PPL Plans Equity Investment in Reko Diq Project

Pakistan Petroleum Limited (PPL) has agreed, in principle, to make an equity investment of 8.33 percent in the Reko Diq project to explore the business opportunities in the mega billion-dollar project.

The company will make the equity investment along with Oil and Gas Development Company Limited (OGDCL) and Government Holdings (Private) Limited (GHPL), which in aggregate amounts to 25 percent of the equity in the project divided equally amongst these local players.

Besides 25 percent shares of the Pakistani companies, 50 percent of the equity will be held by Barrick, who shall also have management and operator rights. The remaining 25 percent of the equity will be held by the Government of Balochistan directly and/or through any of its owned entities, out of which, 10 percent shall be free carry of the Government of Balochistan.

According to stock filing, PPL’s board of directors has, on the basis of directions issued by the Federal Cabinet, resolved to enter into a non-binding framework agreement.

The company also agreed to pay an initial entry fee amounting to $187.5 million on the basis of directions issued by the Federal Cabinet to support the Government of Pakistan with respect to payment obligations of the Government of Pakistan for settlement of the historic Reko Diq dispute.

The State-Owned Entities had also engaged reputable financial, technical, legal, and tax consultants to advise on the transaction, the stock filing added.

The company’s participation in the project remains subject to, inter alia, receipt of internal and corporate approvals, regulatory approvals, execution of definitive long-form agreements, and other conditions precedent stated in the framework agreement. The process to finalize and approve definitive agreements, including the stabilization of the fiscal regime pursuant to the mineral agreement, would involve legislative and judicial validation.

Recently, the government claimed to have saved the country from an $11 billion penalty in the Reko Diq case and reconstituted a project aimed at excavating gold and copper reserves from the site in Balochistan.

The Federal and Balochistan governments and two international firms — Antofagasta PLC and Barrick Gold Corporation — have reached an agreement in principle on a framework to reconstitute the Reko Diq project, and a pathway for Antofagasta to exit the project.

The President of the Islamic Republic of Pakistan, on behalf of the Islamic Republic of Pakistan, the provincial government, and the interested entities, sets out, inter alia, the ownership/transaction structure, rights, obligations, and common objectives of the parties towards facilitating the implementation of the reconstitution of a joint mining project at Reko Diq, on an expedited basis.