E&P firms dogged by uncertainty

Industry concerned over excessive delay in implementation of policies

ISLAMABAD:

An uncertain situation has afflicted oil and gas exploration and production (E&P) companies over a prolonged delay in implementing the policies approved during the last caretaker government.

At that time, the Council of Common Interests approved an increase in gas allocation to third parties by E&P companies from 10% to 35%. Additionally, it green-lighted a tight gas policy, following which the largest explorer, Oil and Gas Development Company, injected gas from the first tight gas well into the system. However, the government has yet to notify the tight gas policy.

Taking encouragement from such decisions, the oil and gas exploration companies pledged investments of $5 billion in a meeting with Prime Minister Shehbaz Sharif.

The PM constituted a committee, headed by Foreign Minister and Deputy PM Ishaq Dar, to facilitate the investment. But the committee failed to take key decisions owing to the absence of Petroleum Minister Musadik Malik and the foreign minister's engagements abroad.

Background discussions with oil industry officials revealed that several executives from E&P companies were concerned about the delay in allocation of 35% discovered gas to third parties. This has created widespread uncertainty in the industry.

Apart from that, a tug of war in the Petroleum Division has persisted between the bureaucracy and the petroleum minister over the application of policy amendments.

Director-general petroleum concessions (DGPC), who had stressed the need for implementing policy amendments in a true spirit to attract investments of billions of dollars in the petroleum sector, was removed.

A new DGPC was appointed with the acting charge, but his tenure ended after 90 days.

DGPC is believed to be a regulator of oil and gas exploration activities but his term has ended, sparking further confusion about policy implementation. During the acting DGPC tenure, according to industry players, Pakistan's energy sector has been reeling, marked by policy inconsistency, staff disillusionment and diminishing stakeholder trust, prompting urgent calls for his replacement to avert the industry's collapse.

The DGPC's mandate includes overseeing all upstream E&P activities, granting petroleum exploration rights such as licences and promoting exploration by negotiating with both foreign and local companies.

He plays a crucial role in driving energy policy forward, managing technical data and collecting government revenues via dividends, royalties and other sources. Of late, these essential functions have reportedly suffered, with stagnation in the key regulatory framework and a breakdown in the administrative order. It is pertinent to note that the Special Investment Facilitation Council (SIFC) also backed the policy of allocating 35% gas to third parties by the exploration companies.

The SIFC has been established to expedite the implementation of decisions taken by the government. Earlier, the petroleum minister told media that gas utilities had informed him that the 35% gas allocation decision would lead to the depletion of underground deposits. Therefore, he wanted a quick overview. Questions were sent to the petroleum minister, secretary and spokesperson, but they did not respond till the filing of the story.