ISLAMABAD: Influential foreign investors have asked Pakistan to deregulate every segment of the energy chain as early as possible and ensure sanctity of contracts currently being tampered with in the upstream petroleum sector to protect business confidence in the country.

Speaking at a news conference, Overseas Investors Chamber of Commerce and Industry (OICCI) representatives — Abdul Aleem, Ghias Khan and Asim Murtaza — advocated complete liberalisation and transformation of the monopolistic power and gas market into a multi buyer-seller marketplace to let the private sector bring in necessary competition and efficiencies.

Asim Murtaza Khan, who is also the Chief Executive Officer of Petroleum Institute of Pakistan, explained that the government was trying to introduce certain fiscal changes through supplemental agreements after the signing of formal contract with the petroleum exploration and production (E&P) companies for retrospective implementation.

Responding to a question, he said the change being pushed pertained to retention of windfall levy on oil production and lease rentals being indexed with 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.

Published in Dawn, November 12th, 2021