The Petroleum Division has asked the Economic Coordination Committee (ECC) to decide whether to cancel petroleum rights held by two companies after a 73.3 percent change in ownership of their ultimate parent, or allow the transaction to be regularized retrospectively.
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 could revoke the companies’ petroleum rights over the ownership change carried out without prior approval, or allow the transaction to be regularized after issuing a warning to the companies.
The division has backed the second option.
It argues that the transaction occurred at the ultimate-parent level rather than directly in SEPL or FHL. It also noted that existing petroleum rules do not clearly prohibit such transactions at the ultimate-parent level.
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 changed effective control of JURA and, indirectly, 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 apply to changes in ownership or control at the petroleum-right holder or parent level, rather than transactions involving an ultimate parent.
The Petroleum Division has challenged that interpretation, citing 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 pointed to a 2012 case in which prior approval was obtained for a change in management and control of FHL at the parent level.
The Law Division has advised that the matter should be assessed separately for each petroleum block because different regulatory regimes may apply. It said prior government consent is required where a share transfer results in a change in effective control, subject to the rules governing the relevant block.
The Petroleum Division has warned that cancellation of the petroleum rights could have serious consequences, including possible international arbitration.
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