New Pe­tro­leum Pol­icy to en­sure en­ergy se­cu­rity

Enterprise - - Policy -

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

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