Task force allows E&P firms to sell 35pc gas to private sector

ISLAMABAD: The task force headed by Deputy Prime Minister Senator Ishaq Dar has allowed the gas exploration and production firms to sell 35pc gas to the private sector. This would help these companies to also offset their massive circular debt.

“Deputy Prime Minister held five meetings of the 20-member task force particularly on the enforcement of the amended E&P Policy 2012 and managed to get Implementation Framework approved. Now the Exploration and Production companies would be able to sell one-third of the future gas discoveries to the private sector companies at competitive rates,” a senior official who was part of the meeting told The News.

The official said, “In Monday’s meeting, Ishaq Dar said that when CCI had decided that E&P could sell 35 percent of gas from future discoveries, there was no need to make and approve the implementation framework. However, Dar got the implementation framework approved.” The Petroleum Division opposed 35 percent gas allocation to the private sector in one go. It suggested staggering 35 percent of gas sales to the private sector in seven years. E&P companies had opposed the proposal, contending it was against the spirit of the CCI decision. However, the deputy prime minister accommodated the Petroleum Division and placed the cap of 100mmcf for one year, which means the private sector companies cannot purchase gas more than 100 mmcfd in the first year.

The Implementation Framework will now be submitted in today’s (Tuesday) meeting of Ecnec (Executive Committee of National Economic Council) for approval and then the E&P companies would be able to sell 35 percent of the gas to private sector companies on the auctioned prices. However, the 65 percent gas would be handed over to the Sui companies at the current wellhead prices, not on the auctioned bids.

In case the new gas is discovered by up to 300 mmcfd, the private sector would get 100mmcfd gas through bids. ECNEC will also be presided over by Deputy Prime Minister Ishaq Dar. However, every year, the cap issue would go under review and if the gas is recovered more than 300 mmcfd, for instance, say up to 500mmcfd, then the private sector would get 35 percent of that discovery. This decision will not only help curtail the circular debt in the gas sector but will also help allure the investment of $5 billion in the oil and gas sector.

The total gas sector circular debt stands at Rs2700 billion out of which sui gas companies owe E&P companies Rs1,500 billion. This has resulted in a massive liquidity crisis for E&P companies; therefore they have not been able to initiate exploration and production activities.