OGRA approves increase in wellhead prices of Qadirpur gas field

Decision will mean transfer of Rs200b in additional burden onto consumers.

ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has implemented a controversial decision taken by the former government by notifying a raise in the wellhead prices of the Qadirpur gas field. The move will transfer an additional burden worth billions of rupees onto consumers.

Ogra has notified the raise in wellhead prices of the Qadirpur field from Rs285.66 to Rs293.57 per million British thermal units (MMBTU), effective from January 1 to June 30, 2013. An Ogra official said the decision had been taken earlier by the Economic Coordination Committee (ECC) of the Cabinet, but had been implemented now. He said the impact of the decision will be passed on to consumers from July 1, 2013.

Headed by former finance minister Dr Abdul Hafeez Shaikh, the ECC had, in December 2012, approved a summary on the renewal of a gas price agreement (GPA) with the Qadirpur Joint Venture, which called for raising the wellhead price from $2.56 per MMBTU to $3.01 per MMBTU. According to officials, the decision will mean Rs200 billion in additional burden on gas consumers during the lifetime of the gas field, which is expected to remain operational till 2017.

As part of the renewal of the GPA, the ECC had allowed the incorporation of Article 4.1(b) in the original document. The insertion of this clause allows greater increases in the wellhead gas price of the Qadirpur field, as it links it to changes in international prices of high sulphur fuel oil (HSFO). Under this decision, the ceiling for the wellhead price of the Qadirpur field was raised from $200 to $400 per ton, tracking furnace oil prices in international markets.  Article 4.1(b) had not been approved by the ECC when the original GPA was formulated earlier in 1993, and had been included later in the agreement by some petroleum ministry officials.

The ECC had approved the inclusion of the clause in the GPA December 2012, despite the fact that the petroleum ministry had admitted it had no record relating to the inclusion of the clause.

Qadirpur is one of the largest gas fields in the country, with 3.6 trillion cubic feet of balance recoverable reserves. Its daily production ranges from 600 to 700 million cubic feet of gas per day. The field is 75% owned by the Oil and Gas Development Company, while Kirthar Pakistan has a stake of 9.5%, Pakistan Petroleum Limited 7%, and Premier Kufpec Pakistan Exploration Limited (PKPEL) and PKPEL-2 hold 8.5% and 4.75% respectively.

Published in The Express Tribune, May 10^th, 2013.

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