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The Economic Coordination Committee (ECC) of the Cabinet has accorded approval, in principle to allocation of 10 MMCFD gas to the Sui Southern Gas Company Limited (SSGCL) and the provisional tight gas price incentive for Rehman-4 well in Kirthar Block subject to 3rd party certification regarding availability of tight gas, sources told Business Recorder.

The Petroleum Division, source said, informed the ECC on March 4, 2020 that the Polskie Górnictwo Naftowe i Gazownictwo S.A. (PGNiG), - Polish oil and gas company operating branch in Pakistan - was operating in Kirther block, which was granted on May 18, 2005 under the Pakistan Petroleum Policy 2001.

The Kirthar Joint Venture comprises PGNiG (operator) with 70 per cent working interest and the PPL having a working interest of 30 per cent in the block. The joint venture has entered into a supplementary agreement for availing the higher gas price incentives envisaged under the Tight Gas Policy 2011. Two separate development and production leases - Rehman and Rizp - have been granted to PGNiG. In 2015, PGNiG constructed the Rehman Production Facility (PPF) with a capability of 15 million MMCFD.

In 2017, plant capacity was increased up to 40 MMCFD, which included processing dehydration capacity. While currently, sales compression and sales marketing was limited to approximately, 60 MMCFD. So far, five wells namely Riaq 1, Rizp 2, Rehman 1, Rehman 2, and Rehman 3 have been certified by 3rd party consultants as tight gas, and have accordingly been approved for the incentives.

The company is in the process of awarding the contract to a 3rd party for certification of another well, Rehman-4. All the wells, except Rehman-4, from both leases are producing 50 MMCFD of gas.

The PGNiG had approached the Petroleum Division and the SSGC to inform that an additional volume of gas from Rehman-4 well, i.e., 10 MMCFD, can be immediately supplied to the SSGCL subject to acceptance of relaxed gas specification, and payment of supplies under the tight gas policy.

However, keeping in view the acute gas shortages in the country, particularly in Balochistan due to the severe winter and snowfall, there is a dire need to bring every available molecule on production and therefore, the request of the PGNiG may be considered in the larger national interest.

Petroleum Division proposed that pending finalization and approval of the requisite 3rd party certifications for tight gas, the gas from Rehman-4 (upto 10 MMCFD) may be allocated to the SSGCL at the applicable tight gas policy price.

The applicable tight gas pricing would however be on a provisional basis till March 31, 2020 from the date of approval of the summary, and will be subject to retroactive adjustment in case the well ultimately does not qualify as tight gas one pursuant to the 3rd party study.

After detail discussion, the ECC approved the Petroleum Division's proposal regarding allocation of 10 MMCFD gas to the SSGCL from Rehman-4 well subject to 3rd party certification. The Cabinet, in its last meeting ratified the decision of the ECC.

Copyright Business Recorder, 2020

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