each area unless otherwise permitted by the Authority.
Q: What happens if the petroleum right is held by two or more companies? A: They are jointly and severally liable towards the Federal Government for obligations and liabilities resulting from their activities, and must appoint an operator from amongst them with the Authority’s prior approval.
Q: What is required for the assignment of a petroleum right? A: The assignment requires the previous written approval of the Authority, an application in writing, a fee of one hundred thousand rupees for each assignee, and particulars of the proposed assignee.
Q: What happens if the entitlement to a petroleum right lapses? A: If a petroleum right is not executed within three months after approval, the entitlement lapses unless the delay is not attributable to the fault of the applicant.
Q: What is the notice period for surrendering a petroleum right? A: The holder must give one month’s notice of the intention to surrender the petroleum right.
Q: What must be fulfilled for the surrender of a petroleum right? A: All obligations under the petroleum right must be fulfilled, including obligations pursuant to rule 73, or liquidated damages must be paid.
Q: What happens if only one of several petroleum right holders wishes to surrender? A: The surrendering holder must give one month’s notice, and if the other holders do not acquire the working interest, the surrendering holder must pay liquidated damages and outstanding financial obligations.
Q: How are petroleum right applications for competitive bidding submitted? A: Applications are submitted based on an invitation from the Authority to submit competitive bids, and a notice for competitive bidding is published in national or foreign publications.
Q: What must be included in a petroleum right application for strategic partners? A: Strategic partners are given privileged awards of petroleum rights without competitive bidding, with terms and conditions mutually agreed upon by the Authority and the strategic partner.
Q: What is the fee for a pre-qualification of bidders for lease grants? A: The fee for pre-qualification is not specified, but the process ensures that only technically and financially capable companies are invited to submit bids.
Q: What must each bidder provide during the bidding process for a lease grant? A: Each bidder must provide a bid bond of ten percent of the offered signature bonus and a development plan.
Q: How is the term of the lease determined after the bidding process? A: The lease term is determined based on the period for which commercial production is expected to continue, and the terms and conditions offered during bidding.
Q: What must be included in the bidding documents for lease grants? A: Bidding documents must include the invitation to bid, instructions to bidders, form of bid, form of the lease deed, and technical documents necessary for assessing the hydrocarbon potential.
Q: How are disputes regarding lease terms and conditions resolved? A: Disputes are resolved through negotiations, and if no agreement is reached, the Authority may invite bids for the lease area.
Q: What is the process for the renewal or re-grant of a lease after the expiry of the initial term? A: The process involves agreeing to pay fifteen percent of the wellhead value of petroleum produced, or the Authority inviting bids if no agreement is reached.
Q: What are the consequences of not fulfilling work or other obligations under a petroleum right? A: Liquidated damages must be paid, or undischarged work obligations transferred to another area, or the lease may be canceled, and the petroleum right holder may be blacklisted.
Q: What is the legal requirement for foreign companies establishing a place of business in Pakistan? A: Under section 435 of the Companies Act, 2017, foreign companies must deliver specific documents to the Registrar of Joint Stock Companies within thirty days of establishing a place of business in Pakistan.
Q: What document must be delivered to the Registrar as a certified copy in English? A: A certified copy of the company’s Memorandum and Articles of Association or other instruments defining the Constitution of the Company must be delivered.
Q: What additional information regarding the company’s office must be provided? A: The full address of the registered or principal office of the company must be provided.`
Q: What are the consequences of failing to comply with the Companies Act, 2017 for foreign companies? A: Non-compliance can result in penalties, legal action, and potential revocation of the right to operate in Pakistan.
Q: Can the President of Pakistan divest its working interest under various Petroleum Concession Agreements without attracting working interest owners’ preemption rights concerning the transfer of interest?
A: Under the Pakistan Onshore Petroleum Rules, 2013, and particularly considering the amendments and provisions related to the assignment of petroleum rights, the President of Pakistan, acting on behalf of the Federal Government, faces specific restrictions and procedural requirements regarding the divestment of working interests.
Per Article 12.2 of the Model Joint Operating Agreement (JOA) and similar provisions found in most JOAs, no working interest owner, including the President, may dispose of its working interest to a non-affiliate without first making a preemption offer to other working interest owners. This provision is designed to ensure that existing working interest owners have the opportunity to acquire the interest before it is offered to an outside party.
The only exceptions to this requirement, as stipulated, are if the disposal results from the selling party’s merger, reorganization, consolidation, or the sale of all or substantially all of its assets. Given the unique legal and constitutional status of the President of Pakistan, the position itself cannot be merged, reorganized, consolidated, or sold. Therefore, any direct transfer of the President’s working interest would typically be treated as an assignment requiring compliance with preemption rights.
Moreover, the Pakistan Onshore Petroleum Rules, 2013, particularly under Rule 9, explicitly state that any assignment of a petroleum right or any working interest therein requires prior written approval from the Authority. This rule reinforces the necessity of securing consent from private working interest owners, which consent may not be unreasonably withheld.
If the government holds its interests through an entity like Government Holdings (Private) Limited (GHPL), which is a legal entity capable of mergers, reorganizations, consolidations, or sales, the interests could potentially be transferred as part of such corporate activities. However, such transfers would still need to respect the preemption rights provisions outlined in the applicable JOAs unless an explicit waiver is obtained from the private working interest owners.
Additionally, if the government attempts to circumvent these preemption rights by creating a new government entity to hold the interests temporarily and then selling this new entity, such a move could be construed as an attempt to evade the spirit and intent of the JOA provisions. According to the principles of Pakistani law, including common law principles regarding constructive transactions, such actions would likely be viewed unfavorably and could be challenged as violating the preemption rights of the existing working interest owners.
In conclusion, while there are procedural avenues that might theoretically allow the President to divest working interests without directly triggering preemption rights, these avenues are fraught with legal challenges and potential disputes. Therefore, in practice, the divestment of such interests would necessitate adhering to the established preemption rights to avoid legal complications and ensure compliance with both the Model Joint Operating Agreement and the Pakistan Onshore Petroleum Rules, 2013.
Q: What types of corporate entities are eligible to obtain petroleum rights in Pakistan? A: Any corporate entity not incorporated in a country hostile to Pakistan can obtain petroleum rights.
Q: Is there a limit on the total value of assets a foreign corporate entity can hold while retaining 100% ownership? A: No, there is no ceiling on the total value of assets for foreign investors to retain 100% ownership.
Q: Which acts protect foreign investments in Pakistan? A: Foreign investments are protected under the Foreign Private Investment (Promotion and Protection) Act, 1976, and the Furtherance and Protection of Economic Reforms Act, 1992.
Q: How are corporate entities from countries with bilateral agreements treated in Pakistan? A: They are treated at par with local Pakistani companies.
Q: Name some countries that have bilateral investment promotion and protection agreements with Pakistan. A: Countries include Germany, Sweden, Kuwait, France, South Korea, Netherlands, Uzbekistan, China, Singapore, Tajikistan, Spain, Turkmenistan, UK, Turkey, Portugal, Romania, Malaysia, Switzerland, Kyrgyz Republic, Azerbaijan, Bangladesh, UAE, Iran, Indonesia, Tunisia, Syria, Belarus, Mauritius, Italy, Oman, Sri Lanka, Australia, Japan, Belgium, Thailand, and Qatar.
Entry as an Explorer and Petroleum Rights
Q: Under which rules are new petroleum rights applied for in Pakistan? A: New petroleum rights are applied for under the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013.
Q: What is a Reconnaissance Permit? A: A Reconnaissance Permit allows the holder to conduct reconnaissance surveys and other exploration activities but not to drill.
Q: How long can a Reconnaissance Permit be renewed? A: It can be renewed for one year.
Q: What guarantees the issuance of an exploration license after a Reconnaissance Permit? A: There is no guarantee of an exploration license after a Reconnaissance Permit.
Q: How can petroleum exploration and production companies obtain an Exploration License and Petroleum Concession Agreement? A: They can obtain them by applying for an exploration license, submitting bids in response to invitations, assignment of another company’s interests, purchasing a company holding interests, merging with a company holding interests, or through privatization or divestment of government-owned interests.
Mergers and Acquisitions
Q: How are mergers typically conducted in Pakistan? A: Mergers can either involve one company absorbing another or both companies merging into a new company.
Q: Are tax advantages available to Pakistani companies after a merger denied to foreign companies? A: No, foreign companies can enjoy the same tax advantages post-merger as Pakistani companies.
Q: What does the Foreign Private Investment (Promotion and Protection) Act, 1976, state about tax concessions? A: It allows foreign private investments to benefit from tax concessions and avoids double taxation similar to local investments.
Q: Can tax-exemptible costs incurred by one of the merging companies be deducted by the new company? A: Yes, provided the company that initially incurred the expenses had an income justifying the deduction.
Privatization and Divestment
Q: What has the Government of Pakistan shown interest in privatizing recently? A: The Government has shown interest in privatizing Oil and Gas Development Company Limited (OGDCL).
Q: What was the purpose of the June 1999 invitation by the Privatization Commission? A: To invite parties to act as Financial Advisors for divestment of its working interests and shareholdings in Pakistan Oilfields Limited and Pakistan Petroleum Limited.
Q: When did privatization efforts in Pakistan begin? A: Privatization efforts began in 1988.
Q: What is the role of the Privatization Board of Pakistan? A: It provides a mechanism for continuous and close coordination between different ministries of the Federal Government regarding privatization.
Application and Approval Process
Q: How should applications for petroleum rights be submitted? A: Applications must be submitted in writing to the Authority using the prescribed forms and accompanied by the required fees and maps.
Q: What is required for the submission of an application for a reconnaissance permit? A: A fee of fifty thousand rupees and five copies of a delineated map.
Q: Can multiple petroleum rights be applied for over non-contiguous areas? A: Yes, separate applications must be made for each non-contiguous area.
Q: What is the policy on the assignability of petroleum rights? A: Petroleum rights or any working interest therein cannot be assigned without the prior written approval of the Authority.
Q: What happens if an application for a petroleum right is not executed within three months? A: The entitlement to the petroleum right lapses unless the delay is not attributable to the applicant.
Rights and Obligations of Licence Holders
Q: What exclusive rights does a petroleum exploration license provide? A: It gives the holder the exclusive right to undertake all activities related to reconnaissance and exploration, including drilling for petroleum within the licence area.
Q: What is the initial term for a petroleum exploration license? A: The initial term is five years, divided into two phases: the first three years as phase-I and the next two years as phase-II.
Q: What are the relinquishment requirements for a licence holder at the end of phase-I? A: Thirty percent of the original licence area must be relinquished.
Q: What happens if seismic and drilling services are not readily available? A: The holder may request an extension of the exploration license term, provided proof is submitted to the Authority.
Q: Can the coordinates of the area covered under a licence be revised? A: Yes, upon a written request, the Authority may revise the coordinates if the geological structure extends into an adjoining free area.
Appraisal, Evaluation, and Production
Q: What should a holder of a license do upon making a discovery of petroleum? A: The holder should submit an appraisal program to the Authority and may perform additional work to appraise the discovery.
Q: What is the maximum duration allowed for extended well testing (EWT) during the appraisal phase? A: The duration is determined by the reservoir uncertainty and the proposed investment outlay.
Q: What obligations must be fulfilled during EWT? A: Obligations include compliance with requisite royalty, tax, rentals of the discovery area, and training and social welfare obligations.
Q: When can early commercial production (ECP) commence? A: After the declaration of commerciality and before the grant of a lease, with approval from the Authority.
Q: What is the retention period for a significant natural gas discovery? A: Up to five years, extendable on a case-by-case basis if adequate gas pipeline transportation facilities are not installed or gas markets are not sufficiently developed.
Development and Production Leases
Q: What is the form prescribed for a development and production lease? A: The lease is granted in the form prescribed in Part III of the Second Schedule.
Q: What is the lease period for a petroleum development and production lease? A: The initial lease period can be up to twenty-five years, extendable if commercial production continues.
Q: What must a holder of a lease provide to the Authority after every five years? A: Updated reserves and production profiles.
Q: How is the lease rent determined? A: The lease rent is determined by the Federal Government and paid in advance for the period it relates to.
Q: What is the rate of royalty on petroleum produced and saved? A: Twelve and a half per cent of the wellhead value, unless a higher rate is provided for in the PCA.
Q: How should the royalty be paid? A: Royalty is payable in cash or kind on a monthly basis within forty-five days of the end of the production month.
Q: What happens if royalty payments are delayed? A: They attract a fine at the rate of the London Inter Bank Offer Rate (LIBOR) plus two per cent.
General Provisions
Q: What must be included in a development plan for a lease application? A: Information such as the nature and characterization of reserves, proposals for development and production, safety measures, environmental impact, organizational setup, and a time schedule for activities.
Q: What are the obligations of the holder of a petroleum right regarding transportation of petroleum? A: They have the right to lift and transport petroleum and must obtain approval for constructing their own transportation system if they intend to claim tariffs.
Q: What constitutes “good international oilfield practices”? A: Practices that result in effective and efficient exploration, appraisal, and development of petroleum with minimal environmental impact, following standards from organizations like API, ISO, and others.
Q: What is the role of the Directorate General Petroleum Concessions (DGPC)? A: The DGPC or any appointed officer exercises the powers and performs the functions of the Authority under the rules.
Q: What must a company do if there are changes in its status or experience after applying for a petroleum right? A: Provide details of any changes to the Authority within three months of the request.
Specific Regulations and Requirements
Q: What is the policy on multiple holders of a petroleum right? A: They are jointly and severally liable for obligations and must appoint an operator from among themselves with the Authority’s approval.
Q: Can a petroleum right be surrendered? A: Yes, by giving the Authority one month’s notice and fulfilling all obligations, including payment of liquidated damages if applicable.
Q: What is required for the grant of a permit for reconnaissance surveys? A: Compliance with conditions such as non-exclusivity, submission of survey reports, and payment of rent.
Q: What is the maximum area for which a petroleum exploration license can be granted? A: Twenty-five hundred square kilometres.
Q: How should the area for a petroleum exploration license be delineated? A: It should be compact, bounded by straight lines, and marked with permanent physical boundaries.
Q: What are the requirements for obtaining an extension of a petroleum exploration license? A: Compliance with the work programme and other obligations, submission of a firm exploration well or equivalent work units, and possible additional conditions.
Q: What should a holder of a license do if unable to perform work due to uncontrollable circumstances? A: Request an extension of the license term from the Authority, providing justification and proof of the circumstances.
Q: What are the conditions for assigning a petroleum right? A: Submission of an application with a fee and required particulars of the proposed assignee for the Authority’s approval.
Q: What are the rent rates for a petroleum exploration license during its initial term? A: Three thousand five hundred rupees per square kilometre for five years, or eight hundred rupees per square kilometre per year.
Q: What must be included in a lease application after a discovery of petroleum? A: A notice of declaration of commerciality and a development plan with detailed information on the development and production proposals.
Q: What are the conditions for early commercial production (ECP)? A: Approval from the Authority, submission of a disposal plan for petroleum, and compliance with all obligations applicable to a lease.
Q: How is the reference price for a privatized unit determined? A: It is set following a pre-bid conference and must be approved by the Secretary/Chairman and the Privatization Board of Pakistan.
Q: What are the possible modes of privatization? A: Total disinvestment through competitive bidding, partial disinvestment with or without management control, and sales/lease of assets and property.
Q: How are state-owned enterprises valued for privatization? A: Through thorough study and analysis by independent professional valuators, ensuring the units are sold at the best market value.
Q: What is required in the appointment procedure for a Financial Advisor for non-industrial transactions? A: Development of Terms of Reference, short-listing based on pre-qualification criteria, and preparation of technical and financial evaluation sheets.
Q: What happens during a pre-bid conference for privatization? A: Pre-qualified bidders meet the Financial Advisor and project team, obtain information, and the reference price is set.
Q: What is the process for selecting the highest bidder in privatization? A: Bids are evaluated, the highest bid above the reference price is selected, and if below, a revised offer may be requested.
Q: What are the obligations of a successful bidder in privatization? A: The bidder must manage payment processes, transfer management where applicable, and comply with the sale agreement.
Q: What happens if a petroleum right holder defaults on work or other obligations? A: The Authority may recover due amounts from performance guarantees or cancel a lease granted to the holder.
Q: How are petroleum rights divided into blocks and zones? A: The Authority determines the sizes and shapes of the blocks, and the licensing zones are specified in a map attached as Annexure I.
Q: What is the significance of the “Authority” in the context of petroleum rights? A: The Authority is responsible for the administration and regulation of the rules, granting petroleum rights, and ensuring compliance.
Q: What are the key features of the performance guarantees required for petroleum exploration licenses? A: Irrevocable and unconditional guarantees in forms like bank guarantees, parent company guarantees, or first liens on production or assets.
Q: Can a holder of a petroleum right be allowed to retain the license area required to be relinquished? A: Yes, subject to the commitment to undertake additional work units equivalent to ten percent of the phase-I committed work units.
Q: What is the purpose of a development plan submitted with a lease application? A: To outline proposals for the development and production of petroleum, safety measures, environmental protection, and organizational setup.
Q: What is the role of the Federal Government in the context of petroleum royalties? A: The Federal Government is responsible for receiving royalties, which are then paid to the provinces, and ensuring timely lifting of royalty petroleum.
Q: What are the penalties for late payment of royalties? A: Late payments attract a fine at the rate of LIBOR plus two percent, and continued non-payment may result in revocation of the petroleum right.
Q: What is required for the construction of a transportation system for petroleum? A: Submission of a proposed organization and implementation plan, including design, construction, and route plans for pipeline transportation.
Q: What is the process for renewing a petroleum exploration license? A: The holder must apply at least three months before the expiry of the initial term, fulfill all obligations, and commit to additional work or relinquishment.
Q: What conditions must be met for the extension of a petroleum exploration license for drilling an exploration well in progress? A: The extension is granted for the period required to complete drilling and may include an additional period for post-well studies.
Q: How is the wellhead value of petroleum defined? A: It is the value of petroleum as determined by the rules, typically based on arm’s length sales in the open market.
Q: What is the policy on flaring of gas during appraisal? A: Flaring is not allowed for longer than thirty days if gas infrastructure is located within twenty-five kilometers of the discovery well, except under exceptional circumstances.
Q: What are the criteria for declaring a commercial discovery of petroleum? A: Completion of appraisal and evaluation work, submission of a notice and report to the Authority, and compliance with specified conditions.
Q: What are the provisions for relinquishing a petroleum right? A: The holder must provide notice, fulfill all obligations, or pay liquidated damages, and the Authority must approve the surrender.
Q: What happens if a holder of a petroleum right fails to fulfill the work program? A: They must pay liquidated damages or request the transfer of undischarged work obligations to another area, subject to the Authority’s approval.
Q: How is the rent for a petroleum exploration license adjusted annually? A: The rent may be adjusted by reference to an appropriate index to ensure it retains its value in real terms.
Q: What is the term of a petroleum development and production lease? A: The initial term can be up to twenty-five years, with the possibility of extension if commercial production continues.
Q: What are the conditions for granting a single lease covering multiple discovery areas? A: The discovery areas must be juxtaposed vertically, and the lease is granted based on the larger discovery area.
Q: What is the process for re-granting a lease after its expiry? A: The lease can be renewed if the holder agrees to pay fifteen percent of the wellhead value to the Federal Government, or bids may be invited for the lease area.
Q: What are the responsibilities of a Financial Advisor in the privatization process? A: Conducting technical, legal, and commercial due diligence, valuation of the unit, recommending pre-sale restructuring, and developing a marketing strategy.
Q: What should be included in the bidding documents for privatization? A: Invitation to bid, instructions to bidders, form of bid, form of the lease deed, and technical documents relating to the lease area.
Q: What is the procedure for handling bids that fall below the reference price in privatization? A: The highest bidder may be asked to submit a revised offer, which is opened in front of the Privatization Commission’s members.
Q: How are successful bidders managed in the privatization process? A: The Privatization Commission manages the payment process, execution of the sale agreement, and the transfer of management and operational control to the successful bidder.
Q: What should a company do if its petroleum right is revoked due to non-fulfillment of obligations? A: The company should address the breach, fulfill its obligations, or provide replacement guarantees to the satisfaction of the Authority to mitigate the default.
Q: What are the potential penalties for a petroleum right holder failing to pay rent or fulfill social welfare obligations? A: The guarantees submitted by the holder may not be returned until all obligations are discharged, and liquidated damages may be imposed.
Q: How does the Authority ensure transparency in the privatization bidding process? A: The bidding process is open to the media and press, and all procedures are conducted transparently to ensure fairness and equity.
Q: What are the key factors considered in evaluating bids for privatization? A: Factors include the signature bonus offered, technical and financial capability of the bidders, and their track record in managing similar operations.
Q: What are the responsibilities of the holder of a lease regarding the environment? A: The holder must adopt safety measures, deal with emergencies, and protect the environment during development and production operations.
Q: What is the policy on retaining gas discoveries in Pakistan? A: Significant gas discoveries may be retained for up to five years, with possible extensions if gas infrastructure or markets are not sufficiently developed.
Q: How is the payment of royalties structured in the event of non-compliance? A: Non-compliance can lead to fines, revocation of petroleum rights, or other actions deemed appropriate by the Authority.
Q: What are the obligations of a petroleum right holder during the relinquishment of the license area? A: The holder must fulfill all obligations or pay liquidated damages and provide necessary notices to the Authority.
Q: How is the shape and size of a license area determined for petroleum exploration? A: The area must be compact, bounded by straight lines, and marked with permanent physical boundaries, as far as practically possible.
Q: What is required for the submission of maps with an application for a petroleum right? A: The maps must delineate the boundaries of the area applied for and be taken from relevant Survey of Pakistan maps.
Q: What are the conditions for the assignment of petroleum rights? A: The assignment requires prior written approval from the Authority and submission of necessary particulars and fees.
Q: What is the policy on mergers of companies outside Pakistan concerning tax advantages? A: Mergers involving foreign companies are entitled to the same tax advantages as Pakistani companies, provided the conditions of the merger are met.
Q: What measures are taken to ensure the market value of privatized units is realistic? A: Independent professional valuators conduct thorough studies and analyses to ensure units are sold at the best market value, and the valuation provides benchmarks for comparing bids.
Q: What types of corporate entities are eligible to obtain petroleum rights in Pakistan? A: Any corporate entity not incorporated in a country hostile to Pakistan can obtain petroleum rights.
Q: Is there a limit on the total value of assets a foreign corporate entity can hold while retaining 100% ownership? A: No, there is no ceiling on the total value of assets for foreign investors to retain 100% ownership.
Q: Which acts protect foreign investments in Pakistan? A: Foreign investments are protected under the Foreign Private Investment (Promotion and Protection) Act, 1976, and the Furtherance and Protection of Economic Reforms Act, 1992.
Q: How are corporate entities from countries with bilateral agreements treated in Pakistan? A: They are treated at par with local Pakistani companies.
Q: Name some countries that have bilateral investment promotion and protection agreements with Pakistan. A: Countries include Germany, Sweden, Kuwait, France, South Korea, Netherlands, Uzbekistan, China, Singapore, Tajikistan, Spain, Turkmenistan, UK, Turkey, Portugal, Romania, Malaysia, Switzerland, Kyrgyz Republic, Azerbaijan, Bangladesh, UAE, Iran, Indonesia, Tunisia, Syria, Belarus, Mauritius, Italy, Oman, Sri Lanka, Australia, Japan, Belgium, Thailand, and Qatar.
Entry as an Explorer and Petroleum Rights
Q: Under which rules are new petroleum rights applied for in Pakistan? A: New petroleum rights are applied for under the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013.
Q: What is a Reconnaissance Permit? A: A Reconnaissance Permit allows the holder to conduct reconnaissance surveys and other exploration activities but not to drill.
Q: How long can a Reconnaissance Permit be renewed? A: It can be renewed for one year.
Q: What guarantees the issuance of an exploration license after a Reconnaissance Permit? A: There is no guarantee of an exploration license after a Reconnaissance Permit.
Q: How can petroleum exploration and production companies obtain an Exploration License and Petroleum Concession Agreement? A: They can obtain them by applying for an exploration license, submitting bids in response to invitations, assignment of another company’s interests, purchasing a company holding interests, merging with a company holding interests, or through privatization or divestment of government-owned interests.
Mergers and Acquisitions
Q: How are mergers typically conducted in Pakistan? A: Mergers can either involve one company absorbing another or both companies merging into a new company.
Q: Are tax advantages available to Pakistani companies after a merger denied to foreign companies? A: No, foreign companies can enjoy the same tax advantages post-merger as Pakistani companies.
Q: What does the Foreign Private Investment (Promotion and Protection) Act, 1976, state about tax concessions? A: It allows foreign private investments to benefit from tax concessions and avoids double taxation similar to local investments.
Q: Can tax-exemptible costs incurred by one of the merging companies be deducted by the new company? A: Yes, provided the company that initially incurred the expenses had an income justifying the deduction.
Privatization and Divestment
Q: What has the Government of Pakistan shown interest in privatizing recently? A: The Government has shown interest in privatizing Oil and Gas Development Company Limited (OGDCL).
Q: What was the purpose of the June 1999 invitation by the Privatization Commission? A: To invite parties to act as Financial Advisors for divestment of its working interests and shareholdings in Pakistan Oilfields Limited and Pakistan Petroleum Limited.
Q: When did privatization efforts in Pakistan begin? A: Privatization efforts began in 1988.
Q: What is the role of the Privatization Board of Pakistan? A: It provides a mechanism for continuous and close coordination between different ministries of the Federal Government regarding privatization.
Application and Approval Process
Q: How should applications for petroleum rights be submitted? A: Applications must be submitted in writing to the Authority using the prescribed forms and accompanied by the required fees and maps.
Q: What is required for the submission of an application for a reconnaissance permit? A: A fee of fifty thousand rupees and five copies of a delineated map.
Q: Can multiple petroleum rights be applied for over non-contiguous areas? A: Yes, separate applications must be made for each non-contiguous area.
Q: What is the policy on the assignability of petroleum rights? A: Petroleum rights or any working interest therein cannot be assigned without the prior written approval of the Authority.
Q: What happens if an application for a petroleum right is not executed within three months? A: The entitlement to the petroleum right lapses unless the delay is not attributable to the applicant.
Rights and Obligations of Licence Holders
Q: What exclusive rights does a petroleum exploration license provide? A: It gives the holder the exclusive right to undertake all activities related to reconnaissance and exploration, including drilling for petroleum within the licence area.
Q: What is the initial term for a petroleum exploration license? A: The initial term is five years, divided into two phases: the first three years as phase-I and the next two years as phase-II.
Q: What are the relinquishment requirements for a licence holder at the end of phase-I? A: Thirty percent of the original licence area must be relinquished.
Q: What happens if seismic and drilling services are not readily available? A: The holder may request an extension of the exploration license term, provided proof is submitted to the Authority.
Q: Can the coordinates of the area covered under a licence be revised? A: Yes, upon a written request, the Authority may revise the coordinates if the geological structure extends into an adjoining free area.
Appraisal, Evaluation, and Production
Q: What should a holder of a license do upon making a discovery of petroleum? A: The holder should submit an appraisal program to the Authority and may perform additional work to appraise the discovery.
Q: What is the maximum duration allowed for extended well testing (EWT) during the appraisal phase? A: The duration is determined by the reservoir uncertainty and the proposed investment outlay.
Q: What obligations must be fulfilled during EWT? A: Obligations include compliance with requisite royalty, tax, rentals of the discovery area, and training and social welfare obligations.
Q: When can early commercial production (ECP) commence? A: After the declaration of commerciality and before the grant of a lease, with approval from the Authority.
Q: What is the retention period for a significant natural gas discovery? A: Up to five years, extendable on a case-by-case basis if adequate gas pipeline transportation facilities are not installed or gas markets are not sufficiently developed.
Development and Production Leases
Q: What is the form prescribed for a development and production lease? A: The lease is granted in the form prescribed in Part III of the Second Schedule.
Q: What is the lease period for a petroleum development and production lease? A: The initial lease period can be up to twenty-five years, extendable if commercial production continues.
Q: What must a holder of a lease provide to the Authority after every five years? A: Updated reserves and production profiles.
Q: How is the lease rent determined? A: The lease rent is determined by the Federal Government and paid in advance for the period it relates to.
Q: What is the rate of royalty on petroleum produced and saved? A: Twelve and a half per cent of the wellhead value, unless a higher rate is provided for in the PCA.
Q: How should the royalty be paid? A: Royalty is payable in cash or kind on a monthly basis within forty-five days of the end of the production month.
Q: What happens if royalty payments are delayed? A: They attract a fine at the rate of the London Inter Bank Offer Rate (LIBOR) plus two per cent.
General Provisions
Q: What must be included in a development plan for a lease application? A: Information such as the nature and characterization of reserves, proposals for development and production, safety measures, environmental impact, organizational setup, and a time schedule for activities.
Q: What are the obligations of the holder of a petroleum right regarding transportation of petroleum? A: They have the right to lift and transport petroleum and must obtain approval for constructing their own transportation system if they intend to claim tariffs.
Q: What constitutes “good international oilfield practices”? A: Practices that result in effective and efficient exploration, appraisal, and development of petroleum with minimal environmental impact, following standards from organizations like API, ISO, and others.
Q: What is the role of the Directorate General Petroleum Concessions (DGPC)? A: The DGPC or any appointed officer exercises the powers and performs the functions of the Authority under the rules.
Q: What must a company do if there are changes in its status or experience after applying for a petroleum right? A: Provide details of any changes to the Authority within three months of the request.
Specific Regulations and Requirements
Q: What is the policy on multiple holders of a petroleum right? A: They are jointly and severally liable for obligations and must appoint an operator from among themselves with the Authority’s approval.
Q: Can a petroleum right be surrendered? A: Yes, by giving the Authority one month’s notice and fulfilling all obligations, including payment of liquidated damages if applicable.
Q: What is required for the grant of a permit for reconnaissance surveys? A: Compliance with conditions such as non-exclusivity, submission of survey reports, and payment of rent.
Q: What is the maximum area for which a petroleum exploration license can be granted? A: Twenty-five hundred square kilometres.
Q: How should the area for a petroleum exploration license be delineated? A: It should be compact, bounded by straight lines, and marked with permanent physical boundaries.
Q: What are the requirements for obtaining an extension of a petroleum exploration license? A: Compliance with the work programme and other obligations, submission of a firm exploration well or equivalent work units, and possible additional conditions.
Q: What should a holder of a license do if unable to perform work due to uncontrollable circumstances? A: Request an extension of the license term from the Authority, providing justification and proof of the circumstances.
Q: What are the conditions for assigning a petroleum right? A: Submission of an application with a fee and required particulars of the proposed assignee for the Authority’s approval.
Q: What are the rent rates for a petroleum exploration license during its initial term? A: Three thousand five hundred rupees per square kilometre for five years, or eight hundred rupees per square kilometre per year.
Q: What must be included in a lease application after a discovery of petroleum? A: A notice of declaration of commerciality and a development plan with detailed information on the development and production proposals.
Q: What are the conditions for early commercial production (ECP)? A: Approval from the Authority, submission of a disposal plan for petroleum, and compliance with all obligations applicable to a lease.
Q: How is the reference price for a privatized unit determined? A: It is set following a pre-bid conference and must be approved by the Secretary/Chairman and the Privatization Board of Pakistan.
Q: What are the possible modes of privatization? A: Total disinvestment through competitive bidding, partial disinvestment with or without management control, and sales/lease of assets and property.
Q: How are state-owned enterprises valued for privatization? A: Through thorough study and analysis by independent professional valuators, ensuring the units are sold at the best market value.
Q: What is required in the appointment procedure for a Financial Advisor for non-industrial transactions? A: Development of Terms of Reference, short-listing based on pre-qualification criteria, and preparation of technical and financial evaluation sheets.
Q: What happens during a pre-bid conference for privatization? A: Pre-qualified bidders meet the Financial Advisor and project team, obtain information, and the reference price is set.
Q: What is the process for selecting the highest bidder in privatization? A: Bids are evaluated, the highest bid above the reference price is selected, and if below, a revised offer may be requested.
Q: What are the obligations of a successful bidder in privatization? A: The bidder must manage payment processes, transfer management where applicable, and comply with the sale agreement.
Q: What happens if a petroleum right holder defaults on work or other obligations? A: The Authority may recover due amounts from performance guarantees or cancel a lease granted to the holder.
Q: How are petroleum rights divided into blocks and zones? A: The Authority determines the sizes and shapes of the blocks, and the licensing zones are specified in a map attached as Annexure I.
Q: What is the significance of the “Authority” in the context of petroleum rights? A: The Authority is responsible for the administration and regulation of the rules, granting petroleum rights, and ensuring compliance.
Q: What are the key features of the performance guarantees required for petroleum exploration licenses? A: Irrevocable and unconditional guarantees in forms like bank guarantees, parent company guarantees, or first liens on production or assets.
Q: Can a holder of a petroleum right be allowed to retain the license area required to be relinquished? A: Yes, subject to the commitment to undertake additional work units equivalent to ten percent of the phase-I committed work units.
Q: What is the purpose of a development plan submitted with a lease application? A: To outline proposals for the development and production of petroleum, safety measures, environmental protection, and organizational setup.
Q: What is the role of the Federal Government in the context of petroleum royalties? A: The Federal Government is responsible for receiving royalties, which are then paid to the provinces, and ensuring timely lifting of royalty petroleum.
Q: What are the penalties for late payment of royalties? A: Late payments attract a fine at the rate of LIBOR plus two percent, and continued non-payment may result in revocation of the petroleum right.
Q: What is required for the construction of a transportation system for petroleum? A: Submission of a proposed organization and implementation plan, including design, construction, and route plans for pipeline transportation.
Q: What is the process for renewing a petroleum exploration license? A: The holder must apply at least three months before the expiry of the initial term, fulfill all obligations, and commit to additional work or relinquishment.
Q: What conditions must be met for the extension of a petroleum exploration license for drilling an exploration well in progress? A: The extension is granted for the period required to complete drilling and may include an additional period for post-well studies.
Q: How is the wellhead value of petroleum defined? A: It is the value of petroleum as determined by the rules, typically based on arm’s length sales in the open market.
Q: What is the policy on flaring of gas during appraisal? A: Flaring is not allowed for longer than thirty days if gas infrastructure is located within twenty-five kilometers of the discovery well, except under exceptional circumstances.
Q: What are the criteria for declaring a commercial discovery of petroleum? A: Completion of appraisal and evaluation work, submission of a notice and report to the Authority, and compliance with specified conditions.
Q: What are the provisions for relinquishing a petroleum right? A: The holder must provide notice, fulfill all obligations, or pay liquidated damages, and the Authority must approve the surrender.
Q: What happens if a holder of a petroleum right fails to fulfill the work program? A: They must pay liquidated damages or request the transfer of undischarged work obligations to another area, subject to the Authority’s approval.
Q: How is the rent for a petroleum exploration license adjusted annually? A: The rent may be adjusted by reference to an appropriate index to ensure it retains its value in real terms.
Q: What is the term of a petroleum development and production lease? A: The initial term can be up to twenty-five years, with the possibility of extension if commercial production continues.
Q: What are the conditions for granting a single lease covering multiple discovery areas? A: The discovery areas must be juxtaposed vertically, and the lease is granted based on the larger discovery area.
Q: What is the process for re-granting a lease after its expiry? A: The lease can be renewed if the holder agrees to pay fifteen percent of the wellhead value to the Federal Government, or bids may be invited for the lease area.
Q: What are the responsibilities of a Financial Advisor in the privatization process? A: Conducting technical, legal, and commercial due diligence, valuation of the unit, recommending pre-sale restructuring, and developing a marketing strategy.
Q: What should be included in the bidding documents for privatization? A: Invitation to bid, instructions to bidders, form of bid, form of the lease deed, and technical documents relating to the lease area.
Q: What is the procedure for handling bids that fall below the reference price in privatization? A: The highest bidder may be asked to submit a revised offer, which is opened in front of the Privatization Commission’s members.
Q: How are successful bidders managed in the privatization process? A: The Privatization Commission manages the payment process, execution of the sale agreement, and the transfer of management and operational control to the successful bidder.
Q: What should a company do if its petroleum right is revoked due to non-fulfillment of obligations? A: The company should address the breach, fulfill its obligations, or provide replacement guarantees to the satisfaction of the Authority to mitigate the default.
Q: What are the potential penalties for a petroleum right holder failing to pay rent or fulfill social welfare obligations? A: The guarantees submitted by the holder may not be returned until all obligations are discharged, and liquidated damages may be imposed.
Q: How does the Authority ensure transparency in the privatization bidding process? A: The bidding process is open to the media and press, and all procedures are conducted transparently to ensure fairness and equity.
Q: What are the key factors considered in evaluating bids for privatization? A: Factors include the signature bonus offered, technical and financial capability of the bidders, and their track record in managing similar operations.
Q: What are the responsibilities of the holder of a lease regarding the environment? A: The holder must adopt safety measures, deal with emergencies, and protect the environment during development and production operations.
Q: What is the policy on retaining gas discoveries in Pakistan? A: Significant gas discoveries may be retained for up to five years, with possible extensions if gas infrastructure or markets are not sufficiently developed.
Q: How is the payment of royalties structured in the event of non-compliance? A: Non-compliance can lead to fines, revocation of petroleum rights, or other actions deemed appropriate by the Authority.
Q: What are the obligations of a petroleum right holder during the relinquishment of the license area? A: The holder must fulfill all obligations or pay liquidated damages and provide necessary notices to the Authority.
Q: How is the shape and size of a license area determined for petroleum exploration? A: The area must be compact, bounded by straight lines, and marked with permanent physical boundaries, as far as practically possible.
Q: What is required for the submission of maps with an application for a petroleum right? A: The maps must delineate the boundaries of the area applied for and be taken from relevant Survey of Pakistan maps.
Q: What are the conditions for the assignment of petroleum rights? A: The assignment requires prior written approval from the Authority and submission of necessary particulars and fees.
Q: What is the policy on mergers of companies outside Pakistan concerning tax advantages? A: Mergers involving foreign companies are entitled to the same tax advantages as Pakistani companies, provided the conditions of the merger are met.
Q: What measures are taken to ensure the market value of privatized units is realistic? A: Independent professional valuators conduct thorough studies and analyses to ensure units are sold at the best market value, and the valuation provides benchmarks for comparing bids.
