Centre provinces agree on new Petroleum Policy 2012

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Pakistan plans to auction at least 17 petroleum concessions within the next few weeks as the major irritants in the approval of the new Petroleum Exploration and Production Policy 2012 were resolved on Friday, with the federal government agreeing to include provincial government representatives in the concessions awards committee and reviving the zoning system. The decisions were made at a specially convened meeting jointly chaired by Special Assistant to the Prime Minister on Petroleum Dr Asim Hussain and Secretary Petroleum Ejaz Chaudhary and attended by Chief Secretary Punjab Nasir Mahmood Khosa, Chief Secretary Sindh Raja Muhammad Abbas and other senior officials of the provincial energy and mineral departments besides senior officers of the ministry of petroleum.
An official source said that the reservation expressed by Khyber Pakhtunkhwa and Balochistan forced the federal government to revive the zoning system which was abolished in the new policy. The provinces were of the opinion that explorations in their areas were difficult as compared to other provinces and a premium should be offered. The amended draft would be circulated to provinces within the next few days after their approval the new policy will be announced. The new Petroleum Policy will have three zones. A price of $6.6 mmBTU will be offered for oil and gas exploration in zone one consisting of parts of Khyber Pakhtunkhwa and Balochistan, $6.3 mmBTU in zone two consisting of parts of Balochistan and Sindh and $6 mmBTU for Sindh and Punjab. The price for offshore drilling will be $7 mmBTU with a bonanza of $1 mmBTU for first three discoveries. The source said new prices will be offered to all discoveries made under the previous policies but not already linked with the transmission network.
The source said the provinces were assured that all the decisions in the award of exploration blocks will be held with their consent. But they stressed inclusion of their representatives in the awards committee which was accepted. However, a proposal of Pakhtunkhwa to get additional gas supply against its royalty payments was rejected by the committee as other provinces opposed it. Pakistan signed the last petroleum concessions agreements in 2010. The process was stopped after July 01, 2010, due the passage of the 18th amendment from the parliament that devolved many subjects on the concurrent list to the provinces that included power and energy sector. Later on the federal government clarified that the centre will maintain the role of the regulator in power and energy issues.
To address the various concerns of the investors, new Petroleum Policy was drafted in 2011 but its approval got delayed due to the opposition of the provinces. The matter was taken to the Council of Common Interest (CCI) for resolution which accorded an in-principle approval to the Petroleum Policy 2012 on February 9. Immediately after the announcement of the new Petroleum Policy, the source said bids will be invited for 17 exploration blocks out of the total available 36. He said 17 were ready for immediate bidding while process on the remaining was being expedited. Pakistan is faced with a shortfall of 2 bcfd of gas as against the estimated national demand of 6 bcfd. This has resulted in a shortfall of 5,000 MW resulting long power outages that is declining the GDP growth by three per cent per annum.
A statement issued by the petroleum ministry said Dr Asim Hussain congratulated the entire team comprising of the officers of the ministry of petroleum and provincial focal persons who worked on the preparation of new Petroleum Policy 2012. Secretary petroleum said issues pertaining to royalties, zoning and well head pricing have been mutually agreed upon and provinces do not have any reservations any more. Provincial representatives agreed that a representative of the provincial governments would be part of the concessions awards committee as well as directorate of petroleum concessions and the average well head pricing in each zone would remain uniform.

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