Incompetent officials shatter Prime Minister Imran Khan’s vision of attracting $5bn FDI in ‘exploration and production’ of Oil & Gas in Pakistan

BY SALMAN ZAFAR

ISLAMABAD: Pakistan may loss Foreign Direct Investment worth $ 5B USD in Oil & Gas sector. Reason! a few incompetent officials in petroleum division have been creating hindrances for the International exploration and production (E&P) companies.

It is worth mentioning here that Prime Minister Imran Khan had constituted high powered committee tasking it to devise policy to attract foreign investment for E&P of oil and gas in the country.

Documents ( a certified copy available with Islamabad Telegraph) revealed that the Ministry of Energy prepared well-thought out plan (PSDPL+ Plan) and shared with foreign missions of Pakistan with approval of competent authority.
Pakistan’s foreign missions were advised to convince foreign companies for public private partnership mode of financing.

Sadly, a few incompetent officials posted in the Ministry of Energy has made it almost difficult to attract investment by International oil and gas Exploration & Production companies in Pakistan. Earlier Pakistani authorities expected an investment of $ USD 5B.

“Appointment of incompetence of officials has discouraged the companies to invest in Pakistan. A few officials in ministry of Energy have caused sever blow to Prime Minister Imran Khan’s vision to attract Foreign Investment,” sources said.
As per detail, Director General Petroleum Concession (DG PC) in recent past has allegedly created hurdles in the exploration and production of Badin South IV gas fields and discouraged E&P companies of Kuwait and Canada who were engaged and invested around $ 60 million in the Badin South IV gas fields for E&P of indigenous resources. Only because of 25 cent tariff differences, DG PC created hurdles for the E&P companies, said sources.

Imran Ahmed, DGPC allegedly refused to award 25cent tariff to a consortium of Kuwait, Canada and Pakistani companies and delayed production of local resources from Badin South IV gas fields.

Motive behind Imran’s move were probably paving the path to import expansive Liquefied Natural Gas (LNG) for vested interested.

“ Pakistan has to bear loss of $ 50 million owing to delayed production from Badin South gas fields in just seven months,” sources said.

Both, Imran Ahmed and consultant Ishaq Saki soon after after National Accountability took notice of undue delay in production from Badin South IV gas field.

Similarly, appointment of Shafi Afridi as DG Oil, proved lethal against interests of Ministry of Energy. Prior to his posting as DG Oil, he was working with Ministry of National Food Security as Joint Secretary.

Shafi Afridi’s couldn’t ensure uninterrupted petroleum supply apparently because of no experience which is required for the post of DG Oil. Large number of E&P companies has left Pakistan only because of incompetence of officials posted in in petroleum division at important positions.

Additional Secretary Ayub Chaudry has launched an inquiry regarding appointment of officials of private E&P companies in the petroleum division, said sources.
According to documents available with Islamabad Telegraph, Pakistan is blessed with enormous hydrocarbon potential most of which is still untapped.

According to technical evaluations, the original recoverable reserves were 1,246,877 million barrels of oil and 57.436 Trillion Cubic Feet (TCF) of gas. The current recoverable reserves are 347.878 million barrels of oil and 19.541 TCF of gas.

Pakistan has a large sedimentary area of 827,268 Square Kilometers in which only 1094 exploratory and 1443 appraisal/development wells have been drilled so far with an average well drilling density of 3.0 wells per 100 square Kilometer. And, these wells have resulted in 394 discoveries giving a success ratio of 1:2.80 which is quite attractive. About 95 percent of these wells are concentrated in the Indus Basin, Balochistan, Khyber Pakhtunkhwa, while the off shore area is virtually unexplored.

“The Ministry of Energy, Petroleum Division seeks to attract foreign investment with the objective to accelerate exploration activities to maximize indigenous production of oil and gas,” documents revealed.

In order to be compatible in the global market, the government has introduced various petroleum policies which contain attractive incentives.

As per salient incentives and gas pricing formula for local and foreign companies at reference crude price of $ 110 BBL, gas price for Zone-I is 6.6 per million British Thermal Unit (MMBTU), 6.3/MMBTU for Zone-II, 6.00/MMBTU&F for Zone-III, for offshore shallow 7$/MMBTU, deep 7$/MMBTU, ultra deep 9$/MMBTU.

Transparent criteria for the award of exploration license on the basis of work units (per unit cost is US$ 10,000), while import of machinery/equipment/material etc vehicles, vessels at concessionary rates of duty. The interested E&P companies are free to participate in the bidding round for acquiring an area either independently or jointly with other companies.

Similarly, corporate tax is capped at 40pc without a ring fence, while renewal of lease after expiry of lease term for another five years subject to payment of 15% of the wellhead value and sale of 90% share of pipeline specification gas to government and 10% by E&P companies to any buyer with prior consent of government.

Likewise, a bonanza of US$ 1/MMBTU shall be given for the first three discoveries in offshore area. More, a new policy for exploring the unconventional hydrocarbon reservoir i-e Tight Gas (Exploration & production) Policy 2011 has also been notified in which 20% premium over the Petroleum Policy (2012) price has been provided for investors. The low BTU policy containing lucrative incentives for E&P companies has also been notified. The Petroleum Division is also in a process of formulating a shale gas policy, which aims to attract multinational companies to Pakistan for undertaking exploration of shale gas and shale oil.

The sources further said that the government has so far taken several initiatives to create ease of doing business in the upstream petroleum sector and has introduced amendments in Petroleum Exploration and Production Rules, 2013. And, the director general (oil) of the Petroleum Division has already devised incentives for investment in the oil refining sector of the country. Besides, the government in a bid to attract foreign investment in energy starved country has decided to adopt a positive concept of PSDP+ plan.

Salman Zafar is Islamabad based Special correspondent of Islamabad Telegraph