EDITORIAL: It is not quite a storm yet, but the Sindh government’s opposition to the idea of oil and gas Exploration & Production (E&P) companies being allowed to sell up to 35 percent of indigenous gas to third-party buyers is slowly brewing one.
The issue pertains to the amended Petroleum Exploration & Production Policy 2012, also ratified by the 51st meeting of the Council of Common Interests (CCI) in January 2024, which the Sindh government, now wants reversed.
Sindh government’s primary contention revolves around the legality of the policy decision that was taken by the CCI under the then caretaker setup. Invoking Articles 158 and 172(3) of the Constitution, the Sindh government argues that the caretaker setup lacked constitutional empowerment to take policy decisions of such importance that may restrict exercise of authority by a future elected government, in addition to the first right of use.
It must be mentioned that the CCI ratified amendment to the Petroleum Policy 2012 clause 9, did clearly stipulate that “The province in which a wellhead of natural gas is situated should be given precedence in terms of Article 158 of the Constitution in its letter and spirit.” The Sindh government has reportedly contended that the CCI’s condition to meet overall demand before allowing third-party sales has not been followed, as it does not take into account demand from residential consumers.
Whether or not the constitutionality of the CCI decision be challenged or overturned is best left to interpretation of legal experts, but there appears merit in the argument that the gas sales framework cannot be rushed through the Executive Committee of the National Economic Council (ECNEC) without formally placing it on meeting agenda.
Reports also suggest the representative from Khyber Pakhtunkhwa participated remotely, where the participation was adversely affected by internet connectivity issues that had gripped the entire country. It goes without saying that Sindh and Khyber Pakhtunkhwa produce more than 80 percent of the country’s gas, and a matter of such critical importance, where the Constitution guarantees rights to provinces, must not be rushed through in a half-baked or non-transparent manner.
As for the merits of the proposed step itself, there are obvious benefits to be had, especially as it will ease the pressure on receivables of the E&P companies, and would unlock higher investments in exploration activities. On the flip side, losing the better paying large industrial consumers would mean added pressure on Sui companies in terms of increased RLNG diversion cost and higher losses.
What could also be of concern is the competitive bidding process, which will most likely lead to higher bids placed by buyers from outside the province. The proposed framework safeguards the right of first use only to the extent where the highest quoted bid is matched, which may not be the case very often, and that is where the Article 158 comes into consideration. With gas load management in place across the country, Sindh would always have a seemingly plausible argument to make that its current demand remains unfulfilled. It is therefore imperative that all parties strive to reach an amicable solution with unambiguous provisions prioritising the first right of use within the province of origination.
Copyright Business Recorder, 2024
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