While the domestic oil and gas exploration and production companies have kept themselves busy in the drilling and exploration activities especially during the last phase of low crude oil prices, the foreign investment picture of the sector has been sluggish. FDI in the country has not revived, and E&P sector’s share in annual FDI has been falling drastically from an average of 34 percent between FY12-FY15 to 6 percent in FY18. Moreover, global producers have been scaling back and disinvesting their upstream oil and gas businesses in the country.
The is a dire need to correct this declining trend to give a significant boost to the falling foreign investment in the country. Though the Petroleum Policy 2012 has been the most comprehensive and investor friendly of all the previous policies announced, addressing issues like incidence of high corporate taxation relative to the other sectors; incoherencies in regulations, delayed timelines and approvals could go a long way.
The government now is apparently working on a new petroleum policy to revamp and revitalize investment in the sector and improve the regulatory environment of the oil and gas drilling and exploration activity in the country. Some key features include empowering the E&P companies more in their exploration and drilling decisions, reducing timelines and simplifying the approval process to encourage local and foreign investment in the sector.
Amid other incentives, the government is planning to set up a task force for providing security to foreign companies going into areas where the security situation is compromised. There are also talks of special incentives to players working in existing fields to encourage them to continue their drilling and production activities as recoverable reserves decline. Also, as reserves continue to deplete, the E&P companies – local and foreign – are likely to venture into wildcat fields or areas already exploited or with unproven reserves. To encourage investment such areas, the government is considering setting up new zones in addition to the existing three onshore and one offshore zone. These new zones are likely to have higher wellhead pricing because they would comprise of high-risk area of Balochistan and the KPK. Apart from the policy proposals under discussion, the government is preparing to auction at least 10 new exploration block in the coming months.
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