Govt agrees to auction new petroleum exploration blocks

Decision made to appease protesting provinces as govt has so far focused on imports

ISLAMABAD: The federal government, after a prolonged delay, has decided to hold a fresh round of bidding for petroleum exploration blocks in an effort to look for new reserves and appease the protesting provinces, sources say.

The present government’s focus has thus far been on gas imports to bridge the shortfall, which is why it has not been able to auction new blocks to exploration and production companies.

It had provisionally awarded licences for 50 blocks to the companies in January 2014, which was expected to attract an investment of $371 million in the first phase. However, their bidding round was held by the previous administration of Pakistan Peoples Party (PPP) before the end of its tenure in early 2013.



Since then, the current Pakistan Muslim League-Nawaz (PML-N) government has not awarded any block to the exploration and production companies. It has been banking on liquefied natural gas (LNG) imports and has ignored the country’s hydrocarbon deposits, inviting scathing criticism from energy-rich provinces.

According to sources, these provinces argued that failure of the central government over the past four years to auction exploration blocks had hampered the search for oil and gas and caused losses of billions of rupees to the provincial governments in the shape of lost royalty and gas development surcharge.

Khyber-Pakhtunkhwa pointed out that not a single block had been put up for auction since 2014 out of 35 identified sites. It also argued that the lease agreements struck before 2012 had expired and were not being renewed. That led to a loss of more than Rs20 billion in royalty earnings to the federal government whereas K-P lost Rs5.8 billion in one year due to lower petroleum production.

Sources told The Express Tribune that the provinces also took up the issue in the Council of Common Interests (CCI) - a representative body of provinces - in November 2017.

In the meeting, Prime Minister Shahid Khaqan Abbasi directed the Petroleum Division to push ahead with the next bidding round for the blocks that had got clearance of the Defence Division.

Of the 50 blocks awarded provisionally in January 2014, state-owned companies Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) won exploration rights for 39 blocks, reflecting lack of interest of foreign companies despite attractive incentives in the new petroleum policy.

Overall, eight companies got exploration rights in that round including two new ones - Canada-based Tallahassee Resources and Pakistan’s Al-Haj Enterprises.



OGDC won 29 blocks, PPL 10, one each went to Mari Petroleum, OMV Pakistan and Ocean Pakistan and Oil and Gas Investment Limited got two.

In resource-rich Balochistan, 21 new blocks were awarded including 14 to OGDC and four to PPL, in Punjab, 15 blocks were auctioned, Khyber-Pakhtunkhwa eight and Sindh six.

Published in The Express Tribune, December 26^h, 2017.

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