The Government of Pakistan’s strategic move to enhance tight gas exploration is reflected in the newly introduced Tight Gas (Exploration & Production) Policy, 2024.
Incentivizing Unconventional Hydrocarbons
Understanding the unique challenges posed by unconventional sources, the policy aims to attract local and foreign Exploration and Production (E&P) companies, fostering investment in unconventional hydrocarbons.
Challenges in Tight Gas Reservoirs
Exploring tight gas reservoirs demands cutting-edge technologies and extensive processes like seismic acquisition, drilling, reservoir stimulation, and Field Development Plan (FDP). The complexity of these processes requires substantial investments with a longer recovery cycle.
Bridging the Demand-Supply Gap
Addressing the demand-supply gap, the policy provides a fair pricing regime, acknowledging the increased production costs associated with tight gas exploration. This is crucial for making the economic model for unconventional sources viable.
Application of Incentives
The incentives outlined in the policy will 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).
Tight Gas Discoveries Criteria
Tight Gas discoveries are considered ‘not developed’ under specific conditions, emphasizing the significance of the Field Development Plan (FDP) in the exploration process.
Resolution of Conflicts
In case of conflict with existing Petroleum Concession Agreements (PCA) or Oil Mining Leases (OML), this policy takes precedence concerning Tight Gas. Other rights of the Operator, however, remain in accordance with PCA/OML/D&PL.
Model Supplemental Agreement
To avail incentives, a Model Supplemental Agreement (SA) shall be developed and executed with the respective Petroleum Concession Agreement (PCA).
Pricing Policy
Exploiting Tight Gas Reserves involves a 40 percent premium on the zonal price of Petroleum (Exploration and Production) Policy 2012, ensuring a competitive pricing structure.
Provisional Incentive Price
Upon confirmation of a discovery as Tight Gas, a provisional incentive price will be notified without EWT discount, with the final price declared after the grant of D&PL/OML.
Operator’s Selling Rights
Operators, with government approval, may sell gas to third parties within Pakistan at mutually negotiated prices, ensuring the government’s first right of refusal.
Ten-Year Applicability
Incentives apply to projects certified within ten (10) years from the notification of this Policy, fostering continued exploration and development.
Royalty and Tax Benefits
Royalty, tax loss carry forward, abandonment costs, windfall levy, and other fiscal levies are outlined, providing a comprehensive fiscal framework.
Production Suspension
Allowing production suspension for up to a year under justified circumstances, this provision aligns with technical and economic justifications.
Review Mechanism
The policy allows for a review after five years, with specific provisions for the service sector to incentivize technology transfer and deployment of cutting-edge equipment.
Conclusion
The Tight Gas (Exploration & Production) Policy, 2024, reflects Pakistan’s commitment to addressing the challenges of tight gas exploration. By offering incentives, fair pricing, and a comprehensive fiscal framework, the government aims to boost the exploration and production of unconventional hydrocarbons.
FAQs
- Q: How does the policy address the increased production costs in tight gas exploration?
- A: The policy provides a fair pricing regime, acknowledging the challenges and increased costs associated with tight gas exploration.
- Q: What criteria determine if a Tight Gas discovery is considered ‘not developed’?
- A: Various conditions, such as the non-submission or approval of the Field Development Plan (FDP), determine whether a Tight Gas discovery is considered ‘not developed.’
- Q: How long do the incentives apply under this policy?
- A: Incentives apply to projects certified within ten (10) years from the notification of this Policy.
- Q: What rights does the government have regarding the sale of gas to third parties?
- A: The government has the first right of refusal when operators sell gas to third parties within Pakistan.
- Q: Can the policy be reviewed, and if so, how often?
- A: The Tight Gas (Exploration & Production) Policy may be reviewed after five years, except for specific sections that require periodic review