Wednesday, September 21, 2011

New petroleum policy for oil and gas exploration companies of Pakistan

As the nation is facing a severe energy crisis, the govt of Pakistan has therefore decided to offer an additional incentive of 67% higher price on domestic oil production and up to 33% on gas production to speed up exploration of oil and gas resources in the country.
It has been learnt that the govt would offer up to $2/MMCF for offshore and shale gas discoveries over and above the existing $6/MMCF conventional gas producer price to encourage fresh investments in difficult gas structures.
According to the sources, the fresh incentives were cleared by Prime Minister Yousuf Raza Gilani during a meeting with Petroleum Minister Dr Asim Hussain on Tuesday. The incentives would be announced in three weeks after formal approval by the Council of Common Interests and the federal cabinet.
Under the new policy, the government will give an additional $1 per MMCF on first three offshore discoveries in addition to the existing producer price of about $6 per MMCF. Likewise, an additional incentive of $2 per MMCF will be given on first three discoveries of shale gas over and above the price available to conventional producer companies.
Gas utilities will be responsible for laying gas pipelines from the processing plant at the wellhead gas field to the main transmission system to reduce the investment required for work by exploration and development companies working in Pakistan.
At the moment gas producer companies are required to lay gas pipeline from the wellhead to the transmission system. As a result, almost half of the investment goes to the pipeline instead of gas production. Small gas producers find it economically unviable to lay the pipeline and instead abandon their production and development plans.
The new petroleum policy has increased the floor on oil production from the existing $30 to $50 per barrel.
Under the new policy, gas utility companies — SSGC and SNGP — will invest in pipelines and their expenditures will be made part of tariff and recovered from end consumers by  OGRA.

The new policy also seeks to reduce appraisal period for gas discoveries from two years to one year and exploratory period from nine years to six years. It allows gas producers to sell 10% gas of their production directly to consumers.

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