ISLAMABAD, Sept 15: The Pakistan Petroleum Exploration and Production Companies Association (Ppepca) has welcomed the Petroleum Policy-2012, saying that internationally competitive rates would help promote this sector.

The new policy is offers almost double the production price of natural gas for new discoveries than the current rate of about $3.24 per mmbtu.

The association said that the new policy was an important response of the ministry to the changed business
environment in the upstream oil and gas sector.

“During the last decade the number and size of new gas discoveries has gone down significantly, whereas cost for exploration, appraisal and development of new hydrocarbon resources has gone up,” the Ppeca said, adding, “in this environment, the oil and gas industry suffered in addition to other factors from the low gas price.

The upstream sector feels that as a result of Petroleum Policy-2001 where hydrocarbon prices were curtailed at very low level, new foreign investment has not come into E&P sector, as the policy was based on oil prices of 2001 which were quite low.

After the 2001 policy, the ministry introduced the 2007 policy and the 2009 policy with improved gas prices. However, those were not providing sufficient incentive for the large risk investments needed to explore and develop hydrocarbon resources.

Those policies were, however, never fully implemented.

The PPEPCA is a group of 24 local and international oil and gas upstream companies operating in Pakistan, and the Association of Upstream Companies feels that the new policy provides a better investment climate with higher gas prices linked to the high international oil prices in the world market.

For its implementation, the policy needs to be backed by a clear set of rules, positive intent for implementation without any delays and bureaucratic wrangling, and a single window operation.

The upstream companies said that the capacity building of various regulatory authorities relating to oil and gas sector is also required to make the Petroleum Policy 2012 a success.

Despite severe gas shortages, negligible E&P activities have been witnessed in the country in the recent past mainly due to low incentives and law and order situation in many parts.

However, an official of the petroleum ministry felt that attractive incentive would encourage upstream companies to initiate operations in Pakistan.

He said that better gas price had been given under which a production price of $6 per mmbtu for Zone-III (West Balochistan, Pishin and Potowar), $6.3 per mmbtu for Zone-II (Kirthar, East Balochistan, Punjab and Suleman Basin) and $6.6 per mmbtu for Zone-I (Lower Indus Basin) has been offered.

Similarly, an attractive price of $7 per mmbtu has been offered for offshore shallow, $8 per mmbtu for Offshore Deep and $9 per mmbtu for Zone Offshore Ultra Deep.

This is compared to existing policy offered $3.13 mmbtu for Zone-III, $3.37 per mmbtu for Zone-II, $3.6 per mmbtu for Zone-I and $3.836 per mmbtu for deep and ultra-deep offshore exploration.

Besides on the first three discoveries, the E&P companies would be offered one dollar per mmbtu higher price to encourage them to speed up their development plan.