Pakistan Petroleum Limited proposes Joint-Ventures with Chinese exploration companies

KARACHI: State-owned Pakistan Petroleum Limited (PPL) has stepped up efforts to strike joint-venture deals with Chinese firms to capitalise on exploration and production opportunities along the China-Pakistan Economic Corridor (CPEC) routes, the company’s top official said on Monday.

PPL Managing Director Moin Raza Khan said PPL is seeking joint ventures with Chinese exploration and production companies on blocks along the CPEC routes, which would expedite exploration activities and enable technology transfer.

“We had a meeting in Islamabad 10 days ago, where we proposed joint ventures with Chinese exploration companies,” Khan said at the company’s 68th annual general meeting. “If materialised, this would add more value to the company as well as enable technology transfer.”

Currently, PPL is facing liquidity crunch-like situation due to significant rise in its trade debts. The company is, however, designing a work program that would be least affected by the circular debt. Joint ventures with Chinese companies on existing and new blocks are likely to relieve some stress on PPL’s liquidity burden.

PPL’s trade debts have reached to a historically high level of Rs227 billion in the last fiscal year of 2018/19 compared with Rs143 billion by the end of the previous fiscal year. Low recoveries from customers coupled with higher statutory payments arising from increase in revenues resulted in additional stress on the liquid balances of the company.

“The situation calls for imminent steps to be taken by the government to ease out the situation particularly for public sector exploration and production companies,” Khan said. “The nature of E&P (exploration and production) lifecycle requires heavy upfront investment with a longer gestation period. As such liquidity constraints due to circular debt might delay the ongoing exploration and development activities.”

Trade debts include Rs197.65 billion in receivables from oil refineries, power producers and gas distribution companies. The recoverability of the sum is dependent on the decision of the government, including availability of funds.

The board approved final cash dividend of 20 percent on ordinary shares and convertible shares along with 20 percent bonus shares to ordinary shareholders and 10 percent to convertible preference shareholders.

Khan, highlighting PPL’s progress and achievements during 2018/19, said the most significant was the highest-ever net profit of Rs61.6 billion along with a record number of 11 discoveries in a year by the company and partner-operated assets.

PPL drilled the first-ever international exploratory well Madain-1 in Iraq. “We have reached near the reservoirs and we will have the good news soon,” Khan said.

Khan, who is also the chief executive officer of PPL, emphasised continuing fast-paced exploration, especially in high rewarding frontier basins expanding PPL’s portfolio with reputable exploration and production companies along with pilot projects for exploring tight and shale gas potential.