ISLAMABAD: In a bid to encourage the exploration and production of Tight Gas reserves, Pakistan has introduced a comprehensive policy that delineates essential provisions related to lease terms, pricing incentives, and operational guidelines.
The policy titled “Tight Gas (Exploration & Production) Policy 2024” has been introduced with the objective of fostering investment, driving technological advancements, and promoting the efficient utilization of Tight Gas resources.
Lease Term & Renewal:
The initial term of the development and production lease for Tight Gas will extend up to 30 years, aligning with the proposed Field Development Plan (FDP). Renewal for an additional period, not exceeding 10 years, is possible with justifications deemed acceptable by the Government. If the Tight Gas Reservoir extends into a free area, the lease area may be extended to the adjoining free area based on technical justifications.
In cases of discovering Tight Gas under existing Development and Production Leases (D&PL), amendments will be made to include rights for the Tight Gas Reservoir separately. Upon expiration of conventional gas rights, the area held for conventional reservoir production will be relinquished, provided it does not impede gas pricing.
Gas Pricing Incentives:
To exploit Tight Gas Reserves, a 40% premium on the zonal price of Petroleum (Exploration and Production) Policy 2012 will be applicable. This pricing incentive applies to existing and future exploration licenses, Petroleum Concessions Agreements (PCAs), Mining Leases, and Development and Production (D&P) leases meeting Tight Gas qualifications under Section 4 of the policy.
The provisional incentive price will be notified by OGRA or any authority designated by the Federal Government once Initial Third-Party Certification confirms a Tight Gas discovery. The final incentive price will be announced upon the granting of D&PL/OML. The Government, with the Operator’s consent, holds the first right of refusal for gas sales within Pakistan.
Royalty and Tax Regulations:
A royalty of 12.5% of the petroleum’s value at the field gate will be payable. Operating losses can be carried forward for a maximum of fifteen (15) years. In cases where both conventional and tight gases are produced from the same D&P lease, lease-related fees shall not be duplicated.
Production Suspension and Review:
Operators are allowed a cumulative one-year suspension of production, subject to technical and economic justifications. The Regulator/Authority may grant further extensions on a case-by-case basis. The Tight Gas Policy will undergo a mandatory review after five years, with periodic reviews of the List of Consultants/Laboratories (Section 7) during the policy term.
Technology Transfer Incentives:
To encourage technology transfer and the use of state-of-the-art equipment, machinery by the services sector will be exempted from Customs duty or other duties. Necessary amendments to existing regulations will be made to accommodate this provision.
Applicability & Effect of the Policy:
The Tight Gas (Exploration & Production) Policy is effective from the date of its publication in the official Gazette. Incentives apply to gas discoveries qualifying as “Tight Gas” under existing and future Exploration Licences (EL), Petroleum Concessions Agreements (PCA), and Development & Production Leases (D&P)/fields and Mining Leases (ML). Existing tight gas discoveries that have not been developed as of the effective date of this Policy are also eligible for incentives, subject to specific conditions outlined in the policy.
Conflict Resolution:
In case of conflict with the general terms of an existing Petroleum Concession Agreement (PCA) or Oil Mining Lease (OML) or Development and Production Lease (D&PL), the provisions of this Policy prevail concerning Tight Gas. However, other Operator rights continue to prevail.
Implementation Requirements:
To avail the incentives of this policy, a Model Supplemental Agreement (SA) will be developed, and SA to the respective Petroleum Concession Agreement (PCA) shall be executed.
It is pertinent to mention here that Tight Gas (Exploration & Production) Policy 2024 seeks to create an environment conducive to attracting investments, encouraging the application of cutting-edge technologies, and ensuring the optimal utilization of the valuable Tight Gas reservoirs within the region. Through these initiatives, Pakistan aims to not only boost its energy sector but also to position itself as a key player in the global arena for responsible and innovative resource management.
Exellent Explained, Nice Article and Suggestable
Ahmad Ahmadani’s concise and informative coverage of Pakistan’s Tight Gas (Exploration & Production) Policy 2024 highlights the government’s efforts to foster investment and technological advancements in the energy sector. Through clear language, Ahmadani outlines key provisions such as lease terms, pricing incentives, and operational guidelines, providing valuable insights into the policy’s objectives and implications. His analysis emphasizes the importance of responsible resource management and innovation in meeting Pakistan’s energy needs while attracting investments and promoting technology transfer. Overall, Ahmadani’s article serves as a valuable resource for policymakers, industry stakeholders, and anyone interested in understanding Pakistan’s energy landscape and its future direction.