- Implementation involves a cap of 100 million cubic feet of gas to be sold to the private sector.
- Circular debt must be reduced through timely advance payments to E&P companies.
- The notified decision of the government has virtually liberalized the upstream oil and gas sector.
ISLAMABAD: The monopoly of Sui gas companies on the purchase and sale of gas has ended and the gas sector has been officially opened as the Petroleum Division has notified the implementation framework for the sale of gas to third parties (sector private), News reported.
Additionally, it was approved by Ecnec with a cap of 100 million cubic feet per day of gas to be sold to private sector companies for each year and the cap will be revised annually under the much-touted amended policy Exploration and Production (E&P) of 2012, paving the way. for a $5 billion investment by E&P companies in the oil and gas sector.
The Council of Common Interests (CCI) on January 26, 2024 approved an amended Exploration and Production Policy of 2012, stipulating that exploration and production companies will have the right to sell up to 35% of their share of the gas specified in the gas pipeline to the third party owning Ogra. license.
The stipulation specifies that this must be done through a competitive process, without the approval of the government or any of its entities, provided that the third party price(s) are not lower than gas prices of wellhead under the 2012 petroleum policy for the country concerned. areas.
The notified decision will also be applied to all existing licenses and leases granted under the Petroleum (E&P) Rules, 1998, 2001, 2009 and 2013 for gas discoveries which are not yet awarded and which will be awarded after the date of notification in accordance with ICC approval. .
The CCI further decided that the province in which a natural gas wellhead is located should be given priority within the meaning of Article 158 of the Constitution in its letter and spirit.
The notification allowed E&P companies, with immediate effect, to sell gas to private sector companies at auction prices, which will help them overcome their growing liquidity crisis which has reached a new high of Rs 1.5 trillion. rupees due to non-payment of Sui gas companies.
More importantly, circular debt would also be reduced through early and timely payments to E&P companies. Private sector companies would buy the gas at the auctioned price and pay the E&P companies on time. This is how the liquidity crisis that E&P companies have been facing for a long time would improve.
Entrepreneurs of E&P companies, during their meeting with Prime Minister Shehbaz Sharif a few months ago, pledged to invest $5 billion in the oil and gas sector on the condition that the amended E&P policy of 2012 approved by the CCI on January 29, 2024 be implemented.
Now, the policy comes into effect on January 9, 2025 and the purchase and sale of gas is open to the private sector. However, the government may review the framework every three years in light of technological advancements or changing circumstances.
Existing users can also enjoy the benefit of any reviews. However, no detrimental changes to their existing economic rights should be made.
According to the notification available with Newsthe framework for the sale of gas to a third party approved by the Executive Committee of the National Economic Council (ECNEC), subject to there being a cap of 100 million cubic feet per day of gas to be sold to a third party in the private sector for each year and this ceiling will be reviewed each year.
There will be appropriate gas sales; Purchasing Agreement (GSPA) between a third party as buyer and E&P companies as seller. The GSPA must cover regulatory, commercial and technical aspects and must be consistent with the spirit of this framework and the ICC decision, clearly indicating the expected volume, percentage, quality specifications and commercial conditions.
To protect the interests of the GoP and the province (royalties, exceptional levies, production bonuses, etc.), the GSPA will be shared with the Petroleum Division. In the event of deviations, the Petroleum Division will communicate its observations within 15 days of receipt of the GSPA.
The notified government decision virtually liberalized the upstream oil and gas sector by increasing the right of exploration and production companies to sell gas to third-party buyers from 10% to 35%.
Private sector companies will ensure timely payments to E&P companies, which will help ensure healthier cash flows and increased revenues, facilitating the expansion of E&P businesses.
This will also generate additional revenue for the government in the form of royalties, income taxes and exceptional gas levies. The gas producer is required to sell its share of gas through a tender process.
To ensure transparency and a level playing field, the tender (international tender) for the sale to third parties must be widely published and also communicated to the Ogra.
Under the proposed third party sales regime, the third party (a) will have the option to use the Sui network, lay its own gas pipeline or use virtual gas pipelines for the transportation of its share of gas while fully compliant with the applicable regulatory regime.