Oil sector deregulation fast-tracked

PM seeks proposals for fixing uniform prices for local and imported gas

ISLAMABAD:

The government has expedited the consultation process for deregulating the petroleum sector and setting uniform gas prices for the processing industry along with wellhead, piped gas and liquefied natural gas (LNG).

Prime Minister Shehbaz Sharif has directed the Petroleum Division to work out proposals for deregulating the petroleum sector and fixing uniform prices for locally produced and imported gas.

Sources told The Express Tribune that the Prime Minister's Office had called a high-level meeting to review a host of critical issues related to the country's petroleum sector.

The premier stressed the need for detailed discussions on the long-standing issues, which were examined in earlier meetings as well.

Key topics for the briefing include the proposed deregulation of the petroleum sector, which has been under consideration for several months as well as efforts to establish a uniform gas pricing mechanism for the processing industry.

Uniform prices for wellhead gas, piped gas and LNG will also be a key point of discussion.

At present, the petroleum sector is regulated except for kerosene oil and furnace oil.

According to the initial discussions, sources said, the government considered a plan to deregulate the ex-refinery prices of petroleum products, which could be extended to ex-depot prices later.

In ex-depot prices, the government includes the inland freight equalisation margin, dealers' margin and oil marketing companies' margin.

Dealers have long been opposing the deregulation of oil prices as in a free market they will face stiff competition.

Oil industry officials complain the government has been evaluating the deregulation of petroleum sector for a long time but it has not been able to come up with any practical steps so far.

Another proposal is the introduction of uniform gas prices for oil and gas exploration companies, piped gas and imported LNG.

Sources pointed out that the wellhead gas prices were related to the hydrocarbon exploration companies; therefore it was not possible to introduce uniform rates.

Elaborating, they said oil and gas exploration companies had entered into petroleum concession agreements under different petroleum policies, which offered different wellhead prices. In this situation, it will not be possible to revise the concession agreements.

However, according to officials, it is possible for the government to introduce uniform prices for piped gas and LNG.

The previous Pakistan Tehreek-e-Insaf (PTI) government has already passed a bill in parliament to introduce a weighted average cost of gas. But provinces, especially Sindh, opposed the plan and even a case was filed in court.

Major gas-producing provinces argue they cannot subsidise gas for the consumers of Punjab and because of their reluctance this proposal will also face bottlenecks.

According to industry officials, the energy sector has been choked owing to a tussle between the bureaucracy in the Petroleum Division and the petroleum minister.

They said the minister was not happy with the work of top officials of the division, arguing that he was not taken on board while arriving at decisions at different forums.

The minister observed that, despite making requests multiple times, he had not been given a report prepared by the Sustainable Development Policy Institute on the liquefied petroleum gas (LPG) plants.

Additionally, the minister aired concern over bidding for the offshore petroleum blocks. The additional secretary, according to sources, has informed the minister that approval had been sought for bidding under the old policy and the process has already begun.

However, the minister has denied giving such an approval, instructing the top officials in the Petroleum Division that his formal nod should have been sought before pushing ahead with the process.