The federal government has made the decision to renew the Sui Mining Lease (Sui ML) agreement between the Government of Balochistan and Pakistan Petroleum Limited (PPL) for a duration of 10 years, commencing from June 1, 2015, to May 31, 2025. This renewal entails a firm payment of Rs 36 billion and a contingent payment of Rs 24 billion, totaling Rs 60 billion, according to sources familiar with the matter.
During a meeting of the Council of Common Interests (CCI) on January 29, 2024, the Petroleum Division was directed to proceed with the favorable renewal of the Sui ML and present a summary to the Economic Coordination Committee (ECC) for its approval, acknowledging it as a special dispensation for the province of Balochistan.
The Sui ML was initially granted to Pakistan Petroleum Limited (PPL) for a period of 30 years from June 1, 1955, under the Pakistan Petroleum (Production) Rules 1949. Subsequently, it was extended for another 30 years from June 1, 1985, to May 31, 2015. Following the expiration of the lease, discussions ensued to ensure the continuity of gas production from the Sui field.
The Government of Balochistan (GoB) expressed concerns over the extension of the lease without their involvement, leading to engagements resulting in the execution of a Memorandum of Agreement (MoA) on May 20, 2016, between the Ministry of Energy (Petroleum Division) and GoB. The MoA outlined procedures for collaboration to extend the Sui Gas Lease and included provisions such as the conversion of Sui ML into Sui Development & Production Lease (Sui D&PL), an increase in wellhead prices, a lease extension bonus, and financial obligations.
However, disagreements arose, with GoB refusing to sign the Petroleum Concessions Agreement (PCA) and other documents, while PPL failed to fulfill its financial obligations. Consequently, a committee was constituted by the former Prime Minister to address the matter, recommending a payment of Rs. 12 billion as part of the Lease Extension Bonus (LEB) out of the total commitment.
Following detailed discussions and assessments of the scenario, the Petroleum Division has recommended a payment plan totaling Rs 36 billion, with Rs 12 billion to be paid initially at the signing of the D&PL/PCA. The remaining payments will be made in installments until May 25, 2025. Additionally, a contingent plan involving Rs 24 billion has been devised. The renewal agreement will be signed before the first payment of Rs 12 billion, and future arrangements beyond May 31, 2025, will be determined within the validity period of the D&PL as per applicable petroleum rules.
Contingent payments will be subject to improved collections by PPL from Sui Companies and an increase in gas prices for consumers.
