PESHAWAR: The provincial government of Khyber Pakhtunkhwa will earn revenue amounting to Rs.89.8 billion in the current fiscal year 2024-25 from oil and gas as compared to Rs.42.8 billion in the financial year 2023-24, said White Paper on the annual provincial budget.
The receipts will be paid by the federal government in heads of Royalty on Oil and Gas, Gas Development Surcharge, Excise Duty on Natural Gas and Windfall Levy. In head of Royalty on Crude oil and Natural Gas, the province will receive an estimated amount to Rs.26.2 billion as compared to Rs.25.1 billion of the last financial year while in head of natural gas it will earn Rs.11.4 billion, Rs.2.7 billion in head of Gas Development Surcharge, Rs.2.7 billion in head of Excise Duty on Natural Gas and Rs.46.8 billion in head of Windfall Levy.
According to 7th National Finance Commission (NFC) Award, the share of Khyber Pakhtunkhwa, in the net proceeds of total royalties on crude oil in a year, is the proportion of crude oil produced in the province out of the total national production of crude oil in that year.
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Royalty on Oil and Gas is payable by the exploration and production companies to the government at the rate of 12.50% of the wellhead value, 2% of which is retained by the federal government and the rest is paid to the provincial government. It is pay able monthly within a period not exceeding 45 days of the end of the month of production in question, which if delayed beyond he stipulated period would attract fine at the rate of the London Inter-Bank Offered Rate (LIBOR) plus two percent as may be determined as per Rule 38 (3) of the Pakistan Onshore Petroleum (Exploration & Production) Rules, 2013. The wellhead value is determined by the government of Pakistan, after every six months.
Gas Development Surcharge is the margin available to the government caused by the difference in the sale price for consumers as determined by OGRA and prescribed price for gas companies on the basis of their fixed return, as defined in the Natural Gas Development Surcharge), Ordinance, 1967.
The prescribed price of Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company Limited (SSGPL) is based on wellhead price of gas, excise duty at wellhead, operation and maintenance cost, depreciation and returns of gas company (17.5% SNGPL and 17% SSGCL) on assets.
Royalty and Gas Development Surcharge are inversely proportional to each other. In case, the wellhead value is more, there will be more royalty but less Gas Development Surcharge and vice versa.
As per the 7th NFC Award, ’each of the provinces shall be paid in each financial year as a share in the net proceeds to be worked out based the average rate per MMBTU of the respective province. The average rate per MMBTU shall be derived by notionally clubbing both the royalty on Natural Gas and Development Surcharge on Gas.
Royalty on Natural Gas shall be distributed in accordance with Clause (1) of Article 161 of the Constitution whereas the Development Surcharge on Natural Gas would be distributed by making adjustment based on this average rate“.
The Excise Duty on Gas is collected by the Federal Board of Revenue (FBR), and the proceeds so collected are reported to the Finance Division on monthly basis for onward transfer to provinces. Excise Duty on Gas is currently being given at the rate of Rs.10 per MMBTU.
Presently ten companies are working in Khyber Pakhtunkhwa that shows promising prospects for oil and gas exploration in the province.
KP is the first province to have established a Provincial Oil and Gas Company (KPOGDCL) in 2013, under the administrative control of the Energy and Power Department for carrying out fast-track exploration and production of oil and gas.
Copyright Business Recorder, 2024
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