Dar-led body okays 35% gas for third parties

Decision to attract $5b investment, play role in controlling debt

ISLAMABAD:

A 20-member task force on gas-related issues, led by Deputy Prime Minister Ishaq Dar, has approved the sale of 35% of future gas discoveries to private companies through competitive bidding.

Despite opposition from Petroleum Minister Musadik Malik, Dar gave the much-awaited approval to attract investments of $5 billion in the oil and gas exploration and production (E&P) sector.

This decision comes in light of the Council of Common Interests' (CCI) directive, which seeks to revitalise the gas sector and address its ongoing challenges. Industry sources have described the decision as a positive development for Pakistan's energy sector. They believe this policy can play a significant role in controlling the gas sector's circular debt as well as contribute to resolving the longstanding energy crisis.

The Dar-led committee approved 35% gas allocation to a third party with a cap of 100 million cubic feet per day (mmcfd) to pave the way for $5 billion investment in oil and gas exploration activities.

Sources revealed that while the petroleum minister ultimately agreed, he insisted that there should be a cap on gas allocation. Therefore, the committee decided to place a cap of 100 mmcfd. Sources said that the cap would be applicable for the first year of gas exploration and would be reviewed next year.

The industry has welcomed this decision. Universal Gas Distribution Company CEO Ghiyas Abdullah Paracha stated that it was a good decision to attract investment.

He told The Express Tribune that it would help to curtail circular debt and improve cash holdings of exploration companies. He added that this move would also benefit the industry by providing access to cheaper gas, thanks to the opening of the market.

According to sources, Ishaq Dar communicated that the government was going to hold the bidding for offshore blocks at the end of December. He said that this decision would attract companies to participate in bidding and make investments.

Earlier, ExxonMobil in a joint venture with Eni, OGDCL and PPL made efforts to drill an offshore block in Karachi but did not get successful results. However, officials were of the view that the government and companies gathered data during exploration activities that would help in future drilling of offshore wells.

During the previous caretaker government, the CCI increased the share of gas allocation to third parties from 10% to 35% in a bid to open the gas market and improve the cash flow for oil and gas exploration companies. However, the petroleum minister prepared a framework for policy implementation, which sparked controversy. He proposed that this increase in gas allocation should be implemented in phases till 2031. This created unrest among the oil and gas exploration companies.

The CEOs of companies also met Prime Minister Shehbaz Sharif, where they raised concerns over delay in implementation of the gas allocation policy.