Gas crisis: Ministry moves to patch up with Dewan Petroleum

Meeting called on December 28 to resolve issue after government fails to meet Supreme Court deadline.

Express December 26, 2011


At long last, Dewan Petroleum may finally get a price for the gas it found at Safed Koh. Sources told The Express Tribune that the petroleum ministry has called a meeting for December 28 to discuss an ‘amicable’ solution to the dispute with the company over the pricing of its gas.

The ministry had been asked to look for such a solution by the Supreme Court in a decision announced on October 18. The Supreme Court had asked the petroleum ministry to reach an ‘amicable solution’ with Dewan within 30 days in accordance with the Petroleum Concession Agreement (PCA) or else be forced to go through arbitration. Dewan had filed a review petition with the court when the ministry failed to respond.

Meanwhile, Dewan Petroleum has said that it will increase its current production from 25 million cubic feet per day (mmcfd) of gas to 150 mmmcfd if the government resolves the issue of the low pricing.

Dewan Petroleum had been awarded an exploration contract under the Petroleum Policy 2001 and had been granted a provisional price of $2.80 per million British thermal units (mmbtu) should they find any gas. This price would be up for renegotiation once an actual find occurred. Yet once the company actually found gas, the government balked at offering what had then become the prevailing price: $3.75 per mmbtu.

Dewan is claiming not only that the government went back on its word, but that it is treating the company in a discriminatory manner.

The government had awarded 84 contracts under the 2001 policy at the lower price but is now ready to convert 77 of those to the 2011 policy, which offers a rate of $6 per mmbtu.

The list of 77 fields includes many owned by companies that bought concessions years ago but have yet to begin exploration activities. It does not include Safed Koh. By contrast, Dewan Petroleum has collectively spent $200 million in exploration costs and now stand in default of the $40 million loan they obtained from the International Finance Corporation, a World Bank subsidiary.

“The government is willing to spend $18 per mmbtu importing liquefied natural gas (LNG), but is not willing to provide incentives to companies that have actually explored local fields,” said one industry source who wished to remain anonymous.

A senior official of Ministry of Petroleum confirmed that a meeting had been called on December 28 for amicable settlement of gas price dispute with Dewan Petroleum. However, he declined to give any more comments on the issue.

Published in The Express Tribune, December 27th, 2011.


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