Oil, gas industry fears policy rollback
Pakistan has made no meaningful discovery of crude oil and gas in more than two decades, increasing its reliance on expensive imported fuels to meet consumer needs. photo: reuters
Tensions have spread across the oil and gas industry as the minister of petroleum is said to have started in-house discussions to roll back the policies approved during the tenure of the caretaker government. Background discussions with industry officials revealed that they were concerned over the appointment of Musadik Malik as the petroleum minister.
Citing a key reason, they pointed out that during the previous PDM government, Malik took only two major policy steps including an agreement for LNG imports from Azerbaijan and the distribution of LPG cylinders by the public gas utilities.
However, several draft policies remained on his table for over two years. Those policies included amendments to the Petroleum Policy 2012 for gas sale to third parties, the tight gas policy and the oil refinery policy. The policies were ultimately approved by the caretaker administration, backed by the Special Investment Facilitation Council. Sources pointed out that the caretaker energy minister had been able to win approval for 60 pending summaries for the oil and gas sector.
Now, again the petroleum minister’s handling of policy matters has sparked concerns in the industry.
According to sources, Malik was holding daily meetings with senior officials to know about the rationale behind earlier policy changes, particularly the amendment to the Petroleum Policy 2012 to foster greater investment.
They revealed that the minister opposed the amendment that allowed exploration and production companies to sell 35% of gas to third parties as he believed that the policy was detrimental to the energy sector. Questions were sent to the petroleum minister for his comments on Wednesday but he did not respond till the filing of the story.
A few days ago, the Pakistan Petroleum Exploration and Production Companies Association, in a plea to the petroleum minister, also highlighted the critical situation emerging in the upstream oil and gas industry. In its letter, the association underscored the pressing need for immediate action to avert a looming crisis that could severely impact Pakistan’s energy security and economic stability.
At the heart of the problem were the mounting receivables from Sui Southern Gas Company and Sui Northern Gas Pipelines Limited, which currently stand at a staggering Rs1,500 billion.
Out of the total, over $600 million was owed to foreign companies, creating a significant barrier to investment in assets critical for domestic energy production. The delayed payments have triggered a cascading effect, leading to a marked decline in oil and gas production.
Pakistan’s upstream sector currently provides approximately 35% of the primary energy supply. Failure to address the delay jeopardises the financial health of companies,undermines energy security and foreign investment. The letter sought immediate intervention from the government to provide financial support to SSGC and SNGPL, including a budgetary grant or the tariff differential subsidy, to partially bridge the revenue shortfall.
Published in The Express Tribune, April 26th, 2024.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.