Ministry of Petroleum and Natural Resources (MoP&NR) has sought Prime Minister’s help to check the reported “irrational” decisions by Ogra and interpret the Article 158 of Constitution which states that the province producing gas has first right of consumption, well informed sources told Business Recorder. As winter begins supply of gas to Punjab-based industry and Compressed Natural Gas (CNG) stations is suspended for three months under Article 158 of the Constitution whereas gas supply continues to other provinces.
This has created a considerable anger in Punjab, especially in its textile sector, which contributes 51 per cent to total exports. Minister for Petroleum and Natural Resources, Shahid Khaqan Abbasi, on October 31, 2014 presented the factual picture of the country’s oil and gas sector along with his Ministry’s achievements to the Cabinet, the sources added.
The cabinet was informed that almost half of Pakistan’s primary energy mix comprises gas and, as such, future of the country is linked to gas. The revenues from petroleum sector are calculated at Rs 1.003 trillion per annum; details of which are as follows: (i) petroleum levy 123 billion; (ii) excise duty on gas Rs 15 billion; (iii) royalty on gas Rs 50 billion; (iv) royalty on oil Rs 32 billion; (v) gas development surcharge Rs 46 billion; (vi) gas infrastructure development cess Rs 150 billion; (vii) discount of crude oil Rs 20 billion; (viii) windfall levy against crude oil Rs 17 billion; (ix) dividends by SoE in petroleum sector Rs 70 billion; (x) GST on petroleum sector Rs 350 billion; and (xi) income tax from petroleum sector Rs 120 billion.
According to the Petroleum Ministry, Petroleum Policy 2012 has been implemented after obtaining approval from the Council of Common Interests (CCI). Forty four new exploration agreements had been signed whereas 137 wells spudded. In addition, 37 oil and gas discoveries have been made during the last 17 months. Pakistan has achieved the highest oil production of 98,980 BBL per day. Against a depletion of 490 MMCFD gas, 500 MMCFD gas has been added and the financial impact of which is Rs 19 billion per annum.
Against the depletion of 19000 BBL, 30000 BBL per day oil has been added which amounts to a financial impact of Rs 20 billion per annum. Additional gas has also been provided to the fertilizer sector which has benefited farmers.
The Cabinet was further informed that a fast track 400 MMCFD LNG terminal is being established which would be functional within next three months. Another 400 MMCFD LNG terminal of SSGC has been tendered recently and is being pursued vigorously. A decision with regard to the import of 200 MMCFD gas from India through Wagah is yet to be taken.
“Negotiations with a Chinese company [CPNC] have started for the establishment of Gwadar LNG terminal and laying of pipeline to Nawabshah(Sindh). Similarly, negotiations have been initiated for $1 billion private sector Chinese investment in deep conversion refinery,” the sources quoted the Petroleum Minister as saying. He further stated that new initiatives of the Ministry include setting up of LNG air mix plants. These plants would be set up in every district headquarter of Balochistan. These plants would also be set up in Sindh, Punjab and hilly areas of KPK.
The Minister further stated that the Gas Theft (Control and Recovery) Act has been promulgated. The price of LPG would also be deregulated after approval of the CCI. A market-based system for the import of LNG for use as CNG has been contemplated and is being introduced. The financial impact of this initiative is Rs 200 billion per annum.
Abbasi argued that gas field on site power generation policy would help in the generation of 1000 MW of electricity. The pumping of gas into pipelines from a new gas well takes almost two years but by installing a unit on the well, power can immediately be generated. This initiative would have a financial impact of Rs 100 billion.
He stated that in order to resolve power issues, Regasified LNG (RLNG) would be used for power generation. 600 MMCFD gas would be used for generation of 3600 MW electricity at 13.5 cent per unit. The Minister for Petroleum and Natural Resources also briefed the cabinet on challenges that are enumerated as follows: (i) increase in oil and gas exploration;(ii) implementation on Iran-Pakistan 750 MMCFD gas pipeline project;(iii) implementation on 1,325 bcfd TAPI gas pipeline project;(iv) implementation of South-North 1.2 bcfd gas pipeline project for transportation of gas in the future;(v) achieve 2 bcfd( 15 million ton) LNG import;( vi) implementation on 5 RLNG terminals;(vii) achieve 2,000 MT per day LGP production;(viii) restructuring and value-addition in oil and gas sector companies;(ix) unbundling of SNGPL and SSGCL; and (x) reduce Unaccounted For Gas (UFG) from 12 per cent to 7 per cent as reduction of 1 per cent translates into Rs 4 billion.
The following issues faced by the Ministry of Petroleum presented before the cabinet: (i) the role of OGRA needs to be defined as it has created irrational hurdles; (ii) amendments are required in PPRA rules for investments in the petroleum sector; (iii) interpretation of the Article 158 of Constitution which states that provinces producing gas have first right of consumption ;(iv) since domestic gas is very cheap, the prices need to be revised; (v) revision and simplification of government procedures; (vi) a lack of co-ordination between Ministries; (vii) the resolution of circular debt; (viii) the use of gas infrastructure development cess; (ix) provision of security drilling for drilling activities; and (x) the need for definition of role of NAB. Prime Minister Nawaz Sharif stated that the theft of gas is a serious issue and it needs to be tackled firmly. Minister for Railways, Khawaja Saad Rafique pointed out that the theft of gas in district Karak is causing a loss of Rs 5 billion per annum to national exchequer.
Minister for Textile Industry Abbas Khan Afridi stated that gas meters are not being installed in district Karak because Ogra has placed a moratorium on new connections. Petroleum Minister informed the cabinet that Chief Minister, KPK, Pervez Khattak has written a letter, indicating that he is helpless in the resolution of gas theft issue.
The issue of tug boats procurement for LNG terminal at Port Qasim also came under discussion. Minister for Defence Production, Rana Tanvir, stated that tug boats can be manufactured locally. However, it was felt that manufacturer would take a long time and procurement on lease is a better option as the terminal would be operational by January 15, 2015. The procurement of tug boats on lease may be handled by the Ministry of Ports and Shipping. The crew of tug boats would also require training.
SOURCE: RECORDER REPORT