As Oil and Gas Exploration and Production Companies have agreed on price higher by 40 to 50 percent for tight gas fields than the price announced in the Exploration and Production Policy 2009, the Ministry of Petroleum has asked provinces to furnish their comments on 'Tight Gas Policy' within three weeks for tabling the policy again before the Council of Common Interests (CCI) for formal approval.
The Tight Gas Policy may also be referred to the Implementation Commission on the 18th Amendment after its formal approval by the CCI. It has been estimated that cost of tight gas will be $6.5 per mmbtu after granting price incentives as compared to imported gas ie $12.3 per mmbtu. The proposal is also being considered to form an independent body on the pattern of Indus River System Authority (Irsa) to resolve the disputes between provinces and federal government after implementation of Tight Gas Policy.
Some exploration companies were awarded tight gas fields but they had not been able to make headway due to lack of price incentives. Under the new Tight Gas Policy, exploration companies have now shown interest in initiating work on the blocks where it was abandoned due to low price. Officials said the country had potential of 40 trillion cubic feet of gas from tight fields and the recovery rate would be around 12 trillion cubic feet gas.
Sources told Business Recorder that in a high level meeting held on Saturday, the Ministry of Petroleum said that provinces would be taken on board in implementing Tight Gas Policy. The meeting was also attended by provincial authorities and oil and gas exploration companies representatives to discuss the draft of Tight Gas Policy.
"We have asked provinces to furnish comments on the draft of Tight Gas Policy within two to three weeks so that the formal approval of the CCI could be sought," sources said, adding that during the meeting, representatives of oil and exploration and production companies supported the price incentive decided by the government in Tight Gas Policy.
The CCI in its meeting on February 1, 2011 had approved in principle Tight Gas Policy that will offer 40 to 50 percent higher price than that of price announced in Exploration and Production Policy 2009 to attract the exploration companies to invest in tight gas fields. The CCI had also decided to take provinces on board while granting licenses to the Exploration and Production companies to recover gas from tight fields.
Conventionally, lease is granted to exploration companies for 30-year period including extension period but in case of Tight Gas Policy, lease will be granted for 40 years that includes 10-year extension. Exploration companies will be given 40 percent higher price over and above wellhead price announced in Exploration and Production Policy 2009. But the companies which succeed in recovering gas from tight fields in two years will be able to get 50 percent higher price.
Provinces said that after the 18th Amendment, they had 50 percent exploration rights and therefore they should be taken on board while granting licenses to exploration companies for tight gas fields. "The Petroleum Ministry has assured to take provinces into confidence while granting exploration rights for the fields in the respective provinces," sources added. The people of the area will be taken into confidence and the development of the area will be part of the policy.