The Government has developed a plan to attract $5 billion in foreign direct investment (FDI) for the country’s oil and gas exploration and production.
This plan is in line with the PSDP+ regime to attract FDI to the upstream and midstream sectors of the country to explore and produce oil and gas. Under this program the projects will be financed in a model of public-private partnership.
As per sources, the Ministry of Energy sent this proposal to Pakistan’s embassies and missions abroad to persuade international companies, but in view of the bureaucratic obstacles that are yet to be overcome it would be a difficult task.
The initial recoverable reserves of hydrocarbons were 1,246,877 million barrels of crude, and 57,436 Trillion Cubic Feet (TCF) of gas, according to scientific estimates. The present reserves are 347.878 million barrels of oil and 19.541 TCF of gas.
Pakistan has a large sedimentary area of 827,268 square kilometers, in which so far only 1,094 exploratory and 1,443 assessment / development wells have been drilled with an average well-drilling density of 3.0 wells per 100 square kilometers, resulting in 394 discoveries giving a very attractive success ratio of 1:2.80.
The government has implemented various petroleum policies which contain attractive incentives in order to be competitive on the global market. As per salient incentives and gas pricing formula for local and foreign companies at reference crude price of $110 BBL, gas price for Zone-I is 6.6 per million British Thermal Unit (MMBTU), 6.3 / MMBTU for Zone-II, 6.00 / MMBTU&F for Zone-III, for offshore shallow 7$/MMBTU, deep 7$/MMBTU, ultra-deep 9$/MMBTU.
The interested companies in exploration and production are free to participate in the bidding round in order to acquire an area either independently or jointly with other companies. Similarly, corporate tax is set at 40% without a ring-fence, while lease extension after the expiry of the lease period for another five years is subject to payment of 15% of the wellhead value and selling of 90% of the pipeline specification gas to government and 10% by exploration and production firms to any purchaser with prior government approval.
It should be noted here that the government has taken several initiatives so far to create business-friendliness in the upstream petroleum sector and has introduced amendments to the 2013 Petroleum Exploration and Production Rules. In addition, the Petroleum Division’s director general (oil) has already devised incentives for investment in the country’s oil refining sector.