Public hearing faces objections to gas marketing licences

Applications submitted for gas allocation lack evidence of firm supply

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) conducted a public hearing on Thursday for granting gas marketing and distribution licences based on dubious supply deals with hydrocarbon producers, which sparked concern among different stakeholders.

Interveners present at the hearing pointed out that applications had been submitted by third parties partly depending on future gas discoveries, which was contrary to Ogra's licensing framework that required evidence of firm supply.

Following the approval of a new government policy that has increased the allocation of newly discovered gas to third parties from 10% to 35%, various buyers are approaching Ogra to obtain licences.

Ogra is holding public hearings for granting licences to companies, which have inked memoranda of understanding (MoUs) with oil and gas exploration firms, but gas is not available right now and agreements are based on future discoveries.

Alhaj Group, an oil and gas exploration company, has signed two MoUs. During the hearing, when interveners asked about gas availability, a company representative revealed that it was not available at present but they committed to future gas production.

Already, Alhaj Enterprises has revised the allocation of gas to Sui Northern Gas Pipelines Limited (SNGPL), increasing it from 20 million cubic feet per day (mmcfd) to 45 mmcfd. In this situation, it may be difficult to arrange additional supplies.

Another exploration firm, Dewan Petroleum, has signed MoUs with Wellhead Energy Solutions and Faqeer Wali for gas supply. A representative of Faqeer Wali appealed to the regulator not to issue the licence to Wellhead Energy as it had already signed an agreement with Dewan Petroleum.

The interveners also raised questions about the prospects of gas supply to Ghani Oil and Gas Group. A representative of Hitech Pipe and Engineering Industries Ltd remarked that any decision, determination or recommendation, arising from the hearing, may directly and materially affect its rights, obligations and commercial interests.

Intervener Muhammad Rafiq said Ghani Oil and Gas had submitted the MoUs inked with SNGPL and Sui Southern Gas Company (SSGC), but those were indicative deals only and did not establish binding transportation arrangements. He added that the company had also submitted an MoU signed with Tariq Lime Merchant, however, the latter had no regulatory approvals for gas sales to third parties. Therefore, "it cannot be treated as a firm supply source."

According to the licensing rules, the applicants are required to disclose the quantity of gas they want to procure. Ghani Oil and Gas has shown anticipated sales of 22 mmcfd to industrial consumers, which are not backed by firm commitments.

Another intervener, Raja Sadaqat Awan Advocate, said Kot Palak gas, owned by Alhaj Group, was out of specification (nitrogen up to 20% and gross calorific value around 800 BTU/SCF), which was unsuitable for pipeline injection without treatment. Metro Gas has indicated the purchase of 45 mmcfd from Kot Palak gas field, however, this volume has already been allocated to SNGPL.

"Metro Gas has not shown the minimum requirement of 10 mmcfd that should be procured in line with the Gas Network Code," he said, adding that the application was partly based on future discoveries, which was contrary to Ogra's licensing framework.

He pointed out that the transmission pipeline status was also unclear. SNGPL is laying its own pipeline to inject allocated volumes, leaving Metro Gas without confirmed evacuation. In addition, third parties can only procure 35% of Kot Palak volumes, further restricting availability. "MoUs with SSGC, SNGPL and Alhaj Enterprises as well as consumer lists remain indicative and do not establish firm capacity or supply," he said.

"A letter from Orient Petroleum for the Zamzama field is not backed by confirmed allocation," he said, adding that the Zamzama field had already been allocated to SNGPL.

Intervener Muhammad Fahd Ibrahim Advocate pointed out that Kot Palak gas field was currently not connected to the SNGPL network and SNGPL was preparing a pipeline construction plan considering the gas allocation from the field.

The MoU with Dewan Petroleum for gas supply from the Salsabil field lacked the committed volumes, was off-spec and the field itself was not connected to SNGPL/SSGC networks, making injection unfeasible, he revealed, adding that overall the application lacked the demonstration of firm supply sources, confirmed transportation arrangements and a proper technical feasibility.

Ogra Chairman Masroor Khan told the hearing that they would conduct due diligence and make decisions keeping in view the questions raised by the interveners.