ISLAMABAD: Auditor General of Pakistan (AGP) has raised serious objections against the Oil and Gas Development Company Ltd (OGDCL) and observed a significant decline in its sales and profit.
According to the AGP’s audit comments, which will be included in the government’s audit report on public sector enterprises for the year 2015-16, OGDCL’s net profit fell from Rs123.9 billion in 2013-14 to Rs87bn in 2014-15 and the net profit margin from 48.21pc to 41.24pc.
Similarly, the company’s net sales decreased 18pc to Rs210.625bn in 2014-15 from Rs257.014bn in 2013-14. The report attributed this to a decrease in the quantity of materials, such as oil, gas and sulphur, which were sold by the company.
“The decrease in sale volume of crude oil and gas was beyond apprehension despite increasing number of wells in different developed fields every year which needs to be investigated at appropriate level. The decrease in sale volume of sulphur also needs to be justified besides, taking remedial measures to increase the sale volume of all the products,” the report states.
According to the report, revenue from gas sales stood at Rs139.48bn on June 30, 2015, which included the gas sold from the Dhachrapur, Nur-Bagla and Jakhro fields. This was being invoiced on provisional prices, which were subject to adjustment once the final wellhead prices were notified by the Ministry of Petroleum and Natural Resources.
“As such the financial statements did not reflect the true picture of the state of affairs. [The] reasons for delay in fixation of gas sale price needs to be investigated at [the] appropriate level to fix responsibility besides ensuring such price fixation at an early date so that accurate/firm sales revenue could be reflected in the financial statements,” the report says.
The report notes that OGDCL’s un-appropriated profit increased from Rs346.056bn in 2013-14 to Rs392.056bn in 2014-15. This, auditors believed, was indicative of a lack of planning for aggressive exploration as well as the development of discovered oil and gas fields. “Numerous discovered fields, after incurring development expenditure of Rs24.052bn as on June 30, 2015, were shut-in for the last many years due to [a] lack of surface facilities,” the report noted.
The report also expressed alarm over the millions of rupees in rental fees that were being paid for fields and reservoirs that may be lost due to geographical and climatic changes, including the Dhamraki, Sheikhan and Jandran fields.
The audit report also mentioned OGDCL’s controversial agreement with Jamshoro Joint Venture Limited (JJVL), signed in Feb 2012 to process gas from the Kunar Pasaki Deep (KPD) field, which “resulted in net loss of revenue of Rs2.12bn borne by OGDCL on account of surrendering the production & sale of by-products up to that date”.
The report also notes an increase in the company’s trade debts, which rose by 20.77pc from Rs100.624bn in 2013-14 to Rs121.524bn in 2014-15. These included an amount of Rs112.782 million, which the report refers to as “un-secured and doubtful”, as well as overdue receivables of Rs76.990bn from oil refineries and gas companies due to the circular debt issue.
“This is an area of significant attention which needs to be resolved at the earliest to avoid loss or un-necessary blockage of heavy funds,” it said.
The audit department also observed an increasing trend in accrued interest, which increased from Rs10.110bn in 2013-14 to Rs14.434bn in 2014-15. “This indicated that timely action for realisation of interest was not taken,” the document said.
When asked to comment on the report, OGDCL Spokesperson Ahmed Hayat Lak said that the company had always complied with all audit observations. He confirmed that the report in question was received in February 2016 and that “a comprehensive reply was being compiled”.
Explaining the reasons behind the decline in production, the OGDCL spokesperson claimed that the company had invested in exploration, which was a core business of the company.
“In 2014-15, a record number of technical surveys were conducted. The company is benefiting from reduced rates of services, equipment and material in the current low-oil price regime and considers it an opportune time to invest in seismic, drilling and development activities,” he said.
He also said that the surge in prospecting expenditure was down to the company’s investment in 31 newly-acquired exploration blocks.
Mr Lak also attributed a rise in the company’s general expenses to an increase in salaries and Corporate Social Responsibility (CSR) donations during the floods of 2014.
He blamed declining revenue and profits on declining oil prices. “This is a worldwide phenomenon and OGDCL is not insulated from the international oil market,” he said.
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