The approval of the Petroleum Exploration and Production Policy 2012 at the forum of Council of Common Interests (CCI) reiterates that the provinces and centre are on the same economic agenda for the development of the country. It is the first policy that will be testing the centre, provinces relationship after the devolution that occurred through the 18th amendment within the constitution.
The objective of this comprehensive policy is to establish the policies, procedures, tax and pricing regime in respect of petroleum exploration and production sector. Provide new stimuli for increasing exploration and production investment by modifying current contracting terms and incentives while taking into account the current market conditions.
The policy provides:
-- Transparent and non discriminatory licensing and contracting regime and providing a balance between prices and incentives to suitably compensate exploration and production risk.
-- Accepting the demand of the provinces, the Directorate General of Petroleum Concessions (DGPC) will be reorganised comprising of federal and provincial representatives.
-- Licensing will be done in three different zones ie Zone-I (West Balochistan, Pashin and Potohar Basins), Zone-II (Kirthar, East Balochistan, Punjab platform and Suleman Basins) and Zone-III (Lower Indus basin).
-- Royalty will be payable at the rate of 12.5% of the value of petroleum at the field gate. The royalty will be paid in cash or kind to provinces to the extent of their share of liquid and gaseous hydrocarbons (such as LPG, NGL, Solvent oil, Gasoline and others) as well as all substances including Sulphur, produced in association with such hydrocarbon.
-- For the first time 10 percent of the royalty will be utilized in the district where oil and gas is produced for infrastructure development. Production bonuses will be expended on social welfare projects in and around the respective contract areas according to guidelines to be issued by the provincial government from time to time.
-- The government will purchase 90 percent production from the E & P companies and they will have right to sell 10 percent of their share directly to any buyer with the prior consent of the provincial government.
-- Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL) will be responsible for laying of pipelines to the field gate delivery point for which they will get tariff on transportation of gas as approved by OGRA. For offshore, the gas will be delivered at the nearest access pint to an existing regulated transmission system or at the shore within coastal locations. This step will expedite linking of natural gas reserves with the national transmission network.
Offshore is the most prospective area for exploration and development activities and the new policy provides enhanced incentives for investment in the two basins; Indus Basin and Makran Basin. The Indus Basin is the second largest offshore basin in the world after Bengal delta. This basin is analogous to other producing basins of the world in terms of geological setting eg Mississippi Delta (Gulf of Mexico, USA), Niger Delta (Nigeria), Mahakam Delta (Indonesia), Mackenzie Delta (Canada) Gippsland Basin (Australia). A bonanza of US $1/MMBTU shall be given for the first three discoveries in offshore area. A commercial discovery in offshore area is likely to bolster exploration activities transforming petroleum landscape of Pakistan in major way.
As the oil and gas exploration gets momentum, the E & P companies can come across gas discoveries with energy content (British Thermal Units or BTU) ranging from almost 100 BTU/SCFT to 1200BTU/ SCFT. The normal economy context of the pipeline quality gas is considered to be anything above 900-1000 BTU /SCFT. If the heating value is lower, the cost of producing energy increases manifolds for producing the same amount of energy. The producers are required to incur additional cost on drilling of more wells and oversized gas gathering systems.
Therefore, the government has already notified Low BTU Gas Pricing Policy 2012, which is aimed at fast tracking development and production of gas from the existing discovered Low BTU Gas reservoirs which have remained dormant due to poor economics. The utilisation of low BTU Gas which would help increase the power generation capacity of the country and reduce the energy deficit, as well as additional revenues for the government in the form of royalty and taxes.
For the successful implementation of the E & P Policy, a special committee, headed by the Petroleum Minister will be constituted to look into removal of difficulties, addressing anomalies, framework for institutional development and strengthening of the Policy Wing. Hopefully in next few years, the domestic oil and gas exploration will increase and will help core issue of national security, national self-reliance as well as economic stability.
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Achievement of Present Government
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A Gas Network Expansion
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Gas Network (Kms) Punjab KPK Sindh Balochistan Total
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Transmission 408 309 134 28 879
Mains (Distribution) 20,329 3,979 7,048 687 32,043
Services 3,990 903 1,584 308 6,785
Total 24,727 5,191 8,766 1,023 39,707
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B- Investment in Gas Network (Rs Million)
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Transmission 5,391 4,083 2515 506 12,495
Mains (Distribution) 20,302 3,974 23,085 2,166 49,527
Services 2,618 592 1,735 197 5,142
Total `28,311 8,649 27,335 2,869 67,164
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C- Category wise New Connections ( Nos ) and increase in consumption (MMCFD)
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Category/Province Punjab KPK Sindh Balochistan Total
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Domestic 928,344 159,297 442,511 52,680 1,582,832
72 23 50 5 150
Commercial 12,649 1,533 6,201 688 21,071
14 1 - - 15
Industrial 1,492 280 1,107 16 2,895
(171) 29 15 (6) (133)
Total 942,485 161,110 449,819 53,384 1,606,798
(85) 53 64 (1) 31
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D - Investment on new Connection (Rs Million)
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Domestic 4,717 809 1,480 190 7,196
Commercial 542 66 42 4 654
Industrial 2,019 379 213 3 2,614
Total 7,278 1,254 1,735 197 10,464
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LNG Policy 2011 Marginal and Stranded Gas Policy
(under preparation)
LPG Policy 2011 Guidelines for Flared Gases (under preparation)
LPG Policy 2011 (Under preparation) Legislation for Theft and Sabotage
Tight Gas Policy 2011 Reduction in UFG
Low BTU Gas Policy 2012 Gas Infrastructure Development Cess Act, 2011
Petroleum Policy 2012 Deregulation of Prices of Petroleum products
Purchase of Pro-gas Terminal ($2.8 billion)
Shale Gas Policy Gas Conservation and Efficiency
(under preparation) (summary under circulation)
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