Austrian oil and gas firm OMV has pressed the new government of Pakistan Muslim League-Nawaz (PML-N) to resolve the dispute over gas price for Tajjal field, part of the Gambat block in Sindh, granted to the company by the government under the Petroleum Policy 1994 that places no price cap.
The issue came up for discussion when the country head of OMV met the petroleum minister last weekend, sources say.
The dispute stemmed from a move by the previous government that offered a very low gas price according to the Petroleum Policy 2001 instead of the price given in the 1994 policy.
OMV had signed a petroleum concession agreement with the then government in 1997 under the Petroleum Policy 1994.
OMV refused to accept the Petroleum Policy 2001 and asked the government to lift the price cap in line with the 1994 policy, but to no avail.
By signing agreements under the 1994 policy, many oil and gas exploration firms are getting up to $12 per million British thermal units.
The director general petroleum concession, which was supposed to facilitate exploration companies, became a stumbling block in exploration activities, sparking controversies, sources say quoting oil and gas firms.
Dewan Petroleum Limited was one of the companies that became a victim of disputes because of a strong lobby of bureaucracy in the petroleum ministry.
According to sources, OMV also took up the issue with President Asif Ali Zardari during the previous tenure of Pakistan Peoples Party-led coalition government, asking him to intervene but no remedial measures were taken.
OMV insisted that the government could renegotiate the price if it did not want to offer the rate set in the Petroleum Policy 1994.
OMV had drilled a well namely Tajjal-1 in the Gambat block and discovered gas on May 25, 2007. It was producing 24.13 million cubic feet per day (mmcfd) of gas.
OMV is demanding a price for Tajjal discovery that is in line with the pricing mechanism set in the Gambat petroleum concession agreement that placed no cap.
OMV is getting $2.9305 per million British thermal units (mmbtu) for Miano and Sawan fields, which are located in the same area, as per 2001 policy.
“The price sought by OMV is not acceptable to the government. However, we may offer the price given in the Petroleum Policy 2001,” a government official said.
OMV, which has operations in different countries, has been exploring hydrocarbons in Pakistan since 1990. It made the first discovery at Miano gas field in 1993, followed by a considerably larger Sawan gas find in 1998.
Production from Miano field in Sukkur district started in December 2001. OMV, the operator of the field, has a 17.68% working interest. In Sawan, it has a 19.74% working interest.
OMV has also discovered gas in Latif field for which a development and production lease was granted on June 8, 2012.
Published in The Express Tribune, June 25th, 2013.