Low pressure gas policy on the cards

OGDC signs supply contract before announcement of policy.

ISLAMABAD:

As powerful groups vie for low-pressure gas supply – because of an overall shortage - from different fields, the Ministry of Petroleum and Natural Resources has proposed competitive bidding for allocating the gas at a higher price of $8 per million British thermal units (mmbtu) in the draft of a new policy for 2012.

However, before the announcement of the policy, the Oil and Gas Development Company (OGDC) has signed a contract with a domestic firm – Mehr Gas – at $4 per mmbtu for low-pressure gas supply from Kunner-Pasakhi field and the director general of petroleum concession – the regulator of the upstream industry – has kept mum over the issue, say sources.

According to sources, OGDC has caved in to political pressure and has awarded the concession to the company whose contract was earlier cancelled with Ocean Pakistan Limited (OPL) for flare gas from Dhurnal field following objection from the regulator on the ground that the petroleum ministry was not taken on board. OGDC is also a partner of OPL in this field.

Earlier, Petroleum Minister Dr Asim Hussain had directed that no agreements should be signed by the time new low-pressure gas policy was notified to ensure transparency in the process. However, OGDC has signed the agreement with Mehr Gas.

Talking to The Express Tribune, Petroleum Secretary Ejaz Chaudhry said draft of low-pressure gas policy had been finalised, but denied having any knowledge of signing of an agreement between OGDC and Mehr Gas. “If it is true, OGDC should have waited for the new policy,” he said, adding some other firms had entered into agreements with OGDC for low-pressure gas supply.

A senior OGDC official said the company had finalised the deal with Mehr Gas in January this year and was waiting for the response of director general gas and director general petroleum concession.

According to the draft of low-pressure gas policy, the price of additional gas made available from lower pressure sources through recompression for national utilities will be $8 per mmbtu.

It will be subject to economic feasibility and fulfillment of applicable requirements and all oil and gas producers will be allowed to sell low-pressure gas to third parties and negotiate seller’s price through competitive bidding.

The draft says that exploration companies will endeavour that all future facilities are designed for maximum recovery of hydrocarbons. The custody transfer of low-pressure gas will be at field gate under a separate dedicated regime of gas sale agreement and metering protocols. The policy will be reviewed after every three years.

The exploration companies will make necessary metering arrangements for accurate measurement of low-pressure gas at production facilities within 12 months from the implementation of the policy. Field-wise plans subject to economic feasibility will be submitted to the regulatory authority within 16 months.

All gas pressure below 100 per square inch (psi) under routine operating conditions will qualify for low-pressure gas policy.

Published in The Express Tribune, April 26^th, 2012.