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Oil spill leads BP to close Pakistan Operation

BP – British Petroleum is United Kingdom’s largest company in addition to the third largest energy and fourth largest company [overall] in the world. The company based in St. James City has been carrying oil drilling operations in Badin District of Pakistan over the years. But the news is prevailing in local and international media that BP is closing down all operations in Pakistan.

A U.A.E. based Oil company is willing to buy the shares of BP in Pakistan. The sources of BP reveal in media that the final decision would much likely to be announced once they shall conclude their meetings with Government of Pakistan in Islamabad.

British Petroleum is in stress due to financial crises being faced due to Deepwater Horizon Oil spill*. It was April 20 2010 when the semi-submersible exploratory drilling rig in the Macondo Prospect field in the Gulf of Mexico blowout. It immediately sank two days later cause killing of 11 people.

It is one of the biggest oil spills and a black mark on the declining reputation of BP’s environment caring measures. It was BP that named as one of the ten worst companies based on environmental and human rights record by Mother Jones Magazine in 2001 & 2005. Earlier in 1991 BP was cited as most polluting company in the US based on EPA toxic release data.

BP has been responsible of hundred of oil spills earlier to April 2010. But current one is really a tough ask for BP in the toughest of time. A rough estimate quotes that the gusher is flowing with oil of 40k to 60k barrels per day. This is affecting 6500 square kilometers of costal areas of Mississippi, Louisiana, Alabama, Texas and Florida.

As BP is being declared responsible by U.S. government of the spill, so they have a responsibility to clean the spill and compensate the effected. The cleaning process is costing US$ 7 million a day to BP that in BP’s view; destroying their resources. BP has created a US$ 20 billion spill response fund that is a major spoiler of their US$ 61 million profit per day as per 1st quarter results of 2010. In addition to it BP has to pay US$ 5 billion in next two quarters of 2010 to settle their liabilities.

In order to support them financially and strategically they have to cut their US$ 10 billion in assets, dividend and cap-ex budgets. They have already seen a significant decline in their share price. After a deep water oil spill they have seen their share price comes to US$ 29.20 from US$ 60.70 within 50 days from April 20 2010.

In my view the scenarios for BP are worst. In this situation when BP has no other option then selling their drilling fields in Badin the government of Pakistan has to put her socks up. It is the high time when we can negotiate with BP to take over BP ops in the portfolio of Pakistan based oil companies rather than giving easy way to U.A.E. Company.

In this regard Government of Pakistan can purchase shares of BP and resell the same to Pakistani companies or consortiums by a proper public offering process. This can bring handy returns to government and our oil drilling operations in Badin can be in our own control.

It must have to be a joint effort of Ministry of Petroleum, Finance and Privatization. We have a real chance to structure a transaction that can benefit Pakistan and take control of brisk oil drilling activities under the portfolio of distressed BP. But this can not be done if our government reacts slow and careless. We need to bring top investment bankers on board for negotiating transaction with BP.

Let us see what will come out in a couple of days in this regard. We have two things to see. First; globally how British Petroleum can manage to secure their current capital structure as they can face bankruptcy? Second; we have to see how well our government can spoil this opportunity?


* An oil spill is a release of a liquid petroleum hydrocarbon into the environment due to human activity, and is a form of pollution. The term often refers to marine oil spills, where oil is released into the ocean or coastal waters. Oil spills include releases of crude oil from tankers, offshore platforms, drilling rigs and wells, as well as spills of refined petroleum products (such as gasoline, diesel) and their by-products, and heavier fuels used by large ships such as bunker fuel, or the spill of any oily refuse or waste oil. Spills may take months or even years to clean up. [Wikipedia]

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Nazir Memon Says:

BP Pakistan is a criminal organisations. It is gang of criminal, cheaters and liars. Communities from Badin, a coastal district in southern Pakistan , protested against alleged violations by oil conglomerate BP at the World Social Forum on Monday (January 22), accusing the company of neglecting community interests while making large profits form mineral resources, writes Shafqat Munir. "Badin the oil and gas rich district of Pakistan is the poorest area on the human development index with only 3% girls’ education and 10-15% boys education and limited health, livelihood and potable water facilities," said Dr Akash Ansari, a leader of Badin Rural Development Society (BRDS). "The reason is very simple. British Petroleum is extracting oil and gas in huge quantities and earning billions of dollar, but not even one percent of this profit is being spent on community development and environment protection, even though the company claims they are doing this." BP denies that it is neglecting local people saying it offers "financial support to projects in health, education and infrastructure development." But Dr Ansari said that: "if the company was fulfilling its claims, the district would not still be the poorest district in the country."

24 - December - 2010 10:47:01 PM

Aqeel Says:

Dear Omer sahab! Accept my good wishes upon writing on such an aritcle and connecting it with Pakistan to strenghten our economy. Now i would like to see how our goverment reacts and deal with it. Please expand your efforts little more to capsule the subject i am talking about. God Bless You AAK

13 - October - 2010 08:31:18 AM

Muniba Masood Says:

I am student of M.Com - Finance at University of Karachi and CMA Finalist at ICMAP. I am ex-employee of BP Pakistan. I am extremely sad at the current sitaution and divestment of exploration and production operations in Pakistan of BP. Life and its circumstances are really very uncertain and unpredictable. Things change in a second. I have learnt 'Nothings Lasts Forever' Regards,

15 - August - 2010 04:54:32 AM

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Mr. Omer

Mr. Omer [1982 born] started  his professional career as a commercial / investment banker after achieving Gold Medal in Finance at master level from University of Karachi in 2006.

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