The government is faced with a new resistance from the provinces, which are demanding a 50 percent share in the profit of any new discovery made by any oil and gas exploration and production company within their jurisdiction.
An official source said the Petroleum Ministry was trying to clarify the situation to the provinces as they were wrongly interpreting the ownership clause. They will be getting 50 percent of the proceeds made by the federal government in the award of petroleum concessions and subsequent revenues. Under the 18th Amendment, a new clause, 172 (3), was introduced in the constitution whereby mineral oil and natural gas within any province or its territorial waters have been vested jointly and equally with that province and the federal government.
This means the federal government alone can neither formulate any policy nor take any decision without the consent of the provincial government concerned. The provinces were wrongly interpreting that they would be getting 50 percent of the profit if discovery of oil and gas was made within their jurisdiction, the official source said. The government, he said, was trying to address the concerns of the foreign exploration and production companies and all their contractual obligations would be protected in accordance with the law.
He said the new petroleum policy would be considered by the ECC in the next meeting and its implementation would address all the issues. He said around 70 petroleum concessions agreements needed to be converted from the 2007 policy, which were never converted to the 2009 policy even though the companies had filed applications. After the announcement of the new petroleum policy, the previous exploration licences needed to be converted to the new policy. The government planned to auction 19 oil and gas exploration blocks after the implementation of the new petroleum policy, he added.
The new petroleum policy proposes increasing the price for onshore discoveries from $4.5 per mmBTU to $6 per mmBTU. The policy seeks revision in the gas price for the offshore discoveries from $5 per mmBTU to $8 per mmBTU. It also recommends a premium of $2 per mmBTU to the first three offshore discoveries. Energy demand in Pakistan is projected to grow with a phenomenal increase of 245 percent to 147 MTOE by 2022 as compared to 2008. Natural gas, being the largest component of energy supply, is also projected to decline from the existing 4.2 bcfd to 1.6 Bcfd in 2022, giving rise to a deficit of 7 bcfd.
Provinces misinterpret profit clause on discoveries
