Petroleum division wants NAB reined in

ISLAMABAD: Reporting the petroleum sector’s circular debt at about Rs1.2 trillion, the petroleum division on Wednesday said the National Accountability Bureau’s (NAB) “brutal act” was causing a heavy cost to the economy and needed to be reined in to let the country achieve its potential.

Petroleum Secretary Dr Arshad Mahmood, while testifying before the Senate Standing Committee on Petroleum, said NAB had dispossessed the government officials of the initiative to take decisions.

“The countries cannot be run like this” but required initiative and enthusiasm, he said, adding that “we are now pitching the proposal that commercial matters be examined by some commercial forum but not NAB on the first cough”.

Giving a few examples, the secretary said the government was unable to utilise 200 million cubic feet per day (mmcfd) of spare capacity at the LNG terminals because of fear of NAB.

“This gas can generate 1,200mw of electricity but we are unable to handle it,” he said, adding that as a solution, the government could facilitate some private company like K-Electric to use the surplus capacity and conclude the deal without any government guarantee. “I am getting its due diligence done,” he said.

Also, some power company generated electricity, sold it to the public-sector firm and NAB took cognisance of the matter. Forty others in the line become reluctant to do business, Dr Mahmood said, adding that an officer was called by NAB, continued with regular visits and others stopped taking decisions.

“Investors are squirming,” he said, adding that “what the listed companies have to do with public procurement rules but they are also afraid of NAB because it intervenes”.

The petroleum secretary said because of limited resources, Pakistan National Shipping Corporation (PNSC) required second hand vessels which were not allowed under the Public Procurement Regulatory Authority (PPRA) rules and any out of box initiative could attract NAB inquiries.

Most of the senators agreed that the accountability watchdog was causing more damage to the country’s business environment and economy than the benefits it was envisaged for.

They asked the petroleum secretary to come up with recommendations for a way out, which they would be ready to take to the parliament for a solution.

Dr Saadia Abbasi said such decisions had to be taken by the government but it was absolutely clear that NAB had impacted governance and working of the government as it maligned businesses. She said there were many officers sitting in the meeting of the standing committee who had been made approvers.

Responding to senators’ questions, the secretary said the officers then think that the loss was going into the economy, why should they suffer or try to look for other avenues and forums to cool down rulings.

“Difficult decisions require ownership,” he said, explaining that a cabinet committee on institutional reforms that was earlier led by Prime Minister’s Adviser Dr Ishrat Hussain and now federal minister Shafqat Mahmood was looking for the option of finding out some institutional solution so that economic decisions were taken on the principle of ‘value for money’.

The secretary told the committee that receivable of the petroleum companies had gone beyond Rs1.178 trillion and he had been assigned by the finance minister to prepare a settlement plan.

He said some receivables and payables would have to be settled through book adjustment and others through cash payment or other instruments.

These include Rs400bn of Oil and Gas Development Company Limited (OGDCL) held up funds with various entities, Rs357bn of Pakistan State Oil (PSO), refineries of Rs57bn, Rs78bn of taxes and Rs132bn of PHPL.

He said most of the international petroleum exploration and development companies had left the country due to various factors, including policy reasons, security and their global factors. He told the committee that countries which had provided 2D and 3D surveys with public expense had been successful in major discoveries.

He said when international companies contract exploration blocks and go for reconnaissance, 2D and 3D surveys, they seldom share data with the government and neither go for exploration nor relinquish contracts due to their global interests.

Managing Directors of Sui southern and northern gas companies informed the committee that gas reserves were depleting and they were importing the commodity which was a big challenge. The committee was told that UFG loss of SNGPL was 9pc while SSGC has 14pc. However, they were trying to reduce the UFG losses. In 2017 the losses in Karak gas field were 37pc which have been reduced to 8pc.

The petroleum secretary told the committee that the White Pipeline Project would be completed soon and from September 1, it would start supply of petrol and HSD. Initially 35 per cent of the total oil requirement will be supplied through the pipeline which would render 10,000 to 15,000 tankers redundant. The pipeline will reduce the cost of fuel transportation, he added.

The committee was informed that the establishment of refinery cost $10bn to $15bn. The exiting refineries in Pakistan require upgradation, which will cost $3.5bn. However 70pc of the amount will be paid by the refineries and the remaining 30pc was being taken care through policy measures covered in the budget 2021-22. The upgradation will increase production and generate job opportunities.