ISLAMABAD: Oil and gas exploration and production companies have criticised the Petroleum Division for not implementing the Council of Common Interests (CCI) decision regarding amendments to Petroleum (Exploration and Production) Policy 2012 in letter and spirit.

The CCI approved that Exploration and Production (E&P) companies could sell 35 per cent of their gas production to the private sector through competitive bidding.
However, the Petroleum Division has yet to finalise the framework seven months after the CCI decision.

The E&P companies have alleged that the new draft framework, proposed by the Petroleum Division in contrast to the CCI decision, would give undue advantages to the loss-making state-owned gas utility companies.

Petroleum Division delays implementing CCI decision

As a result, the private sector will not participate in future upstream oil and gas activities due to the financial crunch, as the SNGPL and the SSGC failed to clear their dues for gas purchased from the E&P sector.

Energy sector experts believe the current gas sector is anti-competitive and heavily monopolised by Sui Southern Gas Company Ltd (SSGC) and Sui Northern Gas Pipeline Company (SNGPL).

Muhammad Arif, a former member of the Oil and Gas Regulatory Authority (Ogra), responding to Dawn’s query, said that the decision to allow the sale of 35pc of gas produced to the private sector was made at the Special Investment Facilitation Council (SIFC) and approved by the CCI, which is the highest forum in this regard.

“But the delay shows some strong lobby was resisting this move to open competition in the gas sector and the new draft framework prepared by the Petroleum Division is actually increasing the administrative dominance of SSGC and SNGPL,” he added.

Mr Arif said that it would also further weaken the private sector financially and in business terms.

Recently, local and international E&P firms informed Prime Minister Shehbaz Sharif that up to $5 billion could be invested in the country’s oil and gas exploration and production sector during the next three years if the sale of 35pc of their production is allowed for the private sector.

Currently, except for some fields, mainly in tribal areas, the gas produced by E&P companies has to be sold to SNGPL and the SSGC. However, the CCI has allowed the private sector to purchase up to 35pc of the gas produced at the well.

This can be provided to their clients through the transmission and distribution system of both Sui gas companies, who will pay the transportation charges at the already approved rates.

The E&P companies maintain that the initiative will help reduce their liquidity crisis because the sui gas companies face circular debt issues, and the private buyers even make advance payments.

On the other hand, the draft framework prepared by the Petroleum Division proposes implementing the 35pc purchase in phases lasting up to six years.

The other objections to the framework are lengthy official and bureaucratic procedures and restrictions and the need to give more space to state-owned companies.

The companies have pointed out 11 discrepancies in the draft framework and called upon the prime minister to reduce state-owned entities’ role in the upstream oil and gas sector to attract fresh investments.

Besides, it was pointed out to the authorities that a long delay might result in non-implementation, as happened with the earlier decision of the government to allow the private sector to import LNG. Still, minor hurdles by state-owned entities in the gas sector discouraged private parties from importing LNG.

Published in Dawn, August 4th, 2024