Body formed to review oil policy
CCOE reviewed the circular debt situation and power sector’s performance in January 2022. Photo: file
The Cabinet Committee on Energy (CCOE) on Friday grilled the Petroleum Division for tabling the petroleum policy for amendment, asking why it was seeking changes in the document which had already been approved.
However, the cabinet body constituted a committee for reviewing the petroleum policy in a bid to ramp up oil and gas exploration and production in the country.
The committee, to be headed by Federal Minister for Energy Hammad Azhar, will also analyse the amendments required in the policy.
With the passage of time, the country’s oil and gas production is falling as according to the Petroleum Division, the gas production is dropping by over 6% per year.
At the same time, there has been no major discovery of oil and gas reserves over the past several years, the meeting was told.
In the Petroleum Policy 2012, the Pakistan Peoples Party (PPP) government had announced incentives, which gave a boost to the oil and gas production. However, the gas production is now falling rapidly despite the discovery of hydrocarbon deposits in new fields.
The country now heavily depends on gas imports. Many countries import around 6% of their gas requirement as a stopgap arrangement to meet rising demand.
However, Pakistan is importing 24% of its gas needs as no major supplies are coming from new fields.
The Pakistan Tehreek-e-Insaf (PTI) government claimed that the previous Pakistan Muslim League-Nawaz (PML-N) administration had prioritised gas imports over the award of new exploration blocks to investors.
The present government also faced the same problem. Though it offered some blocks for oil and gas exploration, there was no encouraging response.
The reliance of the current government on imported gas has risen and it has allowed the setting up of two new LNG terminals despite the fact that LNG is not a permanent solution to the gas shortage.
The meeting also discussed the draft of Petroleum Sharing Agreement as per the Pakistan Petroleum Exploration and Production Policy 2012, which was approved by the Council of Common Interests (CCI).
The draft agreement will facilitate offshore exploration of oil and gas in the country. The Law Division was asked to review the draft before its approval.
Earlier, US energy giant ExxonMobil and Italian firm Eni had formed a joint venture with Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) for offshore exploration in Karachi. However, the effort failed but local companies managed to collect some data, which would help make headway in offshore oil and gas exploration.
Pakistani companies had also been awarded an offshore block in the UAE, which would enhance the capacity of state-run firms. These included Mari Petroleum, OGDC and PPL.
CCOE also reviewed the circular debt situation in the energy chain and power sector’s performance during January 2022.
The Power Division explained the changes in the economic merit order for electricity supplies by power plants due to transmission constraints and limited gas supply in January 2022.
In November 2021, the Petroleum Division revised the draft of new petroleum policy by cutting the share of incremental revenue to 30% of project cost, restricting dividend payment and adjustment of losses against the Special Reserve Account.
Earlier, the division proposed 40% contribution from the incremental revenue to the project upgrades planned by the existing refineries.
However, the CCOE made objections, prompting the Petroleum Division to revise the proposed contribution.
The division has also withdrawn tax holiday for the previously proposed period of 10 years.
A summary was tabled in a CCOE meeting on November 18, but the cabinet body deferred its decision.
Published in The Express Tribune, March 5th, 2022.
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