Gas price as per policy demanded: OMV keen to enhance output from Latif Fields

ISLAMABAD: The Austrian Exploration and Production (E&P) company OMV has expressed interest in enhancing gas production from Latif Gas Fields by 10 percent, if government sets a gas wellhead price in accordance with the new petroleum policy.

In a letter written to the Petroleum Ministry dated March 15, the company has offered to lay a gas pipeline from Latif Gas Fields to Sawan processing plant if the government agrees to offer gas price in accordance with Petroleum Policy 2012.

The letter states that, "confirmation from the authorities that where Latif production exceeds baseline production by 10 percent on a monthly basis, the price to be applied to all production over baseline production shall be the gas price of Policy 2012."

OMV, an operator of Latif Gas Fields jointly owned by Pakistan Petroleum Limited (PPL) and Italy's ENI produces at present 25 Million Cubic Feet per Day (Mmcfd) and is paid $2.6 per Million British Thermal Unit (Mmbtu) as per 2001 Petroleum Policy. In December 2011, the Ministry of Petroleum had proposed a financial assistance of Rs 2.5 billion to Latif Gas Fields to lay a pipeline from Latif gas field to Sawan if the Latif Gas Fields produce an additional 25 Mmcfd. This proposal of assistance was opposed by Oil and Gas Regulatory Authority (Ogra) and Planning Commission of Pakistan.

"Latif Joint Venture met on March 13, 2012 to review and discuss your (ministry's) proposal made on February 29, 2012. The proposal was that Latif JV develops Latif field and connects via pipeline to Sawan plant for processing, having a dual price mechanism, which is 2001 policy price for the baseline production and the gas price in accordance with Section VI of the draft 2012 Policy, which is expected to be approved soon, for the incremental production", the letter said.

The letter added that subject to GoP confirmation that gas price of Policy 2012 will apply to Latif production over and above the baseline production (subject to the condition that the additional production is 10 percent or more than the baseline production calculated monthly), Latif JV will build a pipeline to transport Latif gas to be processed at the Sawan plant. This pipeline will be built either directly from the Latif Field to Sawan Plant or from the Kadanwari processing facility to the Sawan Plant.

Baseline production shall be understood to mean the production profiles in the Latif Field Development Plan submitted to the authorities in December 2011 (Latif FDP) with necessary modifications thereto in light of the gas volumes already produced from the Latif Field and also to account for the delay in commissioning of pipeline to Sawan Plant which was originally expected by end of 2012, the letter continues.

There will be an interim period between the grant of Latif D&PL by the authorities and the construction of the pipeline to Sawan, This period is expected to be not less than 15 months from receipt by the Latif JV of all the approvals/confirmations requested from the government, the letter concludes.