Sui lease extension: PPL to pay 10% bonus to Balochistan

Wellhead gas price set at 55% of the rate set in 2012 petroleum policy

ISLAMABAD: Pakistan Petroleum Limited (PPL) will pay 10% of wellhead gas price as lease extension bonus to the government of Balochistan for the oldest Sui field that is producing gas for the last 60 years, officials say.

The federal government had granted mining lease for the Sui field, located in Dera Bugti, Balochistan, to PPL for 30 years starting from June 1, 1955, which was subsequently extended for another 30 years from June 1, 1985 to May 31, 2015.



At present, the field is producing 437 million cubic feet of natural gas per day (mmcfd) and its remaining reserves are estimated to be more than 1.6 trillion cubic feet.

According to officials, the Ministry of Petroleum and Natural Resources had informed the Economic Coordination Committee (ECC) that it had signed a memorandum of understanding (MoU) with the government of Balochistan, which fixed the wellhead gas price for Sui field at 55% of the price set in the petroleum policy of 2012.

Under the MoU, PPL will pay 10% of the wellhead price as lease extension bonus to the Balochistan government. The company will also pump an investment of Rs20 billion into exploration activities during the lease period in the province.

During discussions, a general consensus was reached between representatives of the Ministry of Petroleum and the government of Balochistan that the new arrangement would be covered under the 2012 petroleum policy.

The ministry was of the view that the wellhead gas price may be set at 50% of the petroleum policy, which would allow PPL to operate the field commercially. As Sui gas is being supplied to the transmission and distribution companies - Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) - the proposed increase in Sui gas price would also lead to a rise in consumer prices.



The Balochistan government, however, insisted that being a joint and equal owner of the resources, it wanted the wellhead price to be set at 100% of the 2012 petroleum policy, which would generate maximum royalty income for the province.

After detailed deliberations, both sides agreed to fix the wellhead gas price at 55% of the petroleum policy with 10% of the value as lease extension bonus.

Published in The Express Tribune, June 9^th, 2016.

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