Oil & gas exploration sector: Investment efforts hamstrung by security clearance delays

A parliamentary committee was informed on Friday that delay in security clearance of Defense Ministry is a big hindrance in attracting foreign investment in oil and gas exploration sector.

Senator Mohsin Aziz chaired a meeting of the Senate Standing Committee on Petroleum. The committee was briefed about the Petroleum Policy 2012, the rights/ shares of provinces under the Article 172 (3) of the Constitution of Pakistan 1973 and the details of concession agreement and CSR responsibilities of the companies under the policy.

Secretary Petroleum Mian Asad Hayaud Din informed the committee that the Petroleum Division has been waiting for the security clearance of at least 24 blocks to oil and gas exploration & production companies for the last six months.

Earlier, Directorate General Petroleum Concessions (DGPC) told the committee that the present government awarded blocks in November 2018 with a delay of four years as security clearance from the Defense Ministry could not be received.

The chairman committee asked the Petroleum Division to complete the pre-bidding process for blocks under a time framework.

The committee was further informed that 1,088 wells have been explored for oil and gas and 1,440 wells have been developed. The success rate is 34 percent. As many as 394 discoveries have been made. Out of total, oil was discovered in 85 wells and gas was discovered in 309 wells. Around 133 active exploration licenses were issued and 183 were awarded active D&P leases.

Imran Ahmed from the DGPC briefed the committee that the total oil and gas production in the country for the year 2018-19 is 89,030 bbl per day oil and 3,935 MMCFD gas. The overall energy mix of the country comprises gas 34%, LNG 9%, oil 31%, LPG 1%, coal 13%, and other sources 8 %. The total sedimentary area was told to be of 827,268 square kilometers and the area under exploration is 224,976 square kilometres. As of today, the total discoveries have been 394 with 85 of these of oil and 309 of gas with a success rate of 34%.

The Petroleum (Exploration and Production) Policy 2012 which governs the complete process associated with this sector was approved by the Council of Common Interests. The briefing also included the process of awarding blocks, the fiscal regime and licensing zones, producers' oil and gas pricing mechanism, royalties and income tax, incentives for unconventional hydrocarbons and other obligations including social welfare in the local population. The ministry was directed to work on inclusion of senators in the social welfare committees across the country in addition to the members of the National Assembly. The committee also sought complete details of the amount of money has so far been spent on corporate social responsibility and social welfare and details of development or infrastructural work done.

The committee was told that other than Khyber Pakhtunkhwa, the three provinces have not yet nominated focal persons who will work with the DGPC to ensure smooth implementation of the Article 172(3) that talks about joint and equal vesting of oil and gas productions. The committee decided to write a letter to the chief secretaries of the three provinces in this regard.

The secretary petroleum further said that a separate regulatory body to regulate upstream oil and gas industry is in pipeline; however, the Division opposed the proposal floated by the provinces. He explained that Division has viewed that experts from the oil and gas sector should be made members of the board of regulatory bodies, rather then non-technical representatives from the provinces. The committee was informed that the government is giving incentives to E&P companies depending on the zones. The Zone-I is considered high risk and high cost zone and fiscal incentives are more. The KP province also falls in Zone-I. Another zone including former Federally Administered Tribal Areas (FATA) regime will also be introduced shortly which has high risk and high cost, added the secretary petroleum.