Exploration and production: Proposed policy puts wellhead price at $6/mmbtu

ASMA RAZAQ & ABDUL RASHEED AZAD

ISLAMABAD: The Ministry of Petroleum and Natural Resources is likely to forward new 'Exploration and Production Policy' to the Economic Coordination Committee (ECC) wherein the gas wellhead price has been proposed to be fixed at more than $6/mmbtu for exploration activities in future.

Well-placed sources told Business Recorder that the oil and gas exploration activities remained victim of terrorism especially in Balochistan that is one of the main reasons behind the slow exploration activities in the country.

"Now the government has decided to introduce the new exploration and production policy aims at fixing wellhead price at more than $ 6/mmbtu to encourage investment in the sector within the region," sources added.

"The policy was supposed to be presented in the Cabinet much earlier but it was delayed due to some unknown reasons," sources said.

They said the law and order situation may dampen this initiative. "If the existing gas producers are offered better gas exploration prices than what they are getting today, the overall gas production can go up to 30 percent of the existing level of production," sources added.

The wellhead price of gas is $2.5/mmbtu that is less then the drilling cost per mmbtu gas which is obviously discouraging for the local as well as global investors. "If, according to the upcoming policy, the government keeps the wellhead price of gas at $6/mmbtu, no doubt the investors would be encouraged and the new gas exploration activities would pick up to cope with the current shortage of gas across the country.

According to sources, to enhance investment opportunities for the global oil companies, it is the need of hour that the government take certain steps such as enhancing the potential to discover large oil and gas fields, oil and gas discoveries should be given priority due to the development costs and the product mobility and the availability of the transport infrastructure including pipelines and LNG terminals.

In Pakistan, the risk factors that have proved to be a hurdle in the way of foreign investment carried out by the oil companies include; exploration risks, changes in the government policies under political influence and last but not the least terrorism threats.