Qadirpur gas wellhead price: consensus reached at $3/MMBTU

The Petroleum Ministry and the Oil and Gas Development Company Limited (OGDC) have developed a consensus on $ 3 per million British Thermal Unit (MMBTU) maximum wellhead gas price of Qadirpur gas field. The $ 3 per MMBTU wellhead gas price is calculated at $ 400 per ton high sulphur furnace oil (HSFO), a maximum limit for wellhead gas price discount of Qadirpur gas field.
The Petroleum Ministry will move a summary to Economic Co-ordination Committee (ECC) of the Cabinet for formal approval. At present, wellhead gas price of other gas fields in Pakistan ranges between $ 2.4 and $ 4.6 per MMBTU. Following an increase in wellhead gas prices of other gas fields, OGDC had requested the Petroleum Ministry to enhance the wellhead gas price of Qadirpur gas field.
After negotiations between Petroleum Ministry and OGDC, it has been agreed to set the maximum price of $ 3 per MMBTU (around Rs 240 per mmbtu valued at Rs 80 per dollar parity) of Qadirpur gas field, placing an upper cap at $ 400 per ton HSFO for maximum 70 percent discount rate. The wellhead gas price will fluctuate in line with variation in price of HSFO in international market. The wellhead pricing mechanism for Qadirpur gas field uses HSFO price for discount.
The Oil and Gas Regulatory Authority (Ogra) in its decision regarding Sui Southern Gas Company Limited (SSGC) on November 20, 2008 had adopted the wellhead gas price of Rs 161.02 per MMBTU for Qadirpur gas field.
At present, Gas Price Agreement (GPA) regarding Qadirpur gas field allows the producers to re-negotiate the discount rates with the government in case six monthly average price of HSFO escalates above $200ton. Ogra is currently adopting wellhead gas price of Rs 161.02 per mmbtu worked out at a discount of 65 percent (HSFO price averaged at $300ton).
The last notification regarding the Qadirpur gas, issued by Ogra effective from July 2007, continues to be operative due to pending resolution between the producer and government of Pakistan on wellhead gas price discount.
The wellhead gas prices are notified bi-annually (in January and July) by Ogra, and there may be a final settlement of Qadirpur gas price in the upcoming wellhead price notification to be issued for July-December 2009, sources said, adding that the GPA will incorporate schedule of discounts applicable at six-monthly average price of HSFO at various slabs.
The government has succeeded in re-negotiating wellhead price discounts in respect of Qadirpur gas field owned by public sector companies after a lapse of over two years. Qadirpur is the country’s fourth largest gas field with 3.6tcf balance recoverable reserves. The field is 75 percent owned by Oil and Gas Development Company (OGDC), while Kirthar Pakistan possesses 8.5 percent, PPL 7 percent, PKPEL 4.75 percent and PKPEL 2 4.75 percent.

Copyright Business Recorder, 2009