Last update: Tue, 09 Feb 2016 02am

Gas being sold to third parties: KP not being informed

Khyber Pakhtunkhwa province is not being informed about the quantity of gas that is being sold by exploration and production companies to the third parties, according to an official document. As per an official document firmed up by Petroleum Ministry in response to Khyber Pakhtunkhaw government questions, Khyber Pakhtunkhaw "province was not being informed how much gas is being sold by the exploration and production companies operating in province to third parties, thus entailing payment of windfall levy".

The province is producing around 40,000 barrels of crude oil per day and production is further picking up with new discoveries/finds. Although, the market price of crude oil is much more than the base price per barrel and resulting in a handsome amount in windfall levy (WFL), no amount is being transferred to provincial government on this account, the document added.

It further stated that exploration and production companies are liable under respective Petroleum Concession Agreement (PCA) to pay a windfall levy to government on the sale of crude oil/ condensate produced from oil fields. A total of Rs 71 billion was claimed to be collected as a windfall levy from the oil producing areas falling in Sindh and Punjab after the 18th Constitutional Amendment. Windfall levy deposited amounted to Rs 7.51 billion in 2010-11 followed by Rs 10.73 billion in 2011-12, Rs 23.75 billion in 2012-13, Rs 18.00 billion in 2013-14 and Rs 10.921 billion in 2014-15. The said amounts were accumulated from the oil producing areas falling in Sindh and Punjab provinces.

The official document further stated that the 18th Amendment acknowledges ''joint and equal'' ownership of province with federation on oil and gas resources. Moreover, the Policy 2012 has specifically included that all benefits of windfall levy (WFL) may be equally divided between the federal government and the concerned provincial government.

Refineries on behalf of the government of Pakistan purchase local crude oil/condensate from respective exploration and production companies and detect admissible amount of windfall while making payment to E&P companies against the sale price of crude oil/condensate. Subsequently, the windfall amount is deposited in the federal treasury which becomes part of federal consolidated fund. Finance Division being the custodian of federal consolidated fund is authorised to utilise the amount generated in the said fund.

In past the provision of windfall levy was not existing in the PCAs, hence no windfall is/was accrued on the crude oil produced from such old blocks. Subsequently, the provision of subject levy has been incorporated in respective PCAs due to rising prices of crude oil.

At present, windfall levy is accrued/deposited from some fields/areas falling in Sindh and Punjab provinces as per their respective PCAs. The provision of windfall also exists in some PCAs pertaining to the area of Khyber Pakhtunkhwa and Balochistan; however, the same will be payable soon after the commencement of regular production of crude/condensate. Since the amount of windfall becomes part of federal consolidated fund, Ministry of Finance may be requested for sharing of windfall levy with the provinces.

Copyright Business Recorder, 2015