PM approves CPEC-style security force, incentives to spur investment in petroleum exploration

ISLAMABAD: Prime Minister Imran Khan on Monday gave a go-ahead for the creation of a dedicated security force for petroleum exploration on the pattern of China-Pakistan Economic Corridor (CPEC) security arrangement in order to offer lucrative incentives for enhanced production of domestic oil and gas resources.

While presiding over a meeting of the energy sector, the prime minister also approved a proposal of the Petroleum Division to shift the existing exploration and development policy from ‘approval regime’ to ‘information regime’ providing greater freedom to oil and gas companies in operations beyond discovery stage.

On top of that, the premier also agreed to allow mid-tier exploration and production firms to enter exploration sector besides reducing timelines and stages for processing and approvals for all investors to push for aggressive search and development of local hydrocarbon reserves.

This was part of a proposed new petroleum exploration and production policy under which the prime minister was informed that the costs of imported oil, gas and LNG were “prohibitively expensive and unsustainable” and the recent gas price shock that created a public outcry was just the beginning of tough times coming. Only LNG imports for the current year are estimated to consume $3-4 billion compared to the significantly high domestic cost of gas production, besides oil imports of about $13-14bn.

A statement said the meeting decided to set up a special force to provide foolproof security to exploration companies in view of prevailing security environment in the country so as to comfort local and foreign investors. An official said the prime minister desired further fine-tuning of the revised policy before it could be formally launched with the approval of the Council of Common Interests in second or third quarter with aggressive marketing.

This would also mean more details on raising a special force of about 50,000 personnel to ensure unhindered exploration of oil and gas reserves in the country’s troubled areas, particularly Balochistan, where highly prospective zones have remained inaccessible so far due to challenging security situation.

Special incentives would be offered to operators of existing petroleum producing fields for enhanced production after a certain stage where companies do not find more investments conducive and give up more production – say, after 60pc production of the total reserves, leaving 40pc remaining resources unutilised.

The new policy, an official said, seeks to upgrade Petroleum (Exploration and Production) Policy, 2012 with the creation of an entirely new exploration zone for high-risk frontier regions with better returns to tap prospects of more hydrocarbon finds and production.

Under the existing policy, there are three zones for onshore, defined on the basis of risks and investment opportunities. Zone-I covers Western Balochistan, Pishin and Potohar, Zone-II comprises Kirthar, Eastern Balochistan, Punjab and Suleman basins while the Lower Indus Basin is described as Zone-III. The wellhead prices to investors are offered at the rate of $6 per mmBtu for Zone-III, $6.3 for Zone-II and $6.6 for Zone-I.

Now a new zone is being created to be called Zone-I (F), covering Kharan and Pishin in Balochistan and some border areas of Khyber Pakhtunkhwa along with its new tribal districts which are reported to have good potential of hydrocarbons estimated to be over 20 trillion cubic feet (TCF). The Petroleum Division has proposed on the request of exploration companies to treat this new zone at par with offshore exploration by offering them $7 per mmBtu wellhead price.

To encourage offshore exploration activities, they said, the government had exempted additional customs duty on import of offshore drilling equipment to tap unexplored hydrocarbon reserves in the country. In future, there will be the clearance of vessels, drill ships and helicopters without any levy, duty or charges whatsoever including customs duty. This dispensation is extended to all companies and joint venture partners who are party to any Production Sharing Agreement with the government for offshore petroleum exploration and production activities.

The meeting was informed that some highly promising areas like Block-28, Zarghon and Kohlu remained under force majeure for decades but could change Pakistan’s energy landscape if provided full security. The matter had been discussed with the army’s southern command, the Frontier Constabulary and the provincial government and now required formal processing through PM office.

It was agreed that after the initial confirmation of a discovery, the firms should not be made to wait like at present for the approval of well development plan and instead would be free to go ahead with field development and just keep filing updates to the government for monitoring and follow-up to reduce steps of interface and approvals involved and result in the bureaucratic red tape.

A databank of working and available rigs and other equipment required for petroleum exploration would be updated so as they could be quickly mobilised where needed the most once security clearance ensured. At present, the companies were bearing about Rs14bn expenditure on security which would be facilitated to be utilised for hiring more rigs and seismic and exploration equipment after the government takes over its responsibility of providing security through the proposed special force.

Source: Dawn

Date: 13th March 2019

Author: Khaleeq Kiani

 

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