Approval of Petroleum Policy 2011 has hit snags as Khyber Pakhtunkhwa and Balochistan have sought complete control over management of the natural resources in their jurisdiction and complete autonomy over determination of royalty. An official source said that a specially called meeting on the issue failed last week to resolve the issues as both the provincial governments were of the opinion that management of the natural resources in their jurisdiction fell under their domain after devolution and the federal government could not force a policy on them.
Provincial governments were of the opinion that it was their prerogative to draft policy for exploration of fossil fuels and hydrocarbon reserves in their jurisdiction and only they were eligible to get royalty. Federal government on the other hand was of the opinion that after devolution the centre would be regulating the sector while it would be sharing 50 per cent royalty with the respective provinces, the source added.
The source said, till the issue was resolved, the planned auction of new oil and gas exploration blocks would remain on hold and there would be no new investment in the sector. Government wanted to expedite indigenous oil and gas exploration to overcome the massive energy crisis that was resulting in decreasing the GDP growth by three per cent for the last few years. Government has reconvened a meeting with provinces this week to settle the issue. However, the source said federal government would face a tough time in developing a consensus on federal regulation instead of provincial oversight and sharing of royalty with the provinces. The draft of Petroleum Exploration and Production Policy 2011 was made public in October 2011.
Feedback and comments from stakeholders were invited to finalise the policy and implement it before the close of current calendar year. The source said the ministry was advised to keep following the 2009 policy instead of opting for a new policy as there were minor differences between both polices no tangible target of the previous policy was achieved.
He said the policy was made with a long term goal and it should be implemented at least for a decade. This government has given two policies in four years even though the last policy was announced only in 2007.
However, the source said the new policy was not likely to be implemented during current fiscal year even if issues with provinces were resolved as the standard petroleum concessions agreements and production sharing agreements were not likely to be finalised. The new policy was drafted to accelerate exploration and production to achieve maximum self sufficiency in energy by increasing oil and gas production. The new policy focuses on promoting investment in the upstream sector and in onshore frontier areas by providing globally competitive incentives.
As around 27 per cent of the country’s energy needs are currently being met through imports. Pakistan’s average daily production of crude oil and gas in 2009-10 was 65,000 barrels and four billion cubic feet, respectively. The country’s indigenous oil and gas production meet around 53 per cent of its total energy requirements while other indigenous sources provide 19 per cent. The new policy ends the system of zones and offers a price of $6 per mmBTU for new discoveries instead of previous prices of $4.38 to $5.03 mmBTU. While shallow discovery will be offered price of $7 mmBTU, deep $8 mmBTU and ultra deep $ 9 mmBTU, while first three off shore discoveries will get a premium of $ 1 per mmBTU. In 1991, government introduced the first petroleum policy. This was followed by policies of 1993, 1994, 1997, 2001 and 2007 and 2009. Whenever previous policies were superseded by a subsequent policy document, the existing rights granted under licences, Petroleum Concession Agreements, Production Sharing Agreements were not affected.
