DGPC delays action on change of ownership

It has been over six months since show cause notices were issued to Spud Energy Limited (SEPL) and Frontier Holdings Limited (FHL) regarding alleged changes in ownership and effective control without prior government approval, yet no visible enforcement action followed.

The Petroleum Directorate’s inaction has raised serious questions about regulatory oversight in Pakistan’s upstream energy sector, particularly in cases involving changes in control of oil rights holders.

The matter stems from a transaction in which Phoenix Exploration sold a 73.3% stake in Jura Energy to IDL Investments Limited, a company registered in the British Virgin Islands, on March 6, 2025.

The Directorate General of Petroleum Concessions (DGPC), which operates under the Ministry of Energy (Department of Petroleum), issued an exposure notice on July 18, 2025, stating that the transaction was not disclosed or approved prior to execution as required by petroleum rules.

According to the DGPC, it came to know about the transaction only after receiving a letter from a third party dated May 2, 2025.

The notice warned that the sale may violate Rule 68(d) of the Pakistan Petroleum (Exploration and Production) Rules, 1986, and Rule 69(d) of the 2001 rules, both of which require prior government consent for changes in ownership or effective control.

Under these rules, petroleum rights holders must disclose changes in ownership, capital issue, board appointments, voting rights and corporate structure.

The DGPC directed SEPL, FHL and Jura Energy to submit detailed documentation within 30 days, including pre- and post-transaction shareholding structures.

The companies were also asked to disclose board changes, voting patterns, trading values, tax returns and whether capital gains or withholding taxes were paid in Pakistan, with warnings of punitive action, including possible withdrawal of oil rights.

Industry sources say the control is linked to national security, as the approval mechanisms aim to prevent ownership by nationals of hostile countries.

Despite the stated admissions that no approvals were obtained, the DGPC has not invoked its powers under section 69(d).