ISLAMABAD: The Petroleum Division has asked the Economic Coordination Committee (ECC) to decide whether to cancel petroleum rights held by two companies or retrospectively regularize a 73.3 percent change in ownership of their ultimate parent.
The issue involves Spud Energy Pty Limited (SEPL) and Frontier Holdings Limited (FHL), which hold petroleum rights in Pakistan.
The Petroleum Division has presented two options to the ECC. The government can revoke the companies’ petroleum rights over the ownership change made without prior approval.
Alternatively, it can allow the transaction to be regularized after issuing a warning to the companies. The Petroleum Division has recommended the second option.
Dispute Over Ultimate Parent Ownership
The dispute arose after IDL Investments Limited acquired a 73.3 percent stake in JURA Energy Corporation, the Canadian-listed ultimate parent of SEPL and FHL.
The Petroleum Division is examining whether the acquisition resulted in a change in effective control of JURA. It is also assessing whether that change indirectly affected the two Pakistani companies holding petroleum rights.
The companies had earlier received show-cause notices over the transaction. They argued that the relevant petroleum rules cover changes in ownership or control at the petroleum-right holder or parent level.
According to the companies, the rules do not apply to transactions involving an ultimate parent company.
The Petroleum Division has challenged this interpretation. It cited Rule 69(d) of the 2001 petroleum rules, which refers to the share capital of a rights holder or its parent company.
The division also referred to a 2012 case involving FHL. In that case, prior government approval was obtained for a change in the company’s management and control at the parent level.
Law Division Seeks Block-Wise Assessment
The Law Division has advised that the matter should be assessed separately for each petroleum block.
It said different regulatory regimes may apply to the blocks. It also maintained that prior government consent is required when a share transfer results in a change in effective control, subject to the rules governing the relevant block.
The Petroleum Division, however, noted that existing petroleum rules do not clearly prohibit ownership transactions at the ultimate-parent level.
It has therefore recommended retrospective regularization rather than cancellation of the petroleum rights.
The division has also warned that cancelling the rights could have serious consequences, including the possibility of international arbitration.
The ECC will now decide whether the petroleum rights should be revoked or the ownership transaction should be regularized.
