MoP submits low BTU gas exploration policy to ECC: minimum 10-years tax holiday proposed

The Ministry of Petroleum and Natural Resources has submitted ''Low BTU Gas Exploration and Production Policy 2011'' to the Economic Co-ordination Committee (ECC) of the Cabinet, proposing a minimum 10 years tax holiday as an incentive to the producers for gas fields development to meet the growing energy requirements, it is learnt.
Sources said that government intends to restructure the oil and gas sector and wants for this purpose a new petroleum policy and a low BTU policy. The tight gas policy has already been approved and the Ministry of Petroleum has now submitted to the ECC a low BTU gas policy for approval.
An official said that the low BTU Gas Policy, 2011 is aimed at achieving fast track development and production of gas from the existing discovered Low BTU gas reservoirs which have remained dormant due to poor economics. Seven fields, five in public sector, and two in private sector, are Low BTU gas field in the country. The public sector low BTU fields reportedly are Nandput, Panjpir, Uch, Bahu and Sara West of Oil and Gas Development Company Limited (OGDC) and Kandra of PEL as well as Yaqiat of DPL.
The policy objectives are to provide an opportunity to the investors for exploration and production of Low BTU gas which would help increase the power generation capacity of the country and reduce the energy deficit; (ii) generate additional revenue for the government in the form of Royalty and Taxes; (iii) improve balance of payments position by reducing the need for import of other fuels such as LNG and fuel oil requiring massive foreign exchange outflow; (iv producing additional power at affordable tariff for the consumers by using indigenous gas resources; (v) boosting local manufacturing of equipments for production of Low BTU gas.
Sources said that policy submitted to the ECC offers various incentives and proposed that no windfall levy would be applicable to the low BTU gas production. The operating losses would be allowed to carry forward for a period of 15 years. The provision of petroleum policy 2009 would be applicable with respect to remittance of proceed abroad and the first production bonus applicable to the grant of a development and production lease of a low BTU gas field shall be waived.
The policy has also proposed that exploration and production companies would be entitled for a minimum of 5 years retention period to determine various development options and marketing of gas from the date of approval of development plan. The retention period may further be extended for another 5 years to implement the development plan. Such retention period of 5 years or 10 years as the case may be, shall not form part of total lease period. The Ministry of Petroleum has recommended to the ECC that the proposed Low BTU Gas (Exploration & Production) Policy 2011 which provides sufficient incentives to the investors may be approved to develop the Low BTU gas fields in the country.