Petroleum policy: New PD terms could discourage $5bn potential investment

ISLAMABAD: The Petroleum Division has prepared a framework for allocation of gas to third party proposing amendments that can create hurdle to $5 billion investment in oil and gas exploration, sources said.

The representatives of exploration companies met Prime Minister Shehbaz Sharif and pledged $5 billion investment that was linked with the amendment in petroleum policy to allocate 35 percent of gas to third parties, the sources maintained.

The caretaker government had approved amendment to petroleum policy and increased share of gas allocation to third parties from 10 to 35 percent.

Oil, gas firms say will invest $5bn in 3 years

It has reportedly said that the Petroleum Division prepared a framework to table before Executive Committee of the National Economic Council (ECNEC) approval with terms that could jeopardise about $5 billion worth of expected investment from national and international players in the Exploration and Production (E&P) sector of the country.

According to industry sources, over seven months have passed since the Council of Common Interests (CCI) approved amendments to the Petroleum (Exploration and Production) Policy, 2012. Despite this, the Petroleum Division now prepared a framework for ECNEC, allegedly diverging from the spirit of the CCI’s decision and potentially putting the $5 billion investment at risk.

Local and international firms, in a meeting held in the first week of July 2024 under the chair of Prime Minister Shehbaz Sharif, announced an investment of $5 billion during the next three years in Pakistan’s oil and gas exploration and production sector.

A delegation from the sector informed the meeting that around 240 potential reserve sites would be excavated with the investment of $5 billion to explore petroleum and gas.

On January 26, 2024, the CCI approved a summary submitted by the Petroleum Division to amend the Petroleum (Exploration and Production) Policy, 2012. The approved amendments allow E&P companies to sell up to 35 percent of their pipeline specification gas to third parties without government approval, provided the sale is conducted through a competitive process and the prices are not lower than the wellhead gas prices under the 2012 policy.

During the fiscal year 2024-25, companies will be able to offer up to 15%, in FY 2025-26 up to 20%, in FY 2026-27 up to 25%, in FY 2027-28 up to 25%, in FY 2028-29 up to 25%, in FY 2029-30 up to 30%, in FY 2030-31 up to 35%.These companies will be allowed to offer up to 35 percent allocation in FY 2031.

The amendment does not apply to Extended Well Tests (EWT), appraisal, development wells, and up-dip or down-dip potential wells production. According to framework, a benchmark for each E&P Company will be formulated, above which the 35 percent will apply.

Copyright Business Recorder, 2024