Model Petroleum Concession Agreement 2013: ECC likely to approve revised agreement

It will stimulate investment with new fiscal and operational incentives.

ISLAMABAD:

The Economic Coordination Committee (ECC), scheduled to meet today (Wednesday), is expected to give a green signal to a revised Model Petroleum Concession Agreement 2013 that will offer new fiscal and operational incentives to oil and gas exploration companies.

The need for the revised agreement arises as the government prepares to grant licences for hydrocarbon exploration in over 60 blocks under the new Petroleum Policy 2012.

According to sources, the petroleum concession agreement is being updated to suit the Petroleum Policy 2012. The existing concession agreement is in line with the Petroleum Policy 2009, which offered wellhead gas price of $4 to $4.5 per million British thermal units (mmbtu).

In the 2012 petroleum policy, the government has announced incentives and higher prices for exploration companies in a bid to give a boost to oil and gas exploration and overcome energy crisis that has plagued the entire economy. The incentives are expected to bring investment in petroleum exploration and production.

In the new policy, wellhead gas price has been set at $6 per mmbtu for Zone-III, $6.3 for Zone-II and $6.6 for Zone-I. It provides a comprehensive pricing mechanism for Zone-0 with $7 per mmbtu for shallow wells, $8 for deep wells and $9 for ultra-deep wells.

Oil and gas exploration companies have been permitted to sell 10% of extracted gas to third parties (other than Sui Southern Gas Company and Sui Northern Gas Pipelines). They will also get the new price if they produce 10% more gas from existing fields over and above the development plan.



Companies operating in the upstream (exploration and production) sector are governed by the Petroleum Exploration and Production Policy, relevant rules and the Petroleum Concession Agreement (PCA).

The ECC had approved the existing Petroleum Concession Agreement 2009 on July 14, 2009 in order to give effect to the provisions of Petroleum Exploration and Production Policy 2009.

The Council of Common Interests (CCI) approved the Petroleum Exploration and Production Policy 2012 on August 8, 2012, which was notified in the Gazette of Pakistan on August 30, 2012.

In the light of the new policy and certain operational changes after the promulgation of 18th Constitution Amendment, the concession agreement needs to be revised. Pakistan Petroleum Exploration and Production Companies Association has already given its input for the revised model.

Published in The Express Tribune, March 6^th, 2013.

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