Petroleum Division set to clear questionable ENI acquisition deal
Special Report
Ministry of Energy has finally completed the process required for the questionable transfer of the assets of Eni Pakistan Limited to a new company PIOGCL at a rate of US$ 16 million.
Sources said that the Federal Board of Revenue (FBR) had granted No Objection Certificate (NOC) in this regard.
Following this, Eni Pakistan Limited has requested to release its bank guarantees.
According to sources, Energy Ministry has completed the process required for the transfer of Eni’s assets to PIOGCL.
However, officials said that the process of the energy ministry completed has raised questions that required the necessary checking of the value of the assets of Eni Pakistan Limited.
They said though Eni had deposited withholding tax of Rs 39 crore to the FBR, however, the value of Eni’s assets should reportedly stand between the US $ 90-110 million.
Transfer of Eni assets to PIOGCL at an under-valued rate of US $ 16 may be to save its skin from the taxes, said sources.
Energy Experts said it is that the transfer of the assets of an exploration and production (E&P) company (Eni)whose gas production is 85 million cubic feet per day (MMCFD) of gas and crude oil production is 107 barrels per day and it has drilled 11 wells in Sindh province, is being sold at a rate of US$ 16 million to an inexperienced company (PIOGCL).
Therefore, experts believed that it was an undervalued price and government should have conducted due diligence on assets.
They added that the drilling cost of a well in the Sind area usually stands at US$ 05 million.
As per rules, it is necessary for each E&P company to secure the experience of operatorship before entering into the field of exploration and production in the country.
The sources also said that the matter pertaining to the transfer of assets of Eni to a new company (PIOGCL) should be forwarded to the federal cabinet as it is the competent forum to resolve such matters.
And, petroleum division should avoid taking a solo flight in the matter pertaining to the transfer of Eni’s assets to PIGOCL.
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According to sources, the tax liability of the Eni is USD118 million and the Directorate General of Petroleum Concession (DGPC) does not have any information that such a company or former employees of Eni can take the burden of the enormous tax liability of Eni Pakistan Limited.
Eni Pakistan Limited and PIOGCL had earlier signed a Sale Purchase Agreement (SPA) on March 08, 2021, under which the entire share capital of ENI was sold to PIOGCL.
And, the ownership of principal shares of Eni has been equally divided between the former employees of Eni Pak Ltd, with as directors of the new venture, and Hub Power Company Limited (‘Hubco’), an IPP (Independent Power Producing) company that mainly specializes in installation and management of power plants throughout various regions across the country.
It is pertinent to mention that Pakistan LNG Limited (PLL) PLL and ENI signed a 15-year term agreement in May 2017 under which ENI was to provide an LNG cargo per month up to 2032.
Under the deal, ENI was to provide per month cargo at 11.6247% of the Brent for the first two years, 11.95% for the following two years, and 12.14% for the remaining 11 years. ENI is bound to provide to Pakistan LNG Limited a total of 180 cargoes in 15 years at the PGPL terminal moored in Port Qasim.
However, ENI defaulted on its commitment and backed out of its term LNG cargos on more than one occasion which had further worsened the gas crisis in the country.
PIOGCL says it has adequate funding
Whereas PIOGCL management said that company is owned by Hub Power Holdings Limited (“HPHL”) and a significant number of employees of Eni Pakistan Limited. Adequate funding has been arranged for meeting the purchase consideration obligation and also for supporting the future exploration and production operations of Eni Pakistan.
Additional funding is currently not envisaged as the producing gas fields are generating sufficient revenues for financing the ongoing operations. However, if a need arises in the future to raise funds, then the Board of Directors of PIOGCL will have the option to generate funding either through debt/bonds from the banks/financial market or by raising additional capital through a rights issue of shares.
It further said that since the transaction includes partial employee ownership of the acquiring company (PIOGCL) almost the entire current management and operational structure of Eni Pakistan Limited will remain intact.
There are 18 staff members who have Masters in Engineering, Geology, and Geophysics. In addition, there are 43 staff members who have Bachelors in the same discipline, company management said.
The key management positions are occupied by individuals having experience in the range of 20 – 30 years in their field of expertise
Officials of the company said that all Eni companies are up to date with their tax filings with FBR. In respect of any dispute with FBR, each of the three companies are at various stages of appeal, as permitted under the law.
Adequate provision has been made in the financial statements of Eni companies in accordance with management assessment of any additional tax payment that may become due as an outcome of the ongoing appeals. FBR has reviewed this transaction in detail and satisfied itself.
They further said that PIOGCL executed SPA for the acquisition of Eni companies after being declared successful bidder as an outcome of competitive bidding.
Spokesperson Ministry of Petroleum said that Ministry follows all applicable rules and regulations for all matters under its domain and same will be done in this scenario.
