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Petroleum Div opposes offloading of OGDCL shares

March 02, 2020

ISLAMABAD: In a major blow to the government plan, the Petroleum Division has opposed offloading the OGDCL shares, arguing that the share’s value has gone down over the years and the ongoing divestment of government’s 7 percent shares in the entity should not be processed at this stage, as it will not help the government mop up a substantial monetary benefit out of it.

The division has further asked the Privatization Commission to consider that the transaction is structured in a manner that instead of government’s seven percent shareholding in the OGDCL, its 10 percent shares may be offered to a strategic investor company preferably to a well-versed oil and gas sector Exploration & Development (E&P) company, which may bring the best industry practices and knowledge, state of the art exploration and production techniques in the larger interests of OGDCL and E&P sector in Pakistan.

It has been revealed in a February 13 letter of Petroleum Division to the Privatization Commission with the subject: ‘Hiring of financial adviser for up to 7 percent shares divestment in OGDCL’. However, a top official of the Petroleum Division also confirms the development saying that in the last meeting of Cabinet Committee on Privatization the issue was figured out and the Petroleum Division asked to come up with more analysis on its proposal in the next meeting.

The official said since 2014, the value of the OGDCL shares was declining and divestment of 7 percent of government holding will not bring monetary solace to the government as the current value stood at Rs137.47 which was equal to the dollar value of 0.84.

The government shares in the OGDCL stand at 74.98 percent. “We want the government to offload shares of 10 percent to a strategic oil and gas company such as the MOL, UEP, KUFPEC and give them a seat in the Board of Directors so that the new company with 10 percent shares stake in the OGDCL brings modern technology and introduce innovation which may help the entity to reap more dividends.

The letter, a copy of which is also exclusively available with The News, says the Privatization Commission is in the process of finalizing the Financial Adversary Service Agreement (FASA) for divestment up to 7 percent GoP’s shares in the OGDCL.

The Financial Advisory Consortium Appointed by Privatization Commission will be mandated to structure the transaction of GoP’s share in OGDCL for divestment in a conventional manner meaning that through selling or offering shares to high net worth value Individual or High Net Worth Value Institutions in the capital market.

However, at the same time, the letter says that earlier in 2014, the Privatization Commission had devised the divestment progress of the GoP’s 7.5 percent shareholding in the OGDCL which was offered at Rs216 per share to a High Net Worth Value Individual or High Net Worth Value Institution in the capital market through book building process at 4 percent discount value, whereas the actual share value of OGDCL shares at that time was Rs225 per share.

The current share price of OGDCL stands at Rs137.47 equal to dollar value at 0.84 as of February 13, 2020 being trade in Pakistan Stock Exchange depicts a very dismal picture comparing with the price offered in 2014 at Rs216per share equal to dollar value at 2.11 per share.

The letter says that the Petroleum division understands that although the divestment or privatization of GoP’s shares in the public sector companies is the sole prerogative or mandate of the Privatization Commission, this Division being the administrative division of OGDCL feels that the Privatization Commission should review the ongoing process and not resort to selling the GoP’s 7 percent shares in OGDCL at this stage.

It also mentions that the Petroleum Division is of the view that OGDCL is a very successful and profitable state-owned E&P company and well-performing asset of the country though there is still a lot of room to make further improvement in its operations.