ISLAMABAD: To safeguard business trust in Pakistan, influential international investors have requested Pakistan to deregulate every section of the energy chain as soon as feasible and ensure the sanctity of contracts now being interfered with in the upstream petroleum industry.
Abdul Aleem, Ghias Khan, and Asim Murtaza of the Overseas Investors Chamber of Commerce and Industry (OICCI), speaking at a news conference, advocated for complete liberalisation and transformation of the monopolistic power and gas market into a multi buyer-seller marketplace, allowing the private sector to bring in needed competition and efficiencies.
After signing a formal contract with petroleum exploration and production (E&P) companies for retrospective implementation, Asim Murtaza Khan, who is also the Chief Executive Officer of the Petroleum Institute of Pakistan, explained that the government was attempting to introduce certain fiscal changes through supplemental agreements.
In response to a query, he stated that the proposed adjustment concerned the preservation of the windfall fee on oil output and the indexation of lease rates to inflation.
He said these conditions were not in the original contracts with the E&P companies and obviously investments were booked under a different policy arrangement. “This has disturbed E&P companies and some of them have also gone into litigation,” he added.
OICCI urges improvement in investor confidence
Mr Khan said the upstream industry was in dialogue with the government and hoped the issue would be settled in the spirit of the policy.
OICCI vice president Ghias Khan added that whenever a government challenged contracts entered into by a previous government, this damaged the overall investor confidence because investors had to then revise their business plans and returns.
“This sends negative signals to the international investors and that’s not good for the country in the long term,” he added.
The business group — a collective voice of top foreign investors in Pakistan — said their electricity and gas costs had gone up by 18-19pc over the past three years.
They maintained that devaluation was harmful for investment climate even though it may be helpful to a select sector – the exports.
The OICCI proposed liberalisation and transformation of the monopolistic power market into a multi buyer-seller marketplace considering that the exclusivity to sell and distribute power for distribution companies was scheduled to terminate in 2023.
This will create options for power purchasers as well as producers to enter bilateral deals i.e., energy sale via B2B mode through a fair and transparent wheeling regime.
As part of its Energy Recommendations 2021, the group focused on implementing an efficient and cost-effective energy supply chain, while increasing the share of green energy sources to meet the environment and sustainability milestones.
Mr Ghias said these recommendations were the collective view of leading energy sector professionals associated with OICCI members and had been shared with the government including the prime minister.