Oil and gas: Exploration firms file 200 applications for price increase

They are seeking to switch to the 2012 petroleum policy

ISLAMABAD: The government has received 200 applications from exploration and production companies for permitting an increase in wellhead prices of new discoveries as a vital incentive to step up the search for hydrocarbon resources.

“Around 200 applications have been received from exploration and production companies for switching to the 2012 petroleum policy,” an official familiar with the development said.

In order to process all the applications in a transparent manner, a model supplemental agreement had been developed in consultation with the Finance and Law Divisions, he said.

So far, 94 applications have been processed while the remaining are being examined and processed.

The government has already signed 70 supplemental agreements with oil and gas exploration companies that cover 94 leases and promise an increase in wellhead prices.

The agreements were aimed at meeting a key condition for the release of a $500-million World Bank loan for the energy sector.

According to the deals, the government will offer a price of $4.1 per million British thermal units (mmbtu) for exploration blocks awarded under the 2007 petroleum policy, $4.38 per unit for blocks covered by the 2009 policy and $5.78 per unit for deals reached under the 2012 policy if crude oil price is $100 per barrel.

Consumer gas prices will rise following the increase in wellhead prices for the exploration companies.

“There are two ways to absorb the price rise. First, provinces could take a hit on the collection of gas development surcharge and second, gas consumers could be forced to pay higher bills,” a senior government official said.

Mari Petroleum Company is also seeking to shift to the 2012 petroleum policy in order to collect higher prices for new discoveries.

Earlier, Mari Petroleum was working under the cost-plus formula but the government scrapped it, which enabled the company to increase the wellhead gas price from $0.37 per mmbtu to $2.17 in the next five years.

A summary has been moved to the Economic Coordination Committee for approval.

Published in The Express Tribune, November 21^th, 2015.

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