The government is likely to enhance exploration expenditure limit of Mari Gas Company Limited (MGCL) by one hundred percent to 40 million dollars from 20 million dollars per annum, official sources told Business Recorder. MGCL is a public limited company incorporated in Pakistan under the Companies Ordinance 1984.
The Government of Pakistan is holding 18.2 percent shares in the company besides 20 percent indirect holding through OGDCL. The company is principally engaged in drilling, exploration, production and sale of oil and gas. The wellhead gas price given to the Company is on cost plus basis as defined in the Mari Gas Well Head Price Agreement of December 22, 1984 signed between government and the company.
Since its inception, Mari Gas has been involved in production of gas from Mari Gas Field located at Daharki, District Ghotki. The Company has also made two additional discoveries in the same Mari Field area namely Mari Deep and SML/Pirkoh discoveries. In 2001, the Company was allowed by GoP to undertake exploration, appraisal and development activities outside Mari Field up to 20 million dollars per annum or 30 percent of annual gross sales revenue, whichever is less on the condition that all the revenues from new oil/gas fields will be credited to GPA.
The current production from Habib Rahi (shallow) reservoir of Mari Field is around 500 mmcfd dedicated to fertiliser sector, while Mari Deep is earmarked for power sector. However, at present around 60 mmcfd is being supplied to power sector by curtailing proportionate volumes from fertiliser unit, as decided in the Energy Summit. In addition, 109 mmcfd has been allocated to IPPs - 65 mmcfd to Fauji power and 44 mmcfd Guddu power plant from Mari Deep reservoir. Fauji power is already in operation while another 44 mmcfd gas is being offered to power or fertiliser sector.
At present notified wellhead price of MGCL is Rs 48.30 per mmbtu (equivalent to $0.53) as compared to $2.6/mmbtu and $4.1/mmbtu offered under 2001 and 2009 petroleum policies respectively. Due to lower wellhead price, the company is a major Gas Development Surcharge (GDS) contributor (around Rs 18.5 billion during 2010-2011).
The company has requested that cap of 20 million dollars should be removed and the company may be allowed the annual exploration expenditure fund to the extent of actual expenditures subject to maximum of 30 percent of annual gross sales revenue. The company has stated that some basic activities were carried out in the initial years of exploration, such as organising and establishing exploration department, data acquisitions, G&G studies, block acquisitions etc.
The company is now involved in fifteen operated/non-operated exploration blocks across the country, where the exploration activities are at different stages. The company has made five new oil/gas discoveries in four operated and one non operated blocks.
The company maintains that due to the exploration efforts and future work programme as per Petroleum Concession Agreements (PCA), the company has reached a stage where threshold of 20 million dollars determined in 2001 is proving insufficient which is undermining the exploration efforts of the company. The company has exceeded the allowable limit of 20 million dollars by incurring $23.481 million in 2008-09, 20.313 million dollars in 2009-10 and 23.506 million dollars in 2010-11.
The Petroleum Policy 2009 also reflects the efforts of Government of Pakistan to accelerate exploitation of indigenous natural resources by attracting foreign investment with technology as well as promoting local companies to participate in E&P activities on a level playing field.
"We have requested that the limit of 20 million dollars per annum should be enhanced by 5 million dollars every year to gradually achieve the revised limit of 40 million dollars per annum over a period of four years starting from January, 2012, subject to the same condition that the revenues from new oil/gas discoveries will be credited to GPA, thus benefiting the GoP," said an official of Petroleum Ministry.
The exploration expenditures will be subject to commercial audit by an independent firm of chartered accountants on the approved panel of SECP/SBP, for certification of the said expenditures. The audit certification shall be submitted to the Government of Pakistan. This will result in decrease in GDS of around Rs 1.8 billion.
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