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June 15, 2024
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The demise of an E&P star – the sad tale of Pakistan Petroleum – News for the Energy Sector – Energy Voice

The sad story that follows is based on the authors’ personal experience as a director on the board of Pakistan Petroleum Limited between September 2014 and October 2018. He thought it important to document the events that transpired during that time so that perhaps the Government of Pakistan will take note and take corrective action. Though the damage done is severe, there may yet be time to salvage the situation.
This is a case study on how to destroy a company. The company in question is Pakistan Petroleum Limited (PPL), one of Pakistan’s premier oil and gas exploration companies.
In September 2014 a new board was appointed at PPL. It was a board of professionals. The Chairman was Waqar A Malik from the private sector. In addition to the professionals there were two people from the Ministry of Petroleum – Arshad Mirza then Secretary Petroleum, and Saeedullah Shah, who at that time was a senior Petroleum Ministry official.
One of the first tasks of the board was to appoint a new managing director. A transparent recruitment process consistent with all statutory requirements led to the appointment of Syed Wamiq Bokhari as the new MD. Bokhari, a petroleum engineer, brought with him a wealth of international operating experience. He was also the first outsider to head PPL.
A bit of history before the story continues: PPL emerged out of what was known as the Burmah Oil Company (BOC). It was registered in Karachi in the early 1950’s by its British owners as a private company. In 1952 PPL discovered the Sui gas field. This was a stupendous discovery. Sui’s estimated reserves of gas were 13 trillion cubic feet. It was expected at the time that this would be enough to keep Pakistan self-sufficient in natural gas for the next 60 years.
As the years went by PPL developed a reputation as a highly professional and well-managed company. It was the employer of choice for many newly minted engineers and other professionals. In 1997 The British owners of PPL decided to divest their shares in the company. The Government of Pakistan (GOP) acquired the BOC stake becoming the majority owner of shares – some 70%.
The change of ownership initially had little impact on PPL. The government or the Petroleum Ministry did not interfere in company affairs. The company board was independent and responsible for oversight. The solid management principles, practices and policies that BOC had developed ensured that management remained professional and competent.
The first signs of trouble started when the PPP government started to politicise the board in July 2010. For the first time a PPP politician with zero business or oil and gas experience was appointed as board Chairman. It was during the tenure of this board that the first case of mega corruption emerged. An acquisition was made by PPL for the Pakistan assets of a Czech oil company called MND for $180 million. Subsequent investigation revealed that PPL had overpaid approximately $100 million for this acquisition. The case has been referred to the National Accountability Bureau.
Now back to 2014. The new board brought in significant improvements in the governance of the company. Credit for this goes mainly to Waqar Malik who brought his experience from top companies in the private sector and applied it to PPL. At the same time Wamiq Bokhari, with the support of the board, implemented important organisational changes, introduced cost cutting measures, and most important of all, instilled a new culture of urgency in the company.
Urgency was needed because, paradoxically, its success in finding the great Sui field, and the steady stream of profits from it, led to a sense of complacency at PPL. The company thought that Sui would last forever and took its eye off the real business of oil and gas companies, which is to always explore for new oil and gas fields. This can only happen through a continuing process of drilling for new prospects. Yet, amazingly, in most years PPL was drilling only two or three wells per year.
As an outsider, with international experience, Wamiq Bokhari immediately realised the problem. During his three year tenure, PPL drilled some 70 wells at an average of 23 wells per year. This was an astonishing ramp up from the two or three wells per year average drilled in the previous 70-year history of the company.
Exploration work expanded many fold. Twelve new significant discoveries were made as a result of the increased drilling. This was the most ever in PPL’s history. Many interesting prospects were identified. The company seemed on the path to making Pakistan self-sufficient in oil and gas.
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But things started to go awry when, for personal reasons, Waqar Malik resigned as Chairman of the board in August 2016. His going started the slow downfall of PPL. At that time, control of the board fell into the hands of Arshad Mirza the then Secretary Petroleum. For a full nine months after Waqar Malik’s departure, Mirza failed to appoint a new Chairman. This left the board headless and directionless. It also frustrated the efforts of Wamiq Bokhari who had laid out detailed plans for future development. These could not be approved because the board was headless. The urgency of having a Chairman was lost on Arshad Mirza.
Finally in April 2017 a Chairman was appointed. This was a chartered accountant named Dr. Ibne Hassan, who seemed more interested in pleasing his clueless masters at the Petroleum Ministry rather than working to push Wamiq Bokhari’s bold initiatives. Dr. Ibne Hassan also, for some reason, attempted to suppress the independent inquiry report on the MND corruption case.
But some directors persisted and it was finally, belatedly and reluctantly, submitted to the National Accountability Bureau (NAB). In the end Ibne Hassan’s appointment made no difference. The early paralysis continued with the board dithering and delaying important decisions, attempting to actively obstruct Bokhari’s efforts, and trying to undermine earlier progress.
So far all the problems at PPL could be attributed to a general level of incompetence at the board level and disinterest at the ministry. All this changed when a man named Sikandar Sultan Raja was appointed Secretary Petroleum in December 2017. Sikandar, a medical doctor by training, knew little about how large companies run, and less about the oil and gas industry, suddenly found himself in control of one of Pakistan’s most prominent oil and gas companies.
What followed can only be described as an unmitigated disaster. It is as if Sikandar wanted to destroy PPL. It is a sordid story. It started by him taking a serious personal dislike to Wamiq Bokhari – the main architect of PPL’s revival. All of Bokhari’s plans requiring board approval were rejected or delayed on flimsy grounds.
Bokhari was harassed in other ways. On several occasions he was kept waiting outside Sikandar’s office at the ministry for many hours to see him. Curiously, Sikandar had a red light installed on his office door. When the light was on, no one was allowed to enter or to disturb him. So when Bokhari asked Sikandar’s secretary to tell him on the intercom that he had an appointment he was told: “Sorry sir, we are not allowed to disturb him when the light is on!” Several hours passed by. The light stayed red. Bokhari left without meeting Sikandar. No professional worth his salt should have to tolerate this kind of conduct, especially from a public servant.
When Wamiq Bokhari’s contract ended in March 2018, many on the board were keen to renew it because they had seen the progress that he had made. But Sikandar, due to his personal dislike of Wamiq Bokhari was not all keen to do so. He hemmed and hawed, delayed and obstructed, until a frustrated Bokhari finally left PPL.
As if this was not enough, worse was to come.
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After Bokhari’s departure, the board needed to appoint an acting MD until a permanent one could be found. The choice was obvious. There were three deputy managing directors in the company. Any one of them could easily have been appointed. But Sikandar Raja decided instead to appoint Saeedullah Shah, a director on PPL’s board, as the acting MD.
Shah had spent his entire career in the Petroleum Ministry. During his time there he acquired a reputation for indecisiveness and extreme incompetence. Many in the industry accuse him solely for preventing the auction of new exploration blocks in Pakistan for several years. An act that seriously handicapped the search for new oil and gas reserves in the country.
Further, Shah had zero corporate and management experience. So it was flabbergasting to all concerned why Sikandar wanted him as the acting MD. Yet he lobbied fiercely for Shah’s appointment by calling up several directors personally and asking them to support Shah. In the end most directors, despite knowing that Shah was unqualified, were unwilling to make an enemy of Sikandar. So they gave in and made Shah the acting MD.
Shah remained as acting MD for six months from July to December 2018. His term at PPL was an absolute disaster for the company. The losses attributable directly to him by both his action and inaction are estimated to be in the range of $50 million of lost revenues. Morale at the company plummeted to new lows. Top technical talent, recruited from international oil and gas companies, with great difficulty by Wamiq Bokhari, headed for the exits. Talk to anyone at PPL and they will tell you that it was the worst period in the history of the company.
Sikandar Raja, in the meantime, was transferred to another post. The mess that he created while at PPL was left for others to clean up. But before he departed, he inflicted a cruel parting blow on the company. He appointed a junior Joint Secretary at the ministry named Sajid Qazi to the PPL board. Qazi, like his erstwhile boss, had zero corporate or oil and gas experience. He continues to be a disaster for PPL.
The PPL board, led by a spineless Chairman, Salman Akhtar, mistakenly accepted without question that Sajid Qazi is a ‘super shareholder’ of PPL and hence whatever he says must be followed. Qazi’s malign influence on the board has led to turmoil in the human resources department which seems to be the main focus of his interest.
He authored a fake and completely fictitious HR report. Based on this the highly professional head of HR, Aysha Chowdry, was replaced with one of his own completely incompetent favourites, a ranker named Afzal Siddiqui who had no professional HR background. Further, Sajid Qazi, in cahoots with Ibne Hassan, orchestrated the removal of the head of internal audit Fazal Ghafoor, a scrupulous professional with a reputation for independence as required by the statutory nature of his position. This is something Qazi and Ibne Hassan were unwilling to countenance. Hence he had to go
Sadly, Sikandar Raja’s successor as Secretary Petroleum, Asad Hayauddin, has remained a largely clueless and silent spectator to the havoc that his Joint Secretary Sajid Qazi is wreaking at PPL. Hayauddin is happy to attend board meetings and pick up his Rs 120,000 check per meeting. Normally he sits in his office at the ministry and joins the meeting by video link. During the meeting he is working on his own papers not really paying attention to what is happening.
Frequently he gets called away to ‘a meeting with the cabinet’. But he still collects his full fee for the meeting. However, after it came to the public’s attention that he had appointed a close relative to the board of PPL, he withdrew from the board.
As for Saeedullah Shah – even his backers at the ministry finally realised the disaster that he was. Instead of being unceremoniously sacked, he was reappointed to the board of PPL. And in his place one of the deputy managing director’s was made acting MD. Ironically, this is exactly what had been proposed to Sikandar Raja six months – and a loss of $50 million – earlier, which he so doggedly resisted.
This is the way that things stand today: There is still no permanent MD even though it has been three years since Wamiq Bokhari left. Sajid Qazi – the Joint Secretary – is the de facto Chairman and MD of PPL. Foolish, one could argue criminal, decisions have been made in regard to cancellation of a critical gas processing project GPF-3 that will alone result in a colossal loss of $500 million. Not to mention years of expensive international litigation. Morale remains low. High quality professionals continue to leave. Drilling and exploration activity – the main business of PPL – has fallen from 23 wells per year during Bokhari’s time to just, believe it or not, one well last year.
There are lessons to be learned from the tragedy of PPL’s fall from one of Pakistan’s best companies to a near basket case. Measures must be taken to prevent this from ever happening again at any public sector company.
From the above it is clear that the fiasco at PPL is the direct result of involvement of officials of the Ministry of Petroleum on the board. Hence these specific measures are needed to safeguard PPL from their malign influence: The board must be completely independent of the Ministry of Petroleum. Directors must be professionals with diverse corporate backgrounds. At least one director – preferably – the Chairman – must be a petroleum engineer with oil and gas experience. No officials from the Ministry of Petroleum should be on the board to ensure its independence. And in any case, the Ministry as regulator of PPL, due to an irreconcilable conflict of interest, by definition cannot have any of its people on the board.
The Securities and Exchange Commission of Pakistan (SECP), the financial markets regulator and protector of shareholder rights, must take a more proactive stance in regard to assessing the performance of company boards. SECP has wide ranging statutory powers to take action against non performing boards. These include disqualifying directors, and, if needed, legal action against them to recover losses caused to the company. SECP has hesitated, in the past, to use these powers with public sector companies perhaps out of fear of offending powerful people. This must change.
It is true that the government has a majority share in PPL and the views of the majority shareholder should be taken into consideration by the board. But the way to do this is not by having junior Petroleum Ministry officials, claiming to be ‘super shareholders’, run roughshod on the board, which in effect renders the board nothing more than a rubber stamp for the Joint Secretary’s whims and wishes, and violates all established rules and laws regarding corporate governance. Rather, government views should be conveyed in writing by the cabinet directly to the board. In other words, there must be no influence whatsoever of the ministry in running the company.
These are some simple prescriptions. But if applied they can vastly improve the governance and performance at PPL. In fact the government would do well to apply these same principles at all public sector companies. That some of these companies are today on the verge of collapse can, in the end, be traced to the absence of these principles. Further, if corrective action is not taken urgently at PPL it will soon join the stable of failed public sector companies such as the Steel Mill and PIA.
Finally, there is a question that merits a serious answer: We know that officials who cause losses to the exchequer through corruption are pursued by NAB and FIA. In PPL’s case losses running into tens, or even hundreds of millions of dollars, verifiable by any independent audit firm, have been caused by Petroleum Ministry officials due to an extraordinary combination of ignorance, arrogance and stupidity.
Some of them, such as Sikandar Raja, have calmly moved on to other assignments in the government with no accountability for the immense damage they left in their wake. Some, such as Sajid Qazi, still continue to do damage. Does justice not demand that they be brought to book?
Nadeem M. Qureshi is Chairman of the political party Mustaqbil Pakistan and a scholar of Arabic. He was a member of the board of directors at Pakistan Petroleum Limited from Sep 2014 – Oct 2018.
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