Contrasting views: ENI wants higher gas price from government

Italian firm says its investment decisions were based on incentives offered

ISLAMABAD: ENI wants Pakistan to give a higher price for additional gas under the petroleum policy of 2012.

The Italian company, which has been operating in Pakistan since 2000, said that it took investment decisions since November 2012 based on the incentives supported by the operating committee resolution.

It added that through its joint venture it invested $187 million to utilise the incentives, producing additional gas of 38 billion cubic feet that saved the Pakistani government around $86 million.

In June, a meeting was held to settle the dispute but the issue remained pending with officials stating that more time was needed to resolve the concerns.

During the meeting, Director General Petroleum Concession (DGPC) Saeedullah Shah said that the assertion of elimination of sole reliance on outdated field development plan (FDP) through amendment in policy 2013 does not hold ground.

He added that the assumption of extension of reservoir in entire ‘B’ could not be substantiated as the well went dry that changed the entire concept behind the grant of lease over both areas of ‘A’ and ‘B’ as well as the corresponding well based on production profile. Therefore, Shah said, the claim is not justifiable.

According to Shah, FDP should have been revised at the time of execution of the lease deed on September 16, 2012 by reflecting volumes projected to be produced from the Bhadra field at that time.

ENI has drilled a number of wells without amending the FDP. Shah further stated that there were several instances in the development of Bhadra field which required ENI to submit revised FDP which had not been done. The full field development of the Bhadra discovery was undertaken on the basis of the results of 3D seismic, various geological studies completed before 2008.

Kamran A Mian, commercial and legal manager ENI, informed that Kirthar Block was awarded to the Kirthar joint venture in 1994 which made two discoveries - Bhit in 1996 and Bhadra in 1998.

The Bhadra appraisal programme comprising production test and re-entry/deepening of Bhadra-1 well was completed in 2003 and on August 28, 2003 the declaration of commerciality and field development plan was submitted to DGPC. Consequently, Bhadra leases were awarded on January 8, 2004 followed by execution of Bhadra lease on September 16, 2012.

He explained that clause 13.8 of the 2012 petroleum policy provides an incentive of the said policy price to exploration and production companies to enhance gas production. He said that this higher volume committed in the approved field development plan or current production which is the daily highest production in six months preceded the announcement of revision in the policy.

He said that investment decisions since November 2012 were based on the incentives.

He stated that all requirements of revised clause 13.8 of 2012 petroleum policy had been met and therefore, additional production from Bhadra was entitled to the gas price set out in the 2012 petroleum policy.

Published in The Express Tribune, August 2^nd, 2016.

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