Call to resolve issues of royalties, ownership through CCI: conference on oil and gas opens

Experts at a conference have urged the federal and provincial governments to device "investor-friendly policies' and resolve issues of ownership and royalties through Council of Common Interests (CCI) to realise post-18th Amendments constitutional obligations.
Speaking at a two-day conference titled "Oil and Gas in Federal System: Policy Choices for Pakistan," arranged by Forum of Federation and Center for Civic Education Pakistan with the support of German Foreign Office, here Saturday, the experts underlined the need for new exploration licensing regime, price fixation mechanisms, revenue earning, royalty determining and its payment, drilling wells of the oil and gas among federal and provincial governments require immediate attention.
They said the CCI is the only forum where equal representations are given to each federating units and they could easily address their problems there. The experts were of the view that Pakistan is confronting severe energy shortfall and required appropriate measures to address the issue.
Punjab Secretary Finance Tariq Bajwa said energy shortfall has badly affected the province and only textile export worth $850 million incurred losses along with closer of about 1300 small and medium size industrial units across the province. After 18th Amendment, the Federation totally hanged and the responsibility shifted from federal govt to provinces, but there are multiple issues between the federal and provincial governments and the CCI is the only forum where these matters could be resolved. He suggested that the CCI should deal with all the decisions and new policy on oil and gas should be approved by the CCI instead of the Cabinet if the center to consult provinces. To deal with energy shortfall, the provincial government of Punjab has set up a new department of energy.
After the 18th Amendment the provinces have become 50 per cent owners of the assets of oil, gas and minerals. "This requires creation of federal institutions with adequate representation of provinces, instead of the institutions of the federal government," said secretary finance Punjab, Tariq Bajwa.
Former Federal Secretary Petroleum and Natural Resources, Dr Gulfaraz Ahmad informed the participants that Pakistan is greatly under-explored and is also very deficit in indigenous production of oil and gas and imports a third of a million barrels of oil daily that eats up more than 40 percent of the total export earnings. We need to increase exploration and production of oil and gas as a national priority. But this is highly capital and technology intensive. Public sector does not have enough capacity or technology to carry out the required level of activity. So our thrust lies in the private sector. Our challenge is to attract investment in high risk upstream petroleum sector. Post-18th Amendment, a technical committee has been created under the DGPC that includes provincial representatives to resolve the regulatory issues. Since the passage of the 18th Amendment, there is a stalemate in the award of licenses for the new system to crystallise.
Khyber Pakhtunkhwa Finance Secretary Sahibzada Saeed Ahmad informed the participants that several petitions have been filed in Peshawar High Court and the people from where oil and gas discoveries were made demanded more incentives. Although the provinces were made 50 percent owners of oil and gas and other mineral resources, but this is not sufficient.
Former Senator Taj Haider said after making 50 percent owner of natural resources, the provinces should also be engaged in policy-making including price fixation and other matters. He said the government imposed Gas Development Surcharge (GDS) but why not Oil Development Surcharge. He also questioned that gas companies faced lots of problems viz royalty of provinces fixed by about 12 percent.
Dr Ishaque Baloch, Vice President National Party said Balochistan remains most poorest and underdeveloped province in terms of development infrastructure, economic stability, education, health, employment, urbanisation and self-reliance. Balochistan contributes and produces more than it receives ie gas, electricity, minerals, etc. Bad Governance is a hurdle in trickle down effect. He suggested that input from the federating units should be considered in policy-making decisions such as agreements policies in exploration of natural recourses share etc and even in foreign policy, the war against terrorism, and international relations.
George Anderson President Emeritus FoF Germany explaining the world prospective of oil and gas said the theory largely favours federal assignment and its uneven distribution can cause disparities among federating units. He said size of petroleum sector critical to nature of issues and dynamics of politics in federations. Ownership, management and fiscal powers are distinct concepts and can be combined in very different ways. Similarly sharing of petroleum revenues, which can be a highly emotional issue, can be handled very differently, he added.
Whatever the constitutional arrangements, there are strong reasons for engaging local communities in producing areas to address their concerns and give them some stake in the activity, he maintained. Executive Director Center for Civic Education of Pakistan (CCEP) Zafarullah Khan said that exploration, ownership and management of oil and gas in federal countries have major economic, political and social implications both for resource rich areas, revenue and overall societal development. Sometime they also become a contentious issue between various tiers of government.