ISLAMABAD: Deputy Prime Minister Ishaq Dar has convened the fourth meeting of the 20-member task force on gas sector issues today (Monday) headed by him mainly to fix the most lingering issue of 35 percent allocation by Exploration and Production (E&P) companies, under the amended E&P policy 2012, to the private sector from their future gas finds which has already delayed by 8 months.
“In the third meeting summoned by the deputy prime minister, the task force deliberated all the thorny issues the gas sector has been facing for many years, but couldn’t resolve any of the problematic issues as Federal Minister for Petroleum Division Musadik Malik who just came from China had to rush to Moscow to attend the Russian Energy Week,” a senior official of the Ministry of Energy told The News.
“However, the third meeting that was held on September 25, 2024 deliberated at length and underwent meaningful brainstorming on all the issues such as the finalization of the circular debt settlement plan, evaluation of a proposal to lease out two LNG power plants by Petroleum and Power divisions, rationalization of port charges for LNG imports, ways to enhance the consumption of RLNG in the country, completion of consultations between stakeholders on the proposed offshore fiscal regime, digitization of DG PC, plan to provide fool-proof security to E&P companies and update on new gas tariff determination based on one month or three months to curb the circular debt, but remained unable to solve any issues because it came to know at the eleventh hour that petroleum minister would not attend the meeting as he has gone to Russia.”
However, the official said, the participants of the meeting including its head, deputy PM expressed their annoyance over the sudden departure of the petroleum minister without letting them know.
The petroleum minister is reported to come on October 3 meaning that he may not be present in today’s task force meeting. However, there are chances that the petroleum minister may attend the meeting through video from Moscow.
Now the meeting has, the official said, been summoned with the resolve to implement the amended 2012 E&P policy that the country’s supreme decision-making body---Council of Common Interests (CCI) approved on January 26, 2024.
In case, the Petroleum Division fails to come up with a consensus Implementation Framework with input from the E&P companies, then the task force will finalize the Implementation Framework on its own as desired by the CCI.
“CCI had allowed the E&P companies to allow the private sector companies to sell the gas from future gas wells to the private sector under the competitive prices to be attained through the bids and the 65 percent remaining gas would be allowed to be taken up by the Sui gas companies.”
CCI had approved this model just to wriggle out the E&P sector from the morass of increasing liquidity crisis that has hiked to Rs1500 billion. Under the amended policy, 2012, private companies would purchase from E&P companies at the auctioned prices and they would pay them in advance which would help them improve the worsening liquidity conditions enabling them to aggressively launch their exploration and production activities across the country to find out more oil and gas reserves.
Sui gas companies are continuing consuming the gas but are not paying back to E&P companies---Oil and Gas Development Company Limited (OGDCL), Government Holding Private Limited (GHPL), Pakistan Petroleum Limited (PPL), Mari Petroleum Company Limited (MPCL) and other foreign companies. The overall gas sector circular debt has jumped to Rs2900 billion.
And to materialize this decision, CCI directed the petroleum division eight months back to submit the implementation framework to the Ecnec (Executive Committee of National Economic Council), but so far petroleum division’s top mandarins couldn’t do so.
According to high-ranking officials involved in the ministry’s internal discussions for carving out the Implementation Framework, E&P companies will first be required to recover depleted gas from their wells. Once this gas is recovered, they may sell 35 percent of the additional gas to the private sector for transportation to clients. E&P and private sector companies may oppose the new guidelines of the Petroleum Division in the meeting of the task force today as they are of the view the new guidelines also negate the spirit of the CCI decision.
From new oil and gas wells, the Petroleum Division seeks to introduce a benchmark mechanism that would allow E&P companies to sell gas to the private sector.
Officials of the Petroleum Division are currently working on formulating this benchmark system. The Petroleum Division advocates deregulation of the entire oil and gas sector.
However, concerns remain that in a deregulated environment, the private sector could secure windfall profits, while state-regulated gas companies might face unfair competition, leading to potential financial losses.
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