PD opposes divestment of OGDC, PPL’s shares
Aftab Ahmed
The Petroleum Division has opposed divesting shares of two state-run companies-Pakistan Petroleum Limited (PPL) and Oil and Gas Development Company Limited (OGDCL) through a public offering.
The cabinet has already decided to divest shares of PPL and OGDCL through a public offering.
The federal government in August last year had approved to offload a 7% stake in Oil and Gas Development Company (OGDC) and 10% in Pakistan Petroleum Limited (PPL).
The Finance Ministry said the Cabinet Committee on Privatization (CCoP) had approved to offer 7 percent shares in OGDC” through a public offering and had directed to start the process of appointing a financial adviser. The CCoP also approved the provision of up to 10 percent government shares in PPL through public offerings.
Now, the privatization commission had informed the cabinet committee on privatization that the Petroleum division had opposed offering shares of PPL and OGDCL through a public offering.
The CCoP had noted that the cabinet had already ratified its decision but the petroleum division had objected it now. The cabinet body had noted that the petroleum division had challenged the decision of the federal cabinet.
The OGDCL does not bear debt and contributes Rs.160 billion per annum to the national exchequer. The government holds 74.97% interest while there 10.05% with Benazir Employees Stock Option Scheme. OGDCL produces 47% of Oil and 29% of Gas out of the total country’s production during 2019-20.
However, this company is facing now a circular debt issue due to the inability of power plants, refineries, and gas companies to pay dues. Sui Southern Gas Company (SSGC) has been a major defaulter.
Soon after the decision of the government to divest shares of OGDCL through a public offering, the market manipulation had started that led to a sharp fall in the share price of the company.
There had been manipulation of shares of OGDCL after Privatization Division selected a financial advisor to divest its shares. The manipulation of shares had raised serious concerns for the Petroleum Division and Finance Ministry.
Following this situation, the Petroleum Division had written a letter to Privatization Division to offer shares of OGDCL to the strategic investors who would also make investments in the exploration of more wells.
Now, it had come to notice of the CCoP that the petroleum division had opposed the divestment of shares of OGDCL and PPL.
Officials say that this was not an ideal time for offering shares of OGDCL due to the lower price of its price. The price of OGDC’s share stood at above $2 in 2014 that had fallen to $0.60 in the recent past.
The total shares of OGDCL are 4.3 billion. Based on these shares, the value of the company had faced a dip of over $6 billion. This shows that the company had not performed well during the last few years which led to falling in its share’s value.
In addition to other factors, the governments have played a key role in pushing the company into the red zone due to the appointment of its board on a political basis. The board members have been involved in making questionable appointments.
The former board of OGDCL had made controversial appointments on key positions and the National Accountability Bureau (NAB) had taken action.
The PPL had also faced a sharp decline in its share price. Therefore, experts say that it was also not an ideal time for the government to divest its shares.
