The federal government has made security clearance mandatory for the companies intending to start reconnaissance survey for exploration and production of Coal Bed Methane (CBM), hydrocarbon gas contained in coal seams, official sources told Business Recorder.
"The CBM exploration and production companies should only be given specific timeline for the proposed work programme, subject to security clearance by the government organisations concerned for carrying out reconnaissance survey," the sources quoted the Economic Co-ordination Committee (ECC) of the Cabinet as directing the petroleum ministry.
The ministry had submitted a summary to the ECC in the case of the Cathay Oil and Gas Limited (COGL), a Canadian incorporated company, which intend to conduct aerial reconnaissance survey covering an area of 40,000 square kilometers of the entire Indus Basin by applying USA''s BellGeospace technology using USGS aircraft with the US government''s approval.
As a condition to make investment, the company has demanded exclusive rights for exploration and production of CBM, not to be supplied in the local market, but used in their own petrochemical plants and sold at deregulated prices besides a unified regulatory control over all the related operations in respect of coal mining, coal gasification, coal seam water production and CBM.
Sources said the Sindh government had taken up the matter with the federal government, saying that CBM was the by-product of coal, which should be regulated by the province.
However, the petroleum ministry was of the view that the CBM was hydrocarbon and was covered in the definition of petroleum, under the regulatory jurisdiction of federal government.
The petroleum ministry had proposed that the matter should be transferred to the federal government who may regulate the licensing of local mining and CBM operations, saying that the constitution should be amended for this purpose.
The second option was that the federal government may transfer the powers and functions to regulate CBM to the provinces under article 146(1) of the Constitution.
Sources said the ECC cleared the second option with the directions that the provincial licensing authority would issue exploration and production licences for CBM after due diligence and obtaining necessary performance bonds from the intending companies.
They also said the ECC also endorsed the ministry''s suggestion to constitute a Dispute Resolution Committee (DRC) under the chairmanship of the petroleum minister with the petroleum secretary, representative for defence ministry and provincial mines and mineral secretaries as its members to resolve possible disputes pertaining to natural resources.
However, the ECC said the federal law minister and secretary, defence division secretary as well as the provincial ministers along with the secretaries should be taken on board.
Sources said the petroleum ministry has been directed to notify the transfer of powers of the federal government to the provincial governments under article 146(1) in consultations with the law ministry.
The ministry has also been asked to forward the guidelines being followed for oil and gas exploration to the provincial government for suitable adoption for CBM exploration, the sources maintained.
However, the agreement with the provinces would stipulate the period for which the matter is being transferred to them.
"All the relevant documents, including agreement with the provinces, performance bond and contract documents with the intending companies would be formulated in consultation with the ministries of petroleum and law," the sources quoted the ECC as directing the provincial governments.
As regards the petroleum rights, the company needs to follow the procedure as given in the petroleum rules and no specific exemption or exclusivity would be granted to the company in any manner whatsoever and it would provide a level playing field for existing and new entrants, the sources added.