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Ministry of Petroleum and Natural Resources: Rationalisation of institutions – VI

During the last decade, with years of poor governance, the institutions of Pakistanis have suffered and have recorded a significant decline with some being on the verge of collapse. There is a need to carry out due diligence and rationalisation of institutions to restore them to their rightful position. The most important are the ones that have the policymaking responsibilities – the foremast being the ministries under the federal government and the subsidiaries operating under them. The conduct of this segment of the state machinery matters the most for the economic and social welfare of the state. Much of public money is being spent to sustain them while their deliverables are neither transparent nor measureable. There is a need to do both.

My previous columns on the subject focused on the overall dynamics of the federal government’s ministerial structure: Ministry of Science & Technology, Ministry of Information & Technology, Ministry of National Food Security and Research and the Federal Ministry of Water and Power. In continuation to the same, the Ministry under focus in this column is the Ministry of Petroleum and Natural Resources.

The Ministry of Petroleum & Natural Resources is responsible for ensuring availability and security of sustainable supply of oil and gas for economic development and strategic requirements of Pakistan and to co-ordinate development of natural resources of energy and minerals. The ministry presides over the largest assets of the nation in terms of revenue and strategic value.

The wings directly operating under the ministry are Directorate General of Gas, Directorate General of LNG & LPG, Directorate General of Oil, Directorate General of Petroleum Concession, Human Resource and Administration Wing and International Joint Venture Wing. Much of them are stuck in the past with business as usual.

The autonomous organisations under the ministry are: Geological Survey of Pakistan, which has a mandate to advance the geo-science knowledge and carry out systematic studies on official mapping and area surveying. Government Holdings Private Limited (G.H.P.L) was established in 2000 to efficiently manage the government’s interest in petroleum exploration and production joint ventures with a mandatory 5% interest in all Exploration Licenses granted by the Government during the exploration phase which was to be carried by other joint venture partners. This working interest was to increase in case of commercial discovery from 15% to 25% depending on the discovery zone.

Oil and Gas Development Company (OGDCL), a national oil & gas company of Pakistan, is the flagship of the country’s exploration and production sector. Pakistan Mineral Development Corporation (PMDC) is involved in exploration and evaluation of economic mineral deposits, preparation of techno-economic feasibility reports, mining and marketing.

Pakistan Petroleum (PPL) operates major oil and gas fields including the Sui gas fields and in joint ventures has non-operating interests in an exploration portfolio – onshore and offshore.

Inter State Gas Systems has a mandate by the government to develop natural gas import projects, and to serve as an interface between the GoP and other national and international agencies for the import and storage of natural gas in Pakistan. Its achievements on ground are not known.

Saindak Metals Limited is engaged in exploration processing of copper, gold, silver, etc. Its current deliverables are reported to be meagre. Lakhra Coal Development Company Ltd supplies coal to 150MW thermal plant of LPGCL (Wapda) at Khanote which was originally planned for 6×50 MW with annual coal consumption of 15,00,000 M. Tonnes. The Ministry of Petroleum presides over the largest infrastructure and tangible assets of the nation systematically built since the inception of the country. But, on account of poor governance, corruption, nepotism and cronyism much of it has been wasted and this trend continues. The institutions which were once the pride of the nation and enjoyed global recognition are now by and large struggling to stay afloat. Prominent among them are OGDCL, PSO, SSGC, SNGPL, PPL and others.

Oil and Gas Development Company Limited (OGDCL), with 11,000 employees, is the flagship of the Ministry. It has primary listing on Pakistan stock exchange and secondary listing on the London Stock Exchange. Established in 1961 by the government, it is involved in exploring, drilling, refining and selling oil and gas. In 2015, it achieved a revenue of US $4.5 billion with a net income of US $2.2 billion.

In the past it enjoyed the distinction of being ranked many times among the Forbes Global 2000. In good days it achieved many impressive discoveries on its own and in joint ventures with world renowned global exploration companies. Today OGDCL is confronted with challenges like reserves depletion, under-performance of gas and oil fields, lack of interest of foreign investors and litigations by vendors. Poor governance over the years could not effectively deal with challenges and has cause immense harm to this once dynamic organisation.

Pakistan State Oil (PSO), with a revenue of over US $15 billion, is another mighty state Organization which is engaged in the marketing and distribution of petroleum, L.N.G, LPG and CNG products through a network of over 3700 filling stations and manages a market share of 60 percent of the total oil market and consumer portfolio in Pakistan. It too enjoyed the distinction of being ranked among the Forbes Global 500 Fortune Companies. Years of poor governance and government interventions have diluted its strength as a globally recognised enterprise.

Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Ltd (SNGPL), with a total revenue of around US $3 billion, are the country’s integrated gas companies responsible for the transmission and distribution of natural gas in southern and northern parts of the country, respectively. Here too poor governance has deprived these organisations of their true potentials

The tremendous national assets operative under the ministry, with good governance and rationalisation, have the potential to generate revenues and margins which could substantially build up the economy of the nation and change its destiny for the better. Pakistan, burdened with unprecedented heavy loans, badly needs to enhance its revenues and profits to pay them back. Bad performing national assets and mounting loans constitute a sure recipe for disaster.

Farhat Ali, "Ministry of Petroleum and Natural Resources: Rationalisation of institutions – VI," Business Recorder. 2016-09-24.
Keywords: Economics , Developing countries , Production planning , Oil industries , Revenue management , Global Positioning System , OGDCL , PSO , SSGC , SNGPL , LPGCL , LNG , LPG , GPS