Out-of-court settlement: Govt agrees to revive 11 oil exploration licences


The government has decided to revive 11 revoked petroleum exploration licences as out-of-court settlement after receiving no objection from the Office of Attorney General for Pakistan (AGP), sources in Ministry of Energy told Business Recorder.

According to Petroleum Division, under the Pakistan Petroleum (Exploration and Production) Rules, the Federal Government/ authority grants exclusive petroleum Exploration Licences (EL) for petroleum exploration for an initial period of five years generally through competitive bidding process against work program/ units.

The Rules also empowered the Government/ authority to revoke the ELs if a holder of a EL has contravened any material terms and conditions of the license including non-performance of committed work program during the time stipulated in license, as well as, non-payment of financial obligations such as social welfare, training, rent, production bonus.

The sources said, eleven exploration licences were revoked due to non- performance of work commitment and non-payment of financial obligations by various exploration and production companies (E&P Companies). In all the 11 blocks, status quo order was passed by the respective Civil Courts, Islamabad and Sindh High Courts. The cases were being pursued in the respective courts for early decisions.

The sources maintained that the litigant companies had approached the Government and had shown keen interest in exploration of the blocks awarded. A summary of the work done in the revoked blocks and the outstanding obligations of the litigant companies was recently submitted by the Ministry to the ECC.

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The sources further stated that litigation timeframe had; however, always been unpredictable and even if a case was decided at one forum, a higher forum was available (up to the Supreme Court) till a final decision is reached. The Ministry stated that litigation over the revoked blocks could be long drawn and it could take substantial time to conclude. It was further added that it would not only result in depriving the E&P sector of investment in these areas but would also deprive the country of benefits from the expected indigenous oil and gas discoveries/ reserves.

The sources added that such discoveries could contribute towards minimizing energy deficit of the country and thus save precious foreign exchange. Petroleum Division further informed that in order to resolve the longstanding issue of litigation, which had resulted in halting of exploration and production activities in some of the prospective blocks of the country, a framework had developed for revival of revoked licences through out of court settlement.

The settlement efforts would be without prejudice to ongoing litigation which would be pursued until a settlement was achieved. Further, the framework was not meant to change any policy provisions of the relevant Petroleum Policy but rather a settlement of dispute among the parties to the contract (exploration license and the petroleum concession agreement), under the provisions of the petroleum rules.

The framework for revival of revoked licences through out-of-court settlement was submitted for consideration and approval of the ECC on October 27, 2022. The ECC was apprised that Law & Justice Division had endorsed the proposal and the Office of Attorney General of Pakistan had also conveyed no objection on the proposal.

The sources said the proposal of Ministry of Energy has been approved by the ECC, which will be ratified by the Federal Cabinet.

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