Pakistan: Divestment of Government Holding in Pakistan Petroleum

In an attempt to accelerate privatization process in Pakistan, the incumbent government had decided to divest its holding in UnitedBank Limited (UBL), Pakistan Petroleum Limited (PPL), Oil and Gas DevelopmentCompany Limited (OGDC) and other state owned enterprises (SoEs).

The recent offer to divest the Government of Pakistan (GoP) holding in United Bank Limited (UBL) attracted enormous response as the amount received was almost twice the initial estimate. Sale of 19.8 percent shares of UBL was through a book building process. The deal was struck at US$387 million, of which 80 percent shares on offer went to foreign investors, which helped GoP in mobilizing around US$310 million. The proceeds have already been received by the GoP on June 20, 2014. More than 40 leading global equity funds, including Templeton, Wellington, Everest, Lazard, Morgan Stanley, Blackrock and others, participated in this transaction.

Encouraged by the outcome, the GoP has decided to divest over 70.05 million shares out of its holding in Pakistan Petroleum Limited (PPL). The offer would be open to both international and domestic institutional investors and high net worth individuals through a book building process, to be completed in the last week of June 2014. It has also been approved to offer 7 million shares to the general public with preference to existing employees of PPL through a subsequent subscription process within next few months.

PPL has been a frontline player in the energy sector since mid fifties. As a major supplier of natural gas, PPL today contributes over 20 percent of the country’s total natural gas supplies besides producing crude oil, Natural Gas Liquid and Liquefied Petroleum Gas.

The company’s history can be traced back to the establishment of a public limited company in June 1950, with major shareholding by Burmah Oil Company (BOC) of the United Kingdom for exploration, prospecting, development and production of oil and natural gas resources.

In September 1997, BOC pulled out itself from exploration and production worldwide and sold its equity in PPL to the GoP. Subsequently, the government reduced its holding through an initial public offer in June 2004, which was further decreased with the initiation of the Benazir Employees Stock Option Scheme (BESOS) in August 2009 when PPL employees were allotted 12 percent shares from the government’s equity.

Currently, the company’s shareholding is divided among the GoP, which owns about 71 percent, PPL Employees Empowerment Trust that has approximately 7 percent — being shares transferred to employees under BESOS — and private investors hold nearly 22 percent.

Lately, PPL has acquired 100 percent shareholding of MND E&P Limited, a company incorporated in England and Wales. The name of the subsidiary has been changed to PPL Europe E&P Limited. It has also established a wholly-owned subsidiary, PPL Asia E&P B.V. with corporate seat in Amsterdam, Kingdom of Netherlands. The subsidiary will focus on exploration and production of oil and gas in the region. PPL has assigned its interest in Block 8, Iraq, under the Exploration, Development and Production Service Contract with Midland Oil Company, Iraq to PPL Asia E&P B.V.

PPL operates six producing fields across the country at Sui (Pakistan’s largest gas field), Adhi, Kandhkot, Chachar, Mazarani and Hala and holds working interest in fifteen partner-operated producing fields, including Qadirpur the country’s second largest gas field.

PPL together with its subsidiaries has a portfolio of 47 exploration assets of which the company operates 27, including one contract in Iraq, while 20 blocks, comprising three offshore leases in Pakistan and two onshore concessions in Yemen, are operated by joint venture partners. 

Daily gas production of PPL from its operated and partner-operated fields stands at around one billion cubic feet (bcf) of gas per day, which translates into over 20 percent of the country’s total gas production. The company’s major clients are Sui Southern Gas Company Limited (SSGCL), Sui Northern Gas Pipelines Limited (SNGPL) and Water and Power Development Authority.

On March 31, 2014, PPL’s proven recoverable reserves were 2.267 trillion cubic feet (Tcf) of natural gas, 40.293 million barrels (MMbbl) of oil/ NGL and 412,557 tonnes (tons) of LPG.