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  • Oct 3rd, 2017
  • Comments Off on KP offers incentives to attract investment in oil & gas sector
The provincial government of Khyber Pakhtunkhwa is offering attractive incentives to woo local and foreign investors for investment in the oil and gas sector of the province. Khyber Pakhtunkhwa is producing crude oil to the tune of 53,322 barrels per day and natural gas to the tune of 443 million cubic feet per day and LPG to the tune of 550 tons per diem and planning to increase the same to 200,000, 2,000 and 3,000 respectively.

Currently, Khyber Pakhtunkhwa contributes over 50 percent of Pakistan crude oil production, 15 percent gas and 25 percent of LPG produced by the province alone with new Geological Frontier (Unexplored terrain) where 10 energy and power companies are active. The provincial government through Planning and Development (P&D) Department had started work on the framing of first-ever investment policy to attract domestic and foreign investors.

In this connection, the provincial government is also consulting stakeholders to include their inputs in the draft investment policy and last week consultations with the representatives of various chambers of the province and representative of the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) was part of such initiative.

In the proposed policy, the provincial government is highlighting both potentials and incentives offered by it to the investors and seeking their recommendations in making them further investors' friendly. The government of KPK through Khyber Pakhtunkhwa Oil & Gas Company Limited (KPOGCL), a corporate body to interact and facilitate oil and gas exploration and production and services companies. This autonomous institutional arrangement has very encouraging response from the international and national investors.

The oil and gas exploration and production companies in Khyber Pakhtunkhwa (Zone 1) receives the highest price of oil and gas produced compared with other zones of the country. This attraction makes the sector as one of the most promising tenet of the provincial economy and further augmented with the huge reserve base of the oil and gas in the province out of which the maximum is yet to be explored while having an exploration success ratio of 1:2.8.

The incentives offered by the provincial government are included the provision of effective and immediate security for full tenure of the oil and gas exploration projects at subsidized rates, zero rate provincial sales tax during exploration phase, including seismic and drilling phases.

After declaration of commercially PST would be at the rate of 20 percent. Therefore, no PST would be charged during exploration phase, including seismic and drilling phase. The incentive would reduce the unwanted burden on investors looking to discover hydrocarbons in KPK. However, once there is a discovery, 20 percent PST shall be charged.

The KPOGCL would provide pre-feasibility studies of highly potential projects with technical data and facilitation at step wise regulatory approval to award of project and would prove support in conducting detailed bankable studies with manpower and technical expertise.

The provincial government also offers G2G agreements also if federal or provincial foreign governments have 51 percent or more shares in the company. These companies would be eligible for obtaining Petroleum Concession Blocks without participating in the bidding rounds. Thus instead of 100 percent ownership, the state-owned companies even with 51 percent ownership would be eligible for G2G agreements to get the Petroleum Concession Blocks. These state owned companies to apply for petroleum concession blocks with KPOGCL who will pursue it further.

Training funds is to be 75 percent during exploration phase and 115 percent during production phase, which is to be reduced to 75 percent in exploration phase from 100 percent to reduce the cost of the investors and subsequently to be raised to 115 percent in production phase. First 3 years royalty shall be 11.5 percent instead of 12.5 percent and later on will be 12.5 percent.

Production bonus 5 percent discount first phase, then 102.5 percent and 5 percent rebate in production phase in first tier. Environmental Protection Agency (EPA) will issue no objection certificate (NoC) in only 15 days as compare to present period of three months, land acquisition in three months.



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