In the 2012 Petroleum Policy, the government had announced incentives and higher prices for exploration companies in a bid to give boost to oil and gas exploration and overcome energy crisis that has plagued the economy. The incentives are expected to bring investment in petroleum exploration and production.
In the new policy, wellhead gas price has been set at $6 per Million British Thermal Unit (MMBTU) for Zone-III, $6.3 for Zone-II and $6.6 for Zone-I. It provides a comprehensive pricing mechanism for Zone-0 with $7 per MMBTU for shallow wells, $8 for deep wells and $9 for ultra-deep wells.
Oil and gas exploration companies have been permitted to sell 10 percent of extracted gas to third parties (other than Sui Southern Gas Company and Sui Northern Gas Pipelines). They will also get the new price if they produce 10 percent more gas from existing fields over and above the development plan.
The government is to revise two main features of the policy regarding conversion regime which includes (i) New exploration efforts means "Exploration Wells" under drilling and/or spudded, after the effective date of the Petroleum Exploration and Production Policy, 2007 (ie November 27, 2007) and have not declared commerciality and (ii)The gas price of policy 2012 will also be extended to those E&P Companies which will give additional 10 percent production over and above the commitment in accordance with approved development plan by the government to the extent of additional production only.
Giving the reasons behind this decision of the ministry, the official said that E&P companies in their development plan are presenting details of discovered gas to the Ministry and normally they provide 10-20 percent below the total capacity of oil/gas discovery at any well and they could enhance the already discovered field's gas. When the government announced to give wellhead gas price as per 2012 Petroleum Policy to those companies which would enhance their production by 10 percent as a result many of the E&P companies approached the ministry with demanding of new price, but they have not enhanced their gas production as per policy instead they enhanced their gas supply so under the situation the ministry was forced to review the policy.
He said that the government has enhanced wellhead gas price for Exploration and Production (E&P) companies working in the oil and gas sector of the country from existing $4 per MMBTU to $9 per MMBTU. The government is expecting that Pakistan daily production of domestic crude oil would cross 0.1 million barrel level and Pakistan would be in a position to produce over 25 percent of its oil requirements. The government has announced to take local natural gas production to 5 Billion Cubic Feet per Day (BCFD) as compared to present production of 4.25 BCF during 2013-14 but is facing many serious challenges due to law and order situation in the potential gas producing areas.
Under the policy, the government to accelerate exploration, the period of exploration license has been reduced from 9 to 7 years, ie, 5 years initial term (Phase-I of 3 years + Phase-II of 2 years) with two time renewals of one year each, he added. Similarly, appraisal renewal period has been reduced from two years to one year.