Upstream oil and gas industry: Deadlock on royalty issue comes to an end
Provinces agree to federal government collecting royalty.
ISLAMABAD:
The row between the centre and provinces has come to an end, for now as both sides have developed a consensus on regulating the upstream oil and gas industry. The key disputes which have been resolved including the collection of royalty and well head price for onshore and offshore fields.
In the new development, after the 18th Amendment and under the Petroleum Policy 2012 provinces have agreed that the federal government will continue to collect royalty on oil and gas resources.
The meeting was chaired by Dr Asim Hussain special assistant to the prime minister for Petroleum and Natural Resources and was attended by representative of all four provinces.
The centre and provinces had reached a deadlock on issues including zones, well head price, collection of royalty and regulating upstream industry in new Petroleum Policy 2012 during a meeting of the Council of Common Interests (CCI) held on Thursday. The CCI had then directed the Petroleum Ministry to resolve these issues in consultation with the provinces.
When contacted, Dr Asim Hussain said that the CCI had in principle, approved the Petroleum (Exploration and Production) Policy 2012. “There were some issues which have been resolved now,” he added.
“The federal government and provinces have agreed to restoring three zones instead of one zone proposed in the new Petroleum Policy,” sources said. The sources also said that avarega ewell head price will now be uniform at $6 per million British thermal units (mmbtu).
The concept of one zone had been introduced in 2010 but now the federal government, envisaging the different geological circumstances across the country reverted to the concept of different zones.
Sources also said that originally the policy had proposed $9 as well head price for offshore fields but this was rejected in the CCI meeting. Now the provinces and the centre have agreed to a price of $7 for offshore fields.
After the promulgation of the 18th Amendment, the federal government had claimed the right to regulate upstream petroleum sector. The provinces had originally opposed this, saying that this was contrary to the spirit of the 18th Amendment. Now a consensus has been reached with the agreement that provincial representatives will be a part of the Concessions awards committee as well as the Directorate of Petroleum Concessions.
Provinces also wanted to be able to directly collect royalty but have now agreed that the centre will continue to do so.
In the current mechanism the federal government collects 12.5% royalty on crude oil and natural gas and then transfers it to the provinces after deducting 2% administration charges. The royalty does not become part of consolidated funds and net proceeds are transferred to provinces.
Meanwhile according to a statement issued here, Dr Asim Hussain has said that the new Petroleum (Exploration and Production) Policy 2012 would enable investor friendly environment.
Secretary Petroleum said that issues pertaining to royalties, zoning and well head pricing have been mutually agreed upon and provinces have no reservations on these issues.
Published in The Express Tribune, February 11th, 2012.
The row between the centre and provinces has come to an end, for now as both sides have developed a consensus on regulating the upstream oil and gas industry. The key disputes which have been resolved including the collection of royalty and well head price for onshore and offshore fields.
In the new development, after the 18th Amendment and under the Petroleum Policy 2012 provinces have agreed that the federal government will continue to collect royalty on oil and gas resources.
The meeting was chaired by Dr Asim Hussain special assistant to the prime minister for Petroleum and Natural Resources and was attended by representative of all four provinces.
The centre and provinces had reached a deadlock on issues including zones, well head price, collection of royalty and regulating upstream industry in new Petroleum Policy 2012 during a meeting of the Council of Common Interests (CCI) held on Thursday. The CCI had then directed the Petroleum Ministry to resolve these issues in consultation with the provinces.
When contacted, Dr Asim Hussain said that the CCI had in principle, approved the Petroleum (Exploration and Production) Policy 2012. “There were some issues which have been resolved now,” he added.
“The federal government and provinces have agreed to restoring three zones instead of one zone proposed in the new Petroleum Policy,” sources said. The sources also said that avarega ewell head price will now be uniform at $6 per million British thermal units (mmbtu).
The concept of one zone had been introduced in 2010 but now the federal government, envisaging the different geological circumstances across the country reverted to the concept of different zones.
Sources also said that originally the policy had proposed $9 as well head price for offshore fields but this was rejected in the CCI meeting. Now the provinces and the centre have agreed to a price of $7 for offshore fields.
After the promulgation of the 18th Amendment, the federal government had claimed the right to regulate upstream petroleum sector. The provinces had originally opposed this, saying that this was contrary to the spirit of the 18th Amendment. Now a consensus has been reached with the agreement that provincial representatives will be a part of the Concessions awards committee as well as the Directorate of Petroleum Concessions.
Provinces also wanted to be able to directly collect royalty but have now agreed that the centre will continue to do so.
In the current mechanism the federal government collects 12.5% royalty on crude oil and natural gas and then transfers it to the provinces after deducting 2% administration charges. The royalty does not become part of consolidated funds and net proceeds are transferred to provinces.
Meanwhile according to a statement issued here, Dr Asim Hussain has said that the new Petroleum (Exploration and Production) Policy 2012 would enable investor friendly environment.
Secretary Petroleum said that issues pertaining to royalties, zoning and well head pricing have been mutually agreed upon and provinces have no reservations on these issues.
Published in The Express Tribune, February 11th, 2012.