ISLAMABAD: With lacklustre domestic hydrocarbon finds, the Cabinet Committee on Energy (CCoE) on Friday constituted a committee to come up with policy incentives to encourage exploration and production (E&P) activities.

The CCoE meeting presided over by Federal Minister for Planning & Development Asad Umar also reviewed the draft Model Production Sharing Agreement (MPSA) to facilitate offshore exploration and referred it to the Ministry of Law for vetting before formal approval.

An official who attended the meeting said it was noted that there had been negligible exploration activities in the offshore blocks. A few much-publicised efforts had remained non-productive while onshore hydrocarbon production had been on a declining trend, the official added.

Need stressed for more offshore exploratory efforts

A committee led by Federal Minister for Energy Hammad Azhar was constituted “to review the oil and gas exploration status and analyse the amendments required in the petroleum policy to enhance E&P activity in the country”.

The meeting was told that there had been no discovery in the offshore areas and there was a dire need for more exploratory efforts for which policy incentives needed to be improved and made competitive. The existing incentives had been reflected in the petroleum exploration and production policy 2012 and the draft MPSA that the award of exploration blocks be decided on the basis of the highest exploration work. The draft MPSA had already been cleared by the Council of Common Interests (CCI).

The meeting was briefed that before the Petroleum Policy 1994, the government used to negotiate petroleum agreements but then the concept of standard terms and conditions in the model agreements was introduced to avoid any discrimination under the policy.

This was followed by the introduction of the Petroleum Policy 1997 to accelerate exploitation of indigenous natural resources by attracting foreign investment with state-of-the-art technology but model profit-sharing agreement could not be developed for long until 2001 when a new policy was announced followed by MPSA 2003 that resulted in the signing of about two dozen production sharing agreements.

Petroleum policies were improved in 2007, 2009 and 2012. The Petroleum Policy 2012 was reinforced through Pakistan Onshore Petroleum Exploration and Production Rules along with Model Petroleum Concession Agreements (MPCAs). However, incentives under 2012 policy could not be provided for offshore exploration.

Given the existing exploration position in the country, while remaining within the overall framework enunciated in the approved Petroleum Policy 2012, the Petroleum Division had finalised the draft MPSA while various amendments were incorporated in Pakistan Petroleum (Exploration and Production) Rules, 2013 (Onshore Rules, 2013) under a November 2019 decision of the Economic Coordination Committee of the cabinet and notified in January 2020. These have now been made part of the draft MPSA as part of Ease of Doing Business.

Apart from the Petroleum Policy 2012, the CCI has also approved the incorporation of an explicit clause for the imposition of royalty on Liquefied Petroleum Gas at market value in the MPCA. Similar insertion is being made in draft MPSA on the analogy of MPCA.

The CCoE also reviewed the circular debt situation and power sector performance during January 2022. The Power Division also explained the changes in the merit order dispatch of power plants due to transmission constraints and limited gas supply during January 2022.

The meeting was also attended by Minister for Science &Technology Senator Shibli Faraz, Member Energy Planning and secretaries of power and petroleum divisions.

Published in Dawn, March 5th, 2022