New Petroleum Policy to ensure energy security
The international oil and gas industry is going through dramatic changes in terms of pricing and cost environment. The drastic increase in crude oil prices in the international market has altered the complexion of the Petroleum Exploration and Production (E&P) sectors. The Government of Pakistan is aware of these changing dynamics and recognizes the operating challenges and considerations for the Pakistani oil exploration and development industry.
In order to address the new market conditions, investment promotion and exploitation of indigenous natural resources by attracting foreign investment and the participation of local companies in E&P activities, the ‘Petroleum Exploration and Production Policy 2011’ is a potent approach of the government towards the sector.
The purpose of the initiative is to establish the policies, procedures and tax and pricing regime in respect of petroleum exploration and production sector. ‘Petroleum Policy 2011’ maintains a system based on two different types of agreements to
establish E&P rights in Pakistan: • For onshore operations, a system based on a Petroleum Concession Agreement (PCA).
• For offshore operations, a system based on a Production Sharing Agreement (PSA).
The draft Petroleum Exploration and Production Policy 2011 focuses on the locally operating exploration and production companies to construct and operate pipelines for local requirements as well as for exports of their share of petroleum. The importance of the domestic petroleum industry to the economy of Pakistan is a core issue of national security, national self reliance and as a major source of government revenue.
The fiscal year 2011 witnessed a revenue stream surge by 31 percent YOY owing to 24 percent rise in average realized wellhead price to Rs. 1200/bpd; spike in production of both oil and gas by 49 percent and 1 percent YOY, respectively. As the revenue mix has been found tilting towards oil reaching a share of 20 percent, the revenue volatility may increase due to erratic nature of oil prices.
However, the proposed policy is also facing opposition from the National Assembly Standing Committee on Petroleum and Natural Resources, as the Committee termed the policy limited to the facilitation of private sector and not for increasing oil and gas exploration at public sector. Thus, the Ministry of Petroleum is expected to efficiently remove the bottle necks faced from the old policy and implement the administrative changes brought by the new policy to overcome the increasing challenges