Salient features of the new petroleum exploration and production policy2012

INTRODUCTION

Pakistan operates a concession type contract for onshore exploration whereas offshore exploration is governed by a production sharing regime. Pakistan has vast sedimentary area of over 800,000 square kilometers of which over 70% is yet to be explored. The success ratio of oil and gas discoveries is one of the best in the world as is evident from the success ratio of 1: 3.22 discovery rates. Pakistan has estimated recoverable reserves of 27 million barrels, according to the last Economic Survey. According to latest Pakistan Petroleum Institute (PPIS) statistics. That comes months after the highest level of 84,650 bpd was achieved. Average oil production was at 81,000 bpd in 2013, up 13% over the previous year with most of the increase coming from the wells located in Khyber-Pakthunkhwa. If the work continues like it is right now, then PAKISTAN should be able to achieve the target of 130,000 to 140,000 bpd in a short time. Around 76 wells were drilled last year alone. We have never seen work on so many wells being done in one year.

SALIENT FEATURESTo attract foreign investment a better gas price had been offered which includes production price of

$6 per MMBTU for Zone-III (West Balochistan, Pishin and Potowar), $6.3 per MMBTU for Zone-II (Kirthar, East Balochistan, Punjab and Suleman Basin) and $6.6 per MMBTU for Zone-I (Lower Indus Basin).

Likewise, an attractive price of $7 per MMBTU has been offered for offshore shallow, $8 per MMBTU for offshore deep and $9 per MMBTU for offshore ultra-deep zone. The existing policy offered $3.13 MMBTU for Zone-III, $3.37 per MMBTU for Zone-II, $3.6 per MMBTU for Zone-I and $3.836 per MMBTU for deep and ultra-deep offshore exploration. On first three discoveries, the companies would be offered a one dollar per MMBTU higher price to encourage them to speed up development programs.

The exploration licence period has been reduced from 9 years to 7 years and the appraisal renewal period has been reduced from two years to one year.

The windfall levy had been reduced from 50 to 40 per cent and that would offer better return to companies and the levy would be equally shared by federal and provincial governments. To determine the production price, the base price of crude oil and condensate for windfall levy has been increased from $30 per barrel to $40 per barrel which will rise each year by $0.5/barrel while the gas pricing ceiling has been increased to $110 per barrel from $100 per barrel. The exploration and production companies will be allowed to sell their gas at the mouth of gas field and gas utilities will bear the pipeline cost

Royalty will be payable at the rate of 12.5 per cent of the value of petroleum at the field gate. It will be paid in cash or kind to the provinces to the extent of their share of liquid and gaseous hydrocarbons for the first time, 10 per cent royalty will be utilised in the administrative district where oil and gas is produced for infrastructure development. Production bonuses will be spent on social welfare projects in and around the respective contract areas, according to the guidelines to be issued by the government of the province.

NAME: GHULAM ALI