E&P firms delay gas allocation

Hydrocarbon exploration and production (E&P) companies are reportedly delaying the allocation of newly discovered gas to third parties, approved by the Council of Common Interests (CCI), in a bid to help their favourite parties, which do not have licences, to enter the arena.

The CCI had approved in January 2025 the criteria for gas allocation to third parties, which should have a valid licence issued by the Oil and Gas Regulatory Authority (Ogra).

Sources told The Express Tribune that earlier some private parties were lobbying in government circles to secure gas supplies, though they did not have the required licence from Ogra.

Now, they said, these parties were exerting their influence on the oil and gas exploration companies, which claim that according to the policy private parties do not need a valid licence from the regulator for participating in bidding for gas purchase.

The policy states oil and gas exploration firms can allocate 35% of gas from new discoveries to private-sector buyers, but no exploration company has implemented the provision so far.

"This is a delaying tactic to enable different buyers to place bids, despite having no Ogra licence," an industry official said, adding that such a practice would constitute violation of the approved policy.

According to a decision of the Executive Committee of the National Economic Council (Ecnec), under Section 23(1) of the Oil and Gas Regulatory Authority (Ogra) Ordinance 2002, no person may engage in the sale, purchase, transmission or distribution of natural gas without first obtaining a licence from Ogra.

This provision sets a legal requirement for licensing prior to participating in the regulated gas market activities. Additionally, the CCI decision states that E&P companies shall have the right to sell up to 35% of their share of pipeline specification gas to third parties having an Ogra licence.

This licensing requirement has been interpreted by some as not necessary for prequalification for the bidding process.

"If unlicensed entities are allowed to participate, the responsibility of vetting and oversight may shift to the post-bidding stage, potentially increasing the administrative workload on the regulatory body," a market official said, adding that it could result in additional costs, extended timelines and an increased strain on regulatory enforcement mechanisms.

Prime Minister Shehbaz Sharif-led government had increased the allocation of gas from 10% to 35% despite opposition from the former petroleum minister in an effort to open the market. Exploration companies welcomed the decision, saying that it would improve their cash flow, which had been stuck in state entities due to circular debt.

According to a document available with The Express Tribune, a meeting was held on July 18, 2025 at the head office of Mari Energies, which was attended by Imran Akhtar, Senior Executive Director (Gas), Ogra; Hassan Mehmood, Director BDC, Mari Energies; Shanza Baig, Head Legal & Commercial, Pakistan Petroleum; and Dr Ghulam Baqir Malik, GM Commercial, Oil and Gas Development Company.

It is, however, surprising that an exploration company held the meeting in its office rather than in Ogra premises to discuss the challenges related to the regulator's licensing requirements.

The discussion pertained to various parties pursuing the execution of memoranda of understanding (MoUs) with E&P companies to obtain a shipper's licence in order to participate in bidding for gas sale under the applicable framework.

During the meeting, the framework agreement was misinterpreted. In a letter sent to the Ogra chairman, Mari Energies said that Section 1(a) of the framework stipulates that E&P companies shall have the right to sell up to 35% of their share of pipeline specification gas to third parties having an Ogra licence, through a competitive process, without the approval of the government or any of its entities, provided that the price(s) from the third parties would not be less than the wellhead gas prices under the Petroleum Policy 2012 for respective zones.

Sources said that some exploration companies were allegedly going to trigger another controversy to sabotage the government's policy to open the gas market for the private sector.

Participants of the meeting agreed that the licensing requirement applies to the execution of gas sale and purchase agreement (GSPA) between the buyer and the seller, but not as a pre-qualification criterion for participation in the bidding process. This distinction is fundamental to preserving competitive market dynamics for market expansion while ensuring regulatory compliance.

They said that no preferential treatment shall be accorded to the existing licence holders during the bid evaluation process to ensure the equitable assessment of all participants. They also agreed that an initial GSPA between the buyer and the seller shall serve as sufficient evidence for securing gas volumes for the purpose of licensing.