AGP Uncovers Major Irregularities in Oil and Gas Sector


ISLAMABAD: The Auditor General of Pakistan (AGP) has unearthed significant policy deviations and inefficiencies by the Director General Petroleum Concession (DGPC) in managing oil and gas exploration companies, leading to substantial losses for the national exchequer.

An audit revealed that gas production dropped from 4,047.95 million cubic feet per day (mmcfd) to 3,597.36 mmcfd, and crude oil production fell from 86,481.375 barrels of oil per day (bopd) to 76,739.479 bopd between 2015-16 and 2019-20. This decline highlights a downward trend in hydrocarbon production over the past five years.

The Performance Audit, conducted by the Director General Audit, Petroleum and Natural Resources, Lahore, covered the period from 2010-11 to 2019-20. The audit aimed to evaluate the DGPC’s effectiveness in managing leases and licenses to promote the exploration and production of indigenous hydrocarbon resources. The audit identified several deviations from relevant policies, laws, and regulations by the DGPC, contributing to the non-achievement of the objectives set out in the Petroleum Exploration and Production Policy 2012.

Key audit findings included:

Non-Monitoring of License Terms: The failure to monitor license terms and subsequent litigation resulted in financial losses due to unrealisable guarantees and non-recovery of liquidated damages.
Unauthorized Price Incentives: The DGPC’s unauthorized granting of price incentives to Exploration & Production (E&P) operators led to significant financial losses.
Irregular Lease Renewals: Delays and non-approval of lease renewals caused irregular production and non-deposit of social welfare obligations by E&P companies, discouraging investment, and inviting potential litigation.
Lack of Policy Integration: Poor integration among various E&P policies and weak coordination within the Petroleum Division exacerbated these issues.
To address these issues, the auditors have made several recommendations:

Streamline Concession Award Mechanisms: Ensure a transparent and competitive process for awarding concession rights.
Effective Monitoring and Implementation: Establish robust mechanisms for monitoring and implementing license terms.
Professional Contract Management: Manage contracts professionally and transparently.
Approval of Pricing Criteria: Obtain approval for Marginal/Standard-Gas Pricing Criteria and Guidelines from the competent forum (CCI).
Timely Disposal of Leases and Licenses: Develop Standard Operating Procedures (SOPs) for timely processing of lease and license renewals.
Improved Liaison: Enhance coordination between the directorates of the Petroleum Division.
These recommendations aim to enhance the efficiency and effectiveness of the DGPC, thereby promoting a more robust and transparent oil and gas sector in Pakistan.

Story by Zafar Bhutta

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