Wellhead prices expected to rise 6 per cent

Published: June 16, 2010
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Increasing international fuel rates could cause prices to surge next month

Increasing international fuel rates could cause prices to surge next month

KARACHI: The first semi-annual wellhead price revision for the fiscal year 2011 is expected to be announced next month. The revision would be based on international Arab Light Crude and High Sulphur Fuel Oil (HSFO) prices in the period from December 2009 to May 2010. During this period, international fuel prices witnessed an increase of eight to nine per cent.

Wellhead prices are expected to rise up to six per cent, according to JS Global Capital analysts.

Wellhead gas prices in the country are revised on half yearly basis, depending on the average Arab Light Crude and HSFO prices in the preceding six-month period.

The average price of Arab Light Crude increased eight per cent to $77 per barrel during this period versus $72 in the previous six months. Similarly, HSFO prices increased by nine per cent to $459 per ton in the same period.

Decline in dollar-rupee parity to improve benefit

Rupee also depreciated by around two per cent against the dollar from December 2009 to May 2010. This fall in the exchange rate would further improve the gas pricing for the Exploration and Production (E&P) companies.

Six per cent hike likely in Sui & Kandhkot prices

Sui and Kandhkot wellhead prices are expected to rise six per cent and JS Global analyst expects that Pakistan Petroleum will benefit from this as the two fields contribute around 80 per cent of total gas production of the company.

Other uncapped fields to witness two per cent rise

Other than Sui and Kandhkot, gas fields governed under the Petroleum Policy 1997 are also likely to witness a rise in the vicinity of two per cent versus the existing wellhead prices. Sawan, Miano, Pariwali, Pindori and Turkwal are key fields operating under the 1997 policy.

On the contrary, fields governed under the policy of 2001 including Manzalai, Makori and Mela would not be subject to revision in wellhead prices due to $36 per barrel cap on their pricing formula.

Published in the Express Tribune, June 16th, 2010

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