Khyber Pakhtunkhwa will receive a receipt of Rs 24.682 billion during financial year 2017-18 from the federal government in heads of royalty on oil and gas and development surcharge and excise duty on gas. The province has been blessed with vast natural resources like water, forests, minerals, gem stones, oil and gas.
Huge deposits of oil and gas were discovered in the southern belt of the province, including district Kohat, Karak and Hangu. As of May 2016, an area of around 360,716 square kilometer is under exploration for oil and gas throughout the country, 32,018 square kilometer of which is in Khyber Pakhtunkhwa.
The payment of receipt by the federal government in head of oil and gas was started in the year of 2004-05 with a small amount of Rs 487.271 million, which during last fourteen years had climbed to Rs 23.024 billion in 2016-17 while for the next financial year the province will get Rs 24.682 billion in the head.
The receipt include an amount of Rs 10.185 billion in royalty on crude oil, Rs 9.574 billion royalty on gas, Rs 1.731 billion in head of excise duty on gas and Rs 2.518 billion in head of gas development surcharge respectively. According to 7th NFC Award, Khyber Pakhtunkhwa's share in the net proceeds of the total royalties on crude oil in a year is equal to the proportion of crude oil produced in Khyber Pakhtunkhwa in the year out of the total country wide production of crude oil.
Ten companies are presently working in Khyber Pakhtunkhwa, which shows promising prospects of oil and gas exploration in the area. The Oil & Gas Development Company Limited (OGDCL) has licenses and leases for the most of the area, followed by MOL and MPCL. Other companies operating in Khyber Pakhtunkhwa are Hycarbex, Al-Haj, OPL, PPL, Tullow and Tallahssee.
Royalty on oil/gas is payable by the exploration and production companies to the government at the rate of 12.50% of the wellhead value. It is payable monthly within 10 days of the calendar month in question as per Rule 36(2) of the Pakistan Petroleum Exploration and Production Rules, 1986. The wellhead value is determined by the government of Pakistan after every six months.
Khyber Pakhtunkhwa is the first province to have established a Provincial Oil and Gas Company (OGDCL) in 2013 under the administrative control of Energy and Power Department to carry out fast track exploration and production of oil and gas. The company is headed by an independent board having majority membership from private sector.
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 Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) 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.