ISLAMABAD: The government has allowed TAL Joint Venture to sell gas from Mamikhel South discovery to third party with the condition that relevant rules and procedure will be followed in letter and spirit and no adverse financial implications may be caused to the Government of Pakistan, well informed sources told Business Recorder.
On January 17, 2023, Petroleum Division informed the forum that the ECC in its earlier decision of June 13, 2022 had allowed a fresh examination of the case in light of the provisions of Pakistan Petroleum (Exploration and Production) Rules, 1985, Petroleum Concessions Agreement and relevant facts of the case. Pursuant to CCI decision of November 24, 2017, Petroleum Policy was amended to include imposition of Windfall Levy on oil/ condensate to PCA executed under 1994 and 1997 Petroleum Policies.
It was further noted that all exploration and production companies including TAL Joint Venture were advised to incorporate amendments, issued from time to time in PCAS, signed under 1994/ 1997 policies within stipulated time, failing which working interest owners shall not remain eligible for gas price incentives.
However, the companies challenged the matter in Islamabad High Court and obtained stay orders against the decision and since then the matter was subjudice. The Division stated that on order of the Court, the matter was being referred to CCI for reconsideration.
Energy ministry tells ECC: Gas from Mamikhel can help reduce circular debt
The Petroleum Division apprised the forum about the new discovery namely “Mamikhel South” that was made in the TAL Block on July 14, 2020 with a gas flow of 20 MMSCFD and condensate flow of4300 barrel per day. Subsequent to that a development and production lease for three years was granted from January 14, 2021.
Recoverable reserves for gas are 15.1 BCE and 2.51MMSTB of condensate. However, due to ongoing litigation, the field could not be put on production. With a view to bringing the field on production, a summary for ECC was processed proposing allocation of gas to SNGPL at a wellhead gas price under 2012 Petroleum Policy on provisional basis pending litigation. However, the summary was withdrawn based on verbal requests of JV Partners for reconsideration of the recommendation of Petroleum Division. Subsequently, several meetings were convened with the Working Interest owners on the early production and sale of gas.
According to Petroleum Division, now M/s MOL had indicated that they had concluded an arrangement for 3rd party buyer for the sale of gas from Mamikhel South field under Article 10.1(iii) of PCA. It was added that the case had been thoroughly examined and legal opinion was also obtained wherein stance of M/s MOL for sale of gas to 3rd party was supported. It was noted that this was the first time a company had approached for involving Article 10.1(iii) of the PCA.
Petroleum Division further stated that the Working Interest Owners had indicated to sell the gas to 3rd party, which would result in windfall levy on gas (40% of price over 2012 Petroleum Policy price) (Rs.5.0 billion assuming $ 9/MMBT price for 3rd party sale) to the Government. It was added that the Provincial Government would also receive higher royalty due to higher gas price (Rs.1.5 billion assuming S9/ MMBTU price for 3rd party sale). Around 4300 barrels per day of condensate would also be available. Moreover, this would encourage investment in upstream sector resulting in more discoveries in the area.
There would be immediate availability of gas (approx. 20 mmcfd) which would also result in import substitution of around $ 241 million assuming LNG price @ $ 15/MMBTU. Petroleum Division continued to explain that the State-Owned Entities (SOEs) had around 70% working interests in the TAL Exploration Licence, which would indirectly benefit the Government of Pakistan in the form of increased dividends and taxes. This would also be an opportunity to enable private sector participation and reduce the circular debt.
Petroleum Division informed the ECC that the working interest owners had expressed their intent for early monetization to ensure timely payments. Petroleum Division recommended that TAL Joint Venture may be allowed sale of gas from Mamikhel South discovery to third party in accordance with Article 10. l (iii) of PCA, which was a sovereign document.
During the ensuing discussion, SAPM on Finance supported the proposal with following observations: (i) relevant rules and procedure should be followed in letter and spirit and no adverse financial implications be caused to the Government of Pakistan; (ii) mode of utilization of gas should be implemented consistent with option/ mode of gas utilization as indicated in the Development Plan submitted under 33 (1) of Pakistan Petroleum (Exploration and Production) Rules, 1986; and (iii) in the event that the President or his nominee is unwilling to purchase all or a portion of any working interest owner’s share of petroleum, it should be disposed of at competitive prices. After detailed discussions, the ECC approved the summary of Petroleum Division along with observation of SAPM on Finance.
Copyright Business Recorder, 2023
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