ISLAMABAD: The government is preparing a draft in order to separate the functions of policymaking, regulation and administration of the exploration and production (E&P) sector, announced Special Assistant to Prime Minister on Petroleum Nadeem Babar.
Speaking at the launching ceremony of Pakistan Energy Outlook 2019 on Monday, Babar said the initiative would help streamline matters related to the E&P sector and attract further investment.
“It is not fair that policymaking, regulation and administration of E&P contracts are being looked after by the sole office of the Directorate General Petroleum Concessions,” he said. “You cannot be the judge, jury and hangman at the same time. We have to separate them.”
As a result, a draft had been prepared, which would be sent to the quarters concerned in the coming months as the existing mechanism had created numerous ambiguities and problems in the award of E&P contracts, he pointed out.
The petroleum sector had been divided into five key areas which included oil and gas, E&P, refining and marketing, pipelines and gas distribution, liquefied petroleum gas (LPG) and liquefied natural gas (LNG), Babar added. He informed the audience that some policy changes had been made to facilitate new companies in the E&P sector and 10 unnecessary steps had been abolished out of the 24 to 30 steps required for getting approval to start drilling activities in potential areas.
“We want to move away from an approval-based concept to a complaint-based concept,” he said while expressing hope that in the coming months the country would have a better integrated energy plan.
He called for opening the market to the private sector as it would extend them maximum facilities and allow them to operate comfortably and play their role in meeting the country’s energy requirements.
The special assistant said it was strange that the private sector could not sell oil, gas and electricity to consumers directly, adding there must be an environment of competitiveness, which would give benefits to both the companies and the consumers. “Besides, it will give a boost to business activities in the country,” he added.
“In the public sector, the entities were running in financial losses despite knowing the cost of providing a service as they never charged the full cost of service,” he said. “They were used to giving heavy subsidies to the consumers, which multiplied their financial woes and made their operational viability difficult.”
He was of the view that the cost of providing a service should be brought down and actual recovery should be made.
“If you do not do that and continue to rely on the public exchequer, it is the most inefficient use of subsidies,” the special assistant stated.
He said the root cause of a problem should be found, instead of addressing it through regulation, adding “we have so much room to fix these things and frankly, we can change the direction of this economy very quickly, for which realisation is a must.”
The government had decided to encourage the private sector to make investment in the LNG sector, he stated. Babar added that only 27-30% of the population had access to piped gas and almost 70% were deprived of the facility, adding until more domestic gas was produced, the expansion in gas infrastructure was not viable.
He said three oil refineries, out of the five existing facilities, were inefficient and the government had announced a 10-year tax exemption for them to increase their capacity.
“Under the strategy, new players will enter the petroleum sector and the inefficient ones will have to quit,” the adviser said. “An environment of competition will be ensured.”
Published in The Express Tribune, September 3rd, 2019.