ISLAMABAD, Dec 11: Oil and gas companies have asked the government to raise gas production prices by 25 per cent to encourage them to produce higher quantities and reduce dependence on imported fuels, it is learnt. The demand comes at a time when the government estimates it will face major gas shortfalls by 2007-08 at the current rate of domestic production and plans to import gas from Iran, Qatar or Turkmenistan to meet energy shortages.

The crux of the demand is that existing operators in Pakistan should be given maximum incentives as a priority to meet a looming energy crisis locally in view of its economic benefits and look for import options as a second preference because of its higher costs, sources in the petroleum ministry told Dawn.

This incentive package is currently under examination at the prime minister’s secretariat and the ministry of petroleum and oil and gas regulatory authority (Ogra), sources said.

The government has been informed that the existing 26 petroleum companies in Pakistan are either not ready to make fresh investments or planning to sell their existing businesses owing to a cap on their selling price at $36 per barrel against a prevailing international price of $70 a barrel.

Petroleum ministry sources told Dawn on Sunday that Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) - an umbrella organization of 26 oil and gas companies - has been in negotiations with the government for the last couple of months to revise domestic producer prices of oil and gas.

The local industry is of the opinion that the government should announce a new incentive package for local operators to maximize their production as a priority instead of higher dependence on the import of fuel oil and proposed gas imports, which has a significantly higher economic cost.

The petroleum exploration and development companies have also demanded that the volume of sales to local distribution companies should also be increased to 90-100 per cent of their production against an existing rate of 70-80 per cent for maximum utilization of their capacity that would reduce gas rates for the government and enhance profitability of producers.