The Oil and Gas Development Company Limited (OGDCL), Pakistan’s largest state-owned oil and gas company, faces a storm of criticism following an audit report exposing severe mismanagement in its procurement processes. The delay in installing compression facilities at key gas fields has resulted in an alarming production loss of Rs. 44,167.182 million, raising questions about accountability and operational efficiency within the organization.
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Major Delays and Losses: The report by the Auditor General of Pakistan for FY 2022-23 highlights OGDCL’s failure to meet critical deadlines for installing compression facilities at KPD-TAY, Dakhni, Uch, and Qadirpur gas fields. These delays have caused:
- KPD-TAY Gas Fields: Production loss of 39,364 MMCF gas and 598,863 barrels of oil, valued at Rs. 21,744.200 million. A 15-month delay in starting a reservoir study and a two-and-a-half-year delay in contractor hiring exacerbated the situation.
- Dakhni, Uch, and Qadirpur Gas Fields: Combined production loss of 49.518 BCF gas, valued at Rs. 22,422.982 million.
At Qadirpur, compression facilities were installed only in April 2022—four years after the reservoir study recommended modifications. This delay resulted in a steep production decline from 83,846 MMCF to 61,979 MMCF.
Critical Issues Identified:
- Inefficient Procurement Process: Reservoir studies for Uch gas fields were conducted repeatedly between 2016 and 2021, causing tendering delays. One tender was annulled in February 2021, and the next took eight months to initiate.
- Project Stalled by Forex Shortages: The Finance Division’s non-allocation of foreign exchange has currently stalled KPD-TAY’s compression project, which requires an additional 16 months post Letter of Credit issuance.
- Penalty Risk at Uch Gas Field: The lack of a compression facility may lead to the supply of off-spec gas to Uch Power Private Limited, risking penalties of up to $600,000 per day under the Gas Sale Agreement (GSA).
Audit Findings and Recommendations: The audit report underscores systemic inefficiencies, attributing the delays to poor project planning and mismanagement. It emphasizes that:
- OGDCL’s procurement timeline is unreasonably long, taking 3-4 years for contractor procurement alone.
- Delayed projects on declining gas fields amplify losses, with production from ten KPD-TAY wells halted until June 2023.
The Departmental Accounts Committee (DAC) directed OGDCL to rationalize procurement timelines, submit detailed progress reports, and expedite compression facility installations.
Impact and Call for Reform: The delays not only compromise Pakistan’s energy sector but also burden the national economy, especially at a time when energy shortfalls persist. Urgent measures are required to identify and address gaps in OGDCL’s processes to prevent such costly missteps in the future.
This saga reflects the broader challenges in Pakistan’s public-sector enterprises, where inefficiency and bureaucracy often eclipse opportunities for growth and efficiency. The question remains: Will OGDCL take corrective action or continue to operate at the cost of national resources?
