ISLAMABAD – The Auditor General of Pakistan has found audit observations amounting to Rs384.744 billion during the current audit of Pakistan Petroleum Limited (PPL). This amount also includes recoverable amount of Rs193.816b as pointed out by the audit, said the Auditor General of Pakistan in its report for the audit year 2024-25. During audit of PPL for the FY2023-24, it was observed that the company did not deposit Gas Development Surcharge (GDS) of Rs77.266b despite receipt of sales proceeds from GENCO-II.
PPL received payments from GENCO-II but the amount of GDS of Rs77.266b was outstanding since 2019 and was not paid in proportion of sales proceeds received from GENCO-II. The management stated in the DAC meeting that GENCO-II had consistently defaulted settlement of gas sales bills. Due to this continuous delay, PPL was unable to make timely payments of GDS into the government treasury, as a substantial portion of the sales invoices to GENCO-II consisted of GDS. Audit held that GENCO-II indicated on payment advice that payment was being made for all components of invoice, hence the GDS payment was also to be proportional to the sales price received from the buyer on the pattern of other duties and taxes. The DAC directed the management to provide invoice-wise detail of amount recovered from GENCO-II and deposited in government treasury on account of taxes and GDS. No further progress was reported till finalization of the report. During audit of PPL for the FY2023-24, it was observed the total outstanding amount increased from Rs497.441b as at June 30, 2023 to Rs566.909b as at June 30, 2024 and an amount of Rs69.133b was increased during the FY2023-24 against refineries, gas companies, and others.
The management replied that an amount of Rs79.810b had been recovered. Audit pointed out that the amount reported by the management had recoveries from previous years. An amount of Rs1,464.123 million was recovered from SNGPL pertaining to the FY2023-24 and verified by audit. The DAC directed the management to get the recovered amount verified by audit within a week and expedite recovery of balance outstanding amount of Rs 68.091 billion. No further progress was reported till finalization of the report. During audit of PPL for the FY2023-24, it was observed PPL had to pay lease extension bonus but the company did not pay the amount despite the fact that it was charging lease extension bonus from buyers. This resulted in undue retention of lease extension bonus of Rs 45,072.924 million as on June 30, 2024. The management responded that PPL would be liable to pay the lease extension bonus along with production bonus/social welfare after signing of Sui Development & Production Lease/PCA. Once the lease deed and PCA were signed, PPL would discharge its liability. Audit pointed out that PPL was retaining the amount of lease extension bonus despite receiving it from buyers and its inclusion in the price of gas for retail consumers. DAC directed the management to pursue the signing of development and production lease by DG PC to ensure early payment of Lease Extension Bonus. No further progress was reported till finalization of the report.
During audit of PPL for the FY2023-24, it was observed that PPL did not charge the take or pay amount of Rs 13.5b despite failure of GENCO-II in buying guaranteed quantity of gas up to the FY2023-24. This resulted in non-recognition and non-recovery of take-or-pay amount from GENCO-II. During audit of PPL for the FY 2023-24, it was observed that in two projects the management failed to convert the discoveries into production despite lapse of more than ten years. Audit is of the view that due to weak project management, GPF-III and Hatim-Faiz gas projects were delayed for more than 9 to 11 years causing an overall loss of Rs 85.589b to the company. In DAC meeting held on January 10, 2025, management stated that following the vacation of the stay order, a way forward and execution strategy was formulated and presented to PPL’s Board, which subsequently approved the initiation of the bidding process on February 26, 2024.Work on subsequent tendering for hiring of pertinent services was ongoing. Another, development project namely HatimFaiz gas project was also under process and SNGPL showed interest in purchasing gas in June, 2023. PPL requested DG Gas for allocation of gas to SNGPL in August, 2023 which was pending. The DAC directed the management to get the stated stance verified by Audit and expedite the remaining work of GPF-III and pursue case for allocation of gas for Hatim-Faiz gas project. Audit recommends the GPF-III and Hatim-Faiz gas projects may be completed on priority basis to ensure injection of indigenous gas in the system.
During audit of PPL for the FY2023-24, it was observed that there was inordinate delay in completion of development works relating to 35 wells and 20 development projects. This resulted in delayed production and non-achievement of production target from exploration of 123 MMCFDe causing valuing loss of revenue of Rs 32.728b for the FY 2023-24. Audit contended that management did not share updated status of ongoing wells and projects which were started in previous years. The DAC directed the management to share the complete detail/updated status of 35 wells and 20 development projects on case-to-case basis. No further progress was reported till finalization of the report.
During audit of PPL for the FY2023-24, it was observed that due to less offtake by GENCO-II, PPL was forced to curtail its daily production to a level of 98.972 MMCFD. For additional capacity of 50 MMCFD, PPL had approached DG (Gas), but this gas had not been allocated to any other buyer despite the fact that six 3rd parties had shown interest in purchasing natural gas from Kandhkot gas-field. This resulted in revenue loss of Rs 12.4b due to less production of gas/off take. Audit is of the view that weak contract management coupled with nonpursuance of case with DG (Gas) for 3rd party allocation resulted in loss of revenue amounting to Rs12,400.404 million. The management stated that the matter was under process. The DAC directed the management to pursue the matter with DG (Gas) regarding reallocation of surplus gas to 3rd party. DAC further directed the management to ensure guaranteed off-take of natural gas as per clauses of the GSA executed with GENCO-II. No further progress was reported till finalization of the report.
