ISLAMABAD : The government on Friday raised the wellhead gas price cap to $100 per barrel of crude oil price, from $45, in the new 'Petroleum and Exploration Policy 2009', to attract investment announced here. However the floor price cap has been placed at $10 per barrel of crude oil.
According to the new policy document, if the market price of crude oil, or condensate, exceeds $100 per barrel, the 100 percent benefit of Windfall Levy Gains (WLG) will be passed on to the government of Pakistan. The ceiling of $100 per barrel would be reviewed after five years, or as and when the pricing dynamics significantly change in the international market.
The base price for crude and condensate under the new policy will be $30 per barrel, which would escalate each calendar year by $0.25 per barrel, starting from the date of the first commercial production in contract area.
Windfall Levy has been introduced by placing cap at $100 per barrel crude oil for wellhead gas price in the new policy to safeguard government interest against the high international crude oil prices. For sale of natural gas to parties other than the government of Pakistan, WLG will be applicable on the difference between the applicable government of Pakistan zone price and third-party sale price. The WLG will not be applicable on sales of natural gas made to the government.
The government has also reduced the discount on well testing to 10 percent, from 15 percent, as part of major fiscal incentives for more investment in the oil and gas sector under the new policy.
For Zone III, the producer gas price has been calculated at $3.13 per million British thermal unit (mmbtu) in case the crude oil price stands at $35 per barrel; $3.3 per mmbtu for Zone II; $3.6 per mmbtu for Zone-1 and Zone O (offshore shallow); and $3.8 per mmbtu for Zone O (Offshore deep & ultra-deep).
The producer gas price will be $5.03 per mmbtu for Zone-1 and Zone O (offshore shallow); $5.35 per mmbtu for Zone O (offshore deep & ultra deep); $4.7 per mmbtu for Zone-II, and $4.3 per mmbut for Zone-III, if the crude oil price swells to $100 per barrel.
A committee will be constituted to address the issues of the implementation of the policy. The Minister for Petroleum and Natural Resources will be chairman of the committee, and planning commission deputy chairman, secretary finance division, secretary petroleum and natural resources and director general petroleum concessions will be its members.
The government has simplified bidding and pre-qualification process and its extent has been reduced from 90 days to 60 days. On a written request of an interested company, DGPC will make every effort to provide bid documents within 15 days of the request. The bids will be evaluated on the basis of best Work Program only.
Smaller local Pakistani companies will be allowed to join consortia with other E&P companies, as non-operator, to gain the necessary industry experience to allow them to expand their capacity to take on operating roles in future. In the event that a local Pakistani company does not have requisite past operating experience, such company shall be required to either produce an agreement with an internationally renowned E&P/services company acceptable to DGPC or a high calibre technical and management team with proven track record of overseeing and managing operations in the international petroleum industry. In the case of a significant gas discovery in Zone I or Zone II, a retention period of up to 5 years will be considered for onshore licences, on case to case basis, provided such discovery can be declared a commercial discovery when inter alia adequate gas pipeline transportation facilities are installed and gas markets have been sufficiently developed for sale of natural gas on commercial basis.
The federal government, in consultation with the provincial government, may share with locals of the area its revenues of royalty, rentals etc, or revenues raised through any other method ie increase of gas price etc, whereby the profitability of the E&P companies are not affected.
Foreign E&P companies shall have the right to remit sale proceeds from the sale of petroleum within Pakistan in foreign currency abroad in accordance with applicable regulations of the State Bank of Pakistan. Pakistan government shall ensure that the State Bank of Pakistan permits all remittances of funds without any delay or additional cost to such companies.
If the foreign E&P companies sell gas to third parties in Pakistan and want to remit sale proceeds in foreign currency abroad, Pakistan government will allow these companies to freely remit a "guaranteed percentage" of their sale proceeds.
The "guaranteed percentage" shall be 75 percent of total gross revenues from any lease in Zone O and 65 percent of the total gross revenues from any lease in Zone III. The remaining gross income, in rupees, can be used to pay royalties, taxes, windfall levy and any other payments to the government and to meet local operating costs.
A marine research and coastal area development fee will be applicable at $50,000 per year--until first discovery; $100,000 per year - thereafter until declaration of commerciality; $250,000 per year - during development phase; $500,000 per year - during production phase. Out of the above fee, 75 percent would be spent on coastal area development, and 25 percent for marine research.
Corporate income tax will also be payable at the rate of 40 percent of profit or gains in accordance with the Fifth Schedule of the Income Tax Ordinance 2001 in case incentives are offered to the operator by the government of Pakistan.
Under the new policy, all local and foreign companies presently operating in Pakistan will be eligible to acquire petroleum right. Foreign companies not operating in Pakistan, but having operated concessions in other geographical areas of the world will also be eligible to acquire petroleum right subject to demonstration of the technical and the financial capability.
Copyright Business Recorder, 2009 |
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