Petroleum Policy 2011: Consumers to pay billions more as gas price expected to rise

Exploration companies to get $6 per unit compared to earlier $3.75.

ISLAMABAD: The petroleum ministry’s plan to revise licences of oil and gas exploration companies with a 60 per cent increase in wellhead gas prices under the new petroleum policy for 2011, will force consumers to pay additional billions of rupees.

Sources told The Express Tribune that oil and gas exploration companies, which had been denied wellhead gas price of $3.75 per million British thermal unit (mmbtu) by the petroleum ministry for the last two years under Petroleum Policy 2009, were now being offered conversion of licences according to Petroleum Policy 2011, which offered a much higher price.

The revision in licence terms would allow exploration companies to charge a high price of $6 per mmbtu and this would be passed on to the consumers, who were already experiencing high energy prices and acute shortages, sources said.

Licences of only those wells will be revised for which either agreement has been signed, provisional licence awarded or bids invited before the approval of 2009 petroleum policy. Wells being drilled since the Petroleum and Exploration Policy 2007 came into effect on November 27, 2007 will also get this offer.

Under the 2007 policy, the director general petroleum concession had not allowed licence revision to exploration companies despite repeated requests by them. But later, the DG petroleum concession prepared a summary to ink licence conversion agreements with exploration companies.

In this regard, the Economic Coordination Committee (ECC) of the cabinet had to give final approval to allow the petroleum ministry to notify the price of $3.75 per mmbtu for 77 exploration blocks for which the companies had sought the facility.

However, the process came to a halt after Sher Khan took charge as DG petroleum concession. After failure to ink agreements for licence conversion, the oil and gas companies slowed down exploration work, leading to acute energy shortages in the country.

“It is surprising that oil and gas companies were earlier being penalised but now they are being offered a high price,” a source said.

When contacted, Khan refused to comment, saying he was not allowed to speak to the media.

Petroleum Minister Dr Asim Hussain told The Express Tribune licence conversion was being offered to oil and gas companies under Petroleum Policy 2009. However, these companies were now seeking conversion under 2011 policy, he said, adding the government would offer a further higher price compared to neighbouring countries due to poor law and order situation in the country.

He said the new petroleum policy would give a boost to exploration activity and help overcome energy crisis.

Published in The Express Tribune, November 10^th,  2011.