The government will give deadline of 18 months to oil refineries to upgrade the petroleum products according to the set international standards they would be asked to pack up otherwise. Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim stated this at a press conference here on Friday.
He said that the government was working to give processing fee to oil refineries and after determining the actual processing fee, they would be given a deadline of 18-month period to upgrade the petroleum products. He said that international processing fee is $3-4 per barrel. He lamented that despite giving 10 percent deemed duty, these oil refineries had not expanded their operations and they even failed to set up de-sulphuration plant.
He said that the oil refineries have not been refining according to international standards and they would have to reduce sulphur content in diesel and lead in petrol to meet the set standards. "If they do not upgrade the products as per international standards, they will pack out and new investment will be brought in the country," he said, adding that these oil refineries were receiving $10 per barrel through deemed duty, when the global oil prices stood at $147 per barrel.
He said that the previous government had made some wrong decisions and made agreement with one oil refinery that the government would give incentive to it if it did not get 25 percent return on the equity, and government found way to give 10 percent deemed duty to all oil refineries to support them. "The decision of reducing deemed duty from 10 percent to 7.5 percent was taken when I was heading a committee on oil pricing," he said.
He said that new petroleum policy would be ready in the next two weeks, the and the government was working on a social welfare package for the people in it. He said that the government would directly transfer production bonus from oil and gas exploration companies in new policy 2009 to the provinces for social work that would remove the sense of deprivation in the provinces, he said, adding that companies would deposit the amount of bonus production in the provincial accounts.
He expressed commitment to enforce the policies made by the current government. He showed dissatisfaction over the oil and gas exploratory wells and said that total oil and gas discoveries stood at 219 wells that included 54 wells of oil and 165 wells of oil, gas and gas condensate. "I want to see 100 oil and gas exploration wells in the current year," he said. The government had set a target of drilling 90 wells of oil and gas during the current year 2009 to meet country's oil requirement, he added.
He said that total gas production was 4 billion cubic feet per day (bcfd) and its constraint demand was 6 bcfd whereas unconstraint demand was 9-10 bcfd.Total oil production is 77,000 barrels per day and its requirement is 3,77,000 barrels per day. He said that total exploration drillings occurred in 725 wells that accounted for 12 wells per annum that was not satisfactory performance.
"I want to see100 drilling wells during the current year," he said, adding that there were no attractive incentives for the investors to move for oil and gas exploration activities in the former policy for the last two year. "We have given attractive incentive in the new policy that would attract the investors for exploration activities," he said.
Dr Asim said that the number of oil and gas discovery was 3 wells in the year 84, 31 wells in year 88, 7 wells in 2002. He said that exploration discoveries were 41 wells in the year 2005-06 that dropped to 14 wells in year 2007-08. "I have set the target of 90 drilling wells in the year 2009".
He said that OGDC had owned 8 rigs whereas it had taken 12 rigs on rent from the private sector. Private sector oil and gas companies had also 20 rigs. He said: "My view is that drilling wing in OGDC should be separated for effective drilling activities in the country."
He noted that OGDC and PPL would hold oil and gas exploration drilling activities in foreign countries and PPL was currently in negotiation process with Yemen in this regard. "We will hold oil and gas drilling activities in Iraq, Nigeria and Sudan to bring oil to Pakistan," he said, adding that offshore drilling activities had been started in Pakistan. BP and ENI are working in this area.
He said that OGDC had not taken any loan from the government for oil and gas exploration activities and it has managed from its own resources. OGDC was to recover Rs 40-50 billion from different entities and Finance Ministry was working to clear this circular debt. The former government had taken oil worth $6 billion free of cost from the Saudi government. He said that present government had paid subsidy of billions of rupees on the petroleum products.
He said that 25 fields were closed in Balochistan due to poor law and order situation in the past and present government had opened 16 fields for drilling activities. He said that companies had also agreed to allocate money for security purposes to involve the local people.
The first choice of company will be Pakistan to provide oil for the country requirement and they would be able to export the surplus oil but the government would have some share in oil export as per formula. He said that the government would also receive 12.5 percent royalty and 40 percent income tax from oil and explorations, thus receiving 52 percent.
He said that Iran is ready to go ahead on Iran-Pakistan-India gas pipeline project even without India, "and we are waiting for the final response from the Iranian side on gas pricing deal". He said: I will take up the gas price issue before the Parliament after finalisation between Iran and Pakistan. He added that gas price demand by Iran is greater and imported gas from Iran would not be feasible for the domestic consumers as it would cost $11-12 per mmbut.
He said that Pakistan was ready to link the gas price to 70 percent of crude oil. He said that according to current demand of Iran gas price, Pakistan would have to pay $250 million per month at $40 per crude oil price that would be escalated to $500 million per month at $100 per barrel crude oil.
However, he said, imported gas from Iran would be fruitful for power generation that would be cheaper from furnace oil. He said that IPI was a commercial project and international donors would be asked to provide lending for the project. He said that transportation cost of imported gas from Iran would cost $1 per mmbtu that would be included in cost of gas.
He said that a Chinese company will initiate $2.1 billion power generation project on run of the river at Kohala Tunnel, and added that the government was working to change policy to generate energy from alternative resources. He noted that Chinese company had deposited 1 million dollars guarantee to government of Pakistan to initiate the project. The government is also working on coal gasification and many other energy projects with the co-operation of Chinese government.
He said that Chinese government had provided $1 billion budgetary support to the current Pakistani government and has a commitment of $5 billion with the present government. "Pakistan and China are working closely to make energy bank to cooperate in the energy projects in Pakistan," he said.