Petroleum Ministry clarifies
A spokesman of the Ministry of Petroleum and Natural Resources has termed the contents of The News item “Handling of copper, gold, gas reserves questioned” appearing in the Daily News of 26th May 2004 as conjectural and without any basis.
Clarifying the factual position the spokesman said the grant of concessions for solid minerals is exclusively controlled by the provincial Governments as their Constitutional right. Mineral deposits are not discovered or proved without putting large risk capital investment on exploration. As per international practices, governments of developing countries attract international investment in mineral exploration by offering pragmatic investment friendly policies. The area of Reko Dek having reported copper - gold deposit had not even been explored by any agency till 1993, when BHP Mineral International Exploration Inc. corporation of the state of Delaware, USA (BHPM) and the Government of Balochistan (GOB) entered into a joint venture Agreement, to carry out exploration of about 8000 sq. kim in Chagai district, Balochistan for copper-gold and other associated minerals.
By virtue of this Agreement, GOB holds 25% interest in the joint venture but without any obligation to contribute towards the cost of exploration till the end of feasibility study. BHPM was to arrange loan for meeting the GOB equity at Libor+2%. By March, 2000 BHPM had spent almost US$ 8 million on exploration and identified H-4 Reko Diq prospect, which however was considered by BHPM not of large size. Additional exploration efforts and expenditure was, therefore, considered necessary to prove more reserves. BHPM as a matter of their international policy was keeping their focus on major mining projects and therefore, transferring their smaller interests to other junior mining companies with a usual provision for a claw back right in case of a major find.
As per their joint venture Agreement BHPM first offered their 75% share to GOB, who and however no resources to take over the property. GOB, therefore, agreed to waive off their right of first refusal and allow BHPM to look for any other company capable to invest in exploration. After NOC from GOB, BHPM entered into an option agreement with Mincor Resources of Australia a reputed international mining company. Mincor set up Tethyan Copper Company (TCC) in Australia having 81% share, while the rest was held by investors from Canada and Australian.
In 2001, TCC approached Ministry of Petroleum & Natural Resources through GOB and informed about its plans to develop H-4 Rko Diq as a pilot project for producing 40,000 tonnes of copper annually. TCC requested the Government of Pakistan (GOP) for grant of EPZ status to Reko Dek as had been extended to Saindak copper-gold project. The grant of EPZ status to Rekodiq was granted to expedite investment in the neglected mineral sector and development of backward area of the Country.
Regarding Rodho 2 well, OGDC had acquired a license for Rodho area in 1968 and 1994. The recoverable reserves from Rodho 2 had been determined at about 1.8 billion cubic feet (not 5 bcf) as alleged in the report. Since the size was small and not commercially viable from OGDC’s perception, it relinquished the license to the Government of Pakistan in 1998, had the ell been rich in reserved as presumed in the press report, OGDC would not have surrendered it in the first place. Subsequently the government awarded the exploration licence over Safed Koh to Scimitar Hydrocarbons Pakistan Limited alongwith MESA (a local Exploration and Production company) after a transparent process in January, 2002, OGDC could have again participated in the process but opted not to do so.
Under the Rules, any investing Exploration & Production Company which invest millions of dollars in exploration activity has the right to partially or wholly assign or transfer its working interest to any other company and it is common practice in the industry to transfer/acquire working interests. Therefore, nothing against the rules had taken place in transfer of working interest to Rally Energy Pakistan Limited. If Rally Energy has now decided to transfer its working interest to an other company, there is nothing malafide or unusual about it; the spokesman said.
Efforts should be made by all concerned including media to encourage investment including foreign investment in the Oil, Gas and Mineral sectors rather than giving straightforward transactions, a controversial appearance.
Islamabad
Link: Daily Jang: Urdu News - Latest Breaking News update Pakistan - jang.com.pk
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Original Article
Handling of copper, gold, gas reserves a big question mark
By Kamran Khan
KARACHI: An intriguing attitude of the Ministry of Petroleum and Natural Resources toward the change of foreign ownership of Pakistan’s massive copper, gold and gas reserves in Balochistan in the past two years has left Islamabad as a silent spectator to the fortunes made from its precious mineral resources by a small group of little known foreign companies, interviews with industry analysts and informed officials said.
As a result, the world’s largest copper and significant quantity of gold reserves in Balochistan are now under the control of a little known Australian company and an equally little known Canadian company that had won a major gas reserve from Pakistan for free is now selling the same facility to a Pakistani company for a hefty premium.
Industry analysts said that the Pakistan government, for reasons unspecified, made no objection when the world famous Australian company BHP Billiton decided to sell its stake in the Riko Diq copper project - considered as the world’s largest copper reserves - to a newly formed Australian company named Tethyan Copper Company Limited last year.
The government had awarded a contract to the BHP Billiton in 1994 to explore copper and gold reserves in the mineral rich Chagai range of Balochistan that also include the Riko Diq which has the potential to produce about 500 million tonnes of copper every year.
The most credible international surveys suggest that Riko Diq is one of the biggest undeveloped copper projects in the world with over 11 billion pounds of copper and nine million ounces of gold.
The industry analysts are questioning as to why the government did not opt to use its right to refuse the transfer of the Riko Diq project from the internationally reputed BHP Billiton to the Tethyan Copper Company which after acquiring the Riko Diq project raised funds for the project by floating its shares in the Australian Stock Exchange.
The Balochistan government that had the basic contract with the BHP for the exploration, a senior official conceded, could have easily used the BHP’s failure to make any significant progress in the copper and gold exploration and its decision to assign the control of the Riko Diq project to a new Australian company by seeking fresh international and local offers for its most precious reserves.
“World’s best mining companies would have rushed to Pakistan to make bid for the world’s largest copper reserve in addition to proven gold reserves,” said an industry analyst. “There was more to it that what was seen on the surface,” he added.
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