Upstream regulatory body on cards

New authority will take provinces on board while regulating petroleum affairs

Zafar Bhutta June 03, 2021
To ensure independence, the upstream industry regulator’s main source of funding will be levies on the entities it regulates. PHOTO: FILE


The government has decided to set up Pakistan Petroleum Upstream Regulatory Authority with the objective of taking provinces on board while regulating affairs of the upstream industry.

At present, the director general petroleum concession (DGPC) regulates the upstream petroleum industry.

The draft Pakistan Petroleum Upstream Regulatory Authority Bill 2021 has been submitted to the Cabinet Committee for Disposal of Legislative Cases for approval.

As soon as the bill gets the green light, the functions of DGPC will be transferred to the upstream regulatory authority. A new office of Directorate General Exploration and Production (DGEP) will be set up with full participation from the provinces.

The DGEP will have the responsibility of policy implementation in the exploration and production sector as per policy guidance.

The current DGPC’s technical and regulatory functions will also be transferred to the upstream regulator.

The new regulator is envisaged to function independently under the guidance of federal government and administrative structure of the Cabinet Division.

Read more: Petroleum Division amends LPG policy draft

Its functions will include overall monitoring and compliance, exploration monitoring, area and development planning as well as forecasting.

It will also have the mandate to notify wellhead gas prices for the producers. It will monitor field development plans, operation and production (including environmental compliance, community engagements, health and safety compliance, and fiscal compliance), cessation of production and removal of facilities.

The new regulator will keep a close watch on data management, forecasting and evaluation, implementation of respective rules/ policies, inspection and audit of upstream activities.

The regulator’s actions will be based on the existing petroleum rules, the Petroleum Act 1948, and the new draft legislation for setting up the upstream regulatory authority.

While there will be additional regulatory responsibilities, the existing legal rights covered under the Production Sharing Agreement and Petroleum Concession Agreements will be maintained to ensure investment.

To ensure independence, the upstream regulator’s main source of funding will be levies on the entities it regulates. The funding will be in line with the revenue received in the form of industry fee.

Although the regulatory authority’s budget will be approved by the government every year, the funding model will provide a more direct link between the regulator, the activities it regulates and the tasks it needs to perform.

For constitutional amendments pertaining to locally produced natural gas under the 18th Amendment of 2010, the federal government and provinces had initiated dialogue on reforms in the institutional structure of upstream petroleum sector.

The main theme of the dialogue was to ensure requisite representation of provinces in the management of petroleum resources.

Under this programme, major measures have been taken over the years to meet the needs of the sector and all stakeholders have agreed that an independent, upstream sector regulator should be appointed.

The government believes that establishment of an efficient and competent mechanism for oil and gas exploration can help achieve policy objectives and meet Pakistan’s specific needs.

The major objective of the Petroleum Policy 2012 is to accelerate oil and gas exploration and production through increased fiscal incentives to attract domestic and foreign investment, which will ensure energy security and self-sufficiency, and help reduce reliance on imported energy.

Published in The Express Tribune, June 3rd, 2021.

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