$5bn investment: Task force may approve today mechanism for 35pc gas sale to private firms

ISLAMABAD: The fifth meeting of the task force on gas-related issues may witness a stormy session today (Wednesday) over the issue of implementation of the amended E&P policy 2002.

Deputy Prime Minister Ishaq Dar heads the 20-member task force. Under the amended E&P policy 2002, exploration and production firms would be allowed to sell to private sector companies 35pc of gas from new finds at the auctioned prices, and the remaining 65pc to Sui gas companies — Sui Southern and Sui Northern.

The Petroleum Division will come up in the meeting with the implementation framework required to enforce the amended E&P policy. The framework has not yet been approved even after eight months. The CCI had approved the amended E&P policy on January 26, 2024. Because of this very reason, about $5 billion investment for more exploration and production activities across the country has not begun.

In the recent past, the E&P companies had informed the prime minister they are ready to invest $5 billion in oil and gas sector to reduce reliance on imported fuel by increasing exploration and production activities. But it was linked with the implementation of the amended E&P policy.

On January 26 this year, the Council of Common Interests approved the amended E&P policy 2012 under which 35pc gas from future discoveries would be sold out to private sector companies by exploration and production companies on competitive bids. The CCI approved the altered E&P policy with the condition that the Petroleum Division would submit implementation framework to Ecnec for approval for the implementation of the policy.

The task force seems not in a mood to further prolong this issue of great importance. In its earlier four meetings, it failed to deliver on this count because of the failure of Petroleum Division in making implementation framework in line with the spirit of CCI decision. In the last meeting, the task force could not take the final decision as Minister for Petroleum Musadik Malik was in Moscow to attend the Russian Energy Week.

Meanwhile, the Petroleum Division, according to sources, has agreed to take back its recommendation under which up to 35pc gas allocation by exploration and production companies to private sector companies from future discoveries will be implemented in seven years till 2030 in phases.

However, it put up another proposal the E&P companies will have to first recover depleted gas from their wells. After recovering the depleted gas from its additional gas volume, they can allow the private sector to get 35pc gas and transport it to their clients, officials who are part of meetings of the ministry on the subject told The News.

“From the brand new oil and gas wells, Petroleum Division mandarins want to introduce a benchmark mechanism under which E&P companies would be allowed to sell gas to private sector. The relevant officials are currently working to figure out the benchmark formula,” they said. The Petroleum Division, headed by Federal Minister Musadik Malik, wants deregulation of the whole oil and gas sector. At the same time, it says in the deregulated regime, private sector would get windfall profit but regulated Sui gas companies would not have a level playing field. That is why they would go in losses.

However, in the amended policy approved by the CCI, it is written the Sui gas companies would be getting 65pc gas from the future discoveries without any bid.

At present, the Sui companies are getting 100pc gas from E&P companies but, in return, not paying them up to the mark against the gas, which is why outstanding dues have risen to Rs1,500 billion. This has created a liquidity crisis for the E&P companies. The companies are unable to further go for exploration, production activities for oil and gas in the country.

The policy was amended with the aim that the E&P companies would sell 35pc of gas to private sector, and in return would get advance payments from private companies at the auctioned price. This is how their cash situation would improve.