Efficiency rewarded: Higher well-head price offered for boosting gas production

Exploration companies to be rewarded for 10% increase in output.

ISLAMABAD:

The government has decided to give well head price of $6 to $6.6 per million British Thermal Unit (mmbtu) in the Petroleum Policy 2012 to those exploration companies that can enhance their gas production by 10%.

A senior official of the Ministry of Petroleum told The Express Tribune that this decision of giving an incentive to exploration companies was taken to overcome the energy crisis.

In addition to this, as soon as the new petroleum policy is notified the government intends to auction off 37 blocks which have received security clearance.

“It is expected that this step will also help settle the price issue of two exploration companies including Austrian firm OMV and local company Dewan Petroleum Limited that have been agitating against the lower price of $2.5 per mmbtu under the old petroleum policy,” the official said adding that Balochistan and Khyber-Pakhtunkhwa have already agreed to this proposal. Sindh and Punjab are yet to agree.

In the Petroleum Policy 2001, for onshore fields, well head price was $2.6 per mmbtu in Zone III, $2.8 per mmbtu in Zone II and $2.99 per mmbtu in Zone I. Under new Petroleum Policy 2012, the well head price for onshore gas fields in Zone III will rise to $6 per mmbtu, $6.3 per mmbtu for Zone II and $6.6 per mmbtu for blocks in Zone I.

Official said that price for offshore field will be $7 per mmbtu for shallow, $8 per mmbtu for deep and $9 per mmbtu for ultra deep fields in new Petroleum Policy 2012.

Earlier, it was proposed that those companies which guarantee a 20% increase in production would get well head prices as per the new policy. “But, now it has been agreed with all stakeholders that exploration companies will get a price according to the new petroleum policy if they can increase production by 10%,” the official said adding that companies would get well head price of gas that would be over and above the existing production. “Companies will not get increase in well head gas price for those fields that were part of business development plan submitted to the government,” he added.

Another issue of royalty between federal government and provinces has also been settled as provinces have agreed to seek clearance to get royalty in the form of oil or gas as part of the new Exploration and Production Policy 2012.

At present, provinces receive 12.5 per cent royalty on gas in cash but they had come up with a demand to grant royalty in form of gas so that they could meet their requirements of gas. Official said that now, the decision had been made with consultation of the provinces that they would be able to get royalty on gas in kind but they will seek clearance first from the federal government.

Published in The Express Tribune, March 23^rd, 2012.