Faced with looming gas shortages, the government plans to expedite oil and gas exploration by auctioning 19 exploration blocks and the new petroleum policy envisages increasing the price to $6 mmBTU for on shore and $8 mmBTU for off shore discoveries. An official source at the petroleum ministry said that the first draft of the Petroleum Policy 2011 was ready that proposes increasing the price for onshore discoveries from $4.5 mmBTU to $6 mmBTU. The policy seeks revision in the gas price for the off shore from $5 mmBTU to $8mmBTU. It even recommends that for expediting off shore exploration a premium of $1-2 mmBTU should be offered to first three off shore discoveries.
Crisis prompted response
The government is considering these measures as the country is in the grip of a severe power crisis due to rising energy needs and expanding population. Energy demand is projected to grow with a phenomenal increase of 245 per cent to 147 MTOE by 2022 as compared to 2008. Natural gas, being largest component of energy supply, is also projected to decline from existing 4.2 BCFD to 1.6 BCFD in 2022, giving rise to a deficit of 7 BCFD.
To overcome the crisis, the only solution lies in expediting oil and gas exploration to discover and produce greater volumes of oil and gas, the source said, adding that expensive and limited import of gas would not meet the requirements of the country.
Foreign investment encouraged
The draft of the policy would be discussed at an internal meeting of the ministry during the next few days, the source added. It is meant to get high level consent on new prices. He said that the increase in well head prices would act as a catalyst to attract foreign investment for enhancing oil and gas exploration in the country.
The issuance of new oil and exploration blocks was put on hold for the last year due to confusion over whether after devolution it fell under the provincial or federal domain. Finally, legal opinion from the ministry of law mandated that petroleum concessions agreements would be issued by the federal government with the consent of provincial governments, he said.
The government plans to auction 19 oil and gas exploration blocks. The bidding for the blocks will take place in November as the new petroleum policy is expected to be implemented from October, the source said.
