THE Khyber Pakhtunkhwa government’s rising revenue from the new discoveries of oil and gas reserves and their production is providing a growing fiscal space for the cash-strapped provincial administration.

Chief Minister Amir Haider Khan Hoti last week told newsmen that the revenue from the province’s oil and gas production will reach an all-time high of Rs15 billion.

The KP’s southern districts of Karak, Kohat and Hangu, which lag behind other parts of the province in social infrastructure, are rich in natural resources including huge deposits of oil, gas and minerals.

Latest statistics issued by the government says that as of March 2011, an area of around 18891 square kilometers in the province produces 6.76 per cent of the country’s total oil and gas production. Official estimates suggest that KP has the potential to produce one billion barrel oil and four trillion cubic feet gas.

The oil and gas sites in Khyber Pakhtunkhwa fall in Potohar region, where almost all the major oil and gas fields including Chanda, Thall and the recently discovered Nashpa oil and gas reserves are situated. The area has attracted investment by the Oil and Gas Development Corporation limited (OGDCL) MOL, Hyearbox and PPL. Chanda oil field was the first major discovery in KP in 1999.

Since 2004-05 KP has received straight transfers, which include royalty on oil and gas, gas development surcharge and excise duty on gas, from the federal government. Each year, the proceeds from these heads have surpassed the initial budgeted estimates.

From just half a billion rupees in the year 2004-05, the outgoing straight transfers has now grown to Rs14.649 billion. For this financial year, the budget estimates put these figures at Rs13.806 billion, which, as chief minister hints, will surpass Rs15 billion. An official privy to these developments tells Dawn that efforts are being made by the exploration companies to explore the untapped oil and gas reserves.

Citing the official reports, official says the oil and gas exploration company MOL, which has the second largest stakes in the area, has made two latest oil and gas discoveries that are currently under appraisal of reserves.

Similarly, production from Makori East-I oil field of Karak district is expected to commence from this month. Moreover, after security clearance, production from Maramzai oil field of Hangu district is also expected shortly.

Apart from being a major source of income for the provincial government, the oil and gas production has also opened up an avenue for social uplift of the people residing in the under-developed areas of Kohat, Karak and Hungu.

The ministry of Petroleum and Natural Resources is granting production bonus to those districts where oil and gas reserves have been discovered. These funds are spent on uplift projects through Petroleum Social Development Committees, which consists of MNAs, MPAs, Tehsil Nazim, District Nazim, DCOs and two representatives of exploration and production companies.

Statistics compiled by the provincial finance department show that first production bonus worth Rs29.486 million was transferred to the districts of Karak and Hangu in 2008-09 and Rs85.809 million in 2010-11. For fiscal year 2011-12, the government anticipates a bonus of Rs127.5 million.

In addition to that, the provincial government also transfers five per cent of receipts from straight transfer to the districts where the oil and gas well heads are located.

Citing the report of a committee constituted to formulate a mechanism for utilisation of such funds, the official said this money will be over and above the size of district and provincial Annual Development Programmes and will be utilised for electricity, gas supply, education, technical education, water supply schemes, roads and health facilities.

In the financial year 2010-11 a sum of Rs225.185 million was released to Kohat and Karak as five per cent share in straight transfers, the official says.

Under the 18th Constitutional Amendment natural resources stand devolved and the provinces now have the authority to exploit their natural resources including oil and gas and hydropower generation.

Taking advantage of this constitutional provision, the provincial government had announced setting up of Khyber Pakhtunkhwa Oil & Gas Company, which will be registered with Security and Exchange Commission of Pakistan as a public limited outfit. This organisation will serve as an executing arm of the energy and power department, which the current coalition government established two years back.

Moreover, as per the planning, the proposed company will take part in the bidding for acquiring exploration and production licences side by side with the national and multinational companies as competitors.