Capital flight: Australia’s BHP plans to pull out of Pakistan

ISLAMABAD: In an apparent disregard for the incentives in the new petroleum policy, foreign oil and gas exploration companies continue to pull out of the country. In the latest episode, Australia-based oil and gas firm BHP, a major player in the international petroleum industry, has planned to wind up operations and sell assets in Pakistan, says an official. Recently, Canada-based Asia Resources Oil Limited has also decided to divest itself of all its assets in Pakistan. State-owned Pakistan Petroleum Limited (PPL) is planning to acquire shares in three of these fields containing reserves of tight and shale gas. Already, several foreign oil and gas exploration companies like BP, Petronas and Niko Resources have wrapped up their businesses in Pakistan.

According to the official, BHP has been operating on a small scale in the country and working as a joint venture partner in the Zamzama field. The company’s decision to pack up comes on the back of its global policy changes and has nothing to do with policies of the Pakistan government. However, another official laid the blame on what he said were poor policies and hurdles created by different institutions that discouraged foreign firms from investing in the country. “Actions taken by the National Accountability Bureau (NAB) and Federal Board of Revenue (FBR) have driven away foreign investors,” he said. Dewan Petroleum, which faced action following a dispute over wellhead gas price, had stopped pouring further capital into the oil and gas sector, he said. In an effort to woo investors, the Ministry of Petroleum and Natural Resources conducted roadshows abroad to highlight the new petroleum policy and market 50 exploration blocks. However, in the subsequent offer, state-run Pakistani exploration companies including Oil and Gas Development Company (OGDC) and PPL won majority of the blocks totalling 39 and no foreign firm submitted bids. “Foreign investors hesitated to make offers due to bureaucratic hurdles and poor law and order situation,” the official said. Ministry comes into action Reacting to BHP’s move, the Ministry of Petroleum was trying to convince the company to change its mind and instead of withdrawing it should expand footprints in Pakistan, sources said. BHP is a major international player but its activities in Pakistan are limited to Zamzama field only. The government is now offering BHP to assess the possibility of entering into joint ventures with OGDC and PPL. BHP, headquartered in Melbourne and listed on stock exchanges in Australia, London and New York, has been working in the upstream petroleum sector of Pakistan since 1995. It discovered Zamzama gas field in April 1998 in the Dadu exploration block along with joint-venture partners Eni (formerly Lasmo with a share of 17.75%), Pakpel (9.375%), Pakpel-2 (9.375%) and Government Holdings Private Limited (25%). BHP was the operator of the field with a 38.5% stake. The government also granted development and production lease for 20 years for the Zamzama field with effect from April 2, 2002. At present, BHP is supplying 273 million cubic feet of gas per day to Sui Southern Gas Company and Sui Northern Gas Pipelines and is also producing 1,288 barrels of crude oil per day. Published in The Express Tribune, April 19th, 2014.