ISLAMABAD, Jan 15: The petroleum exploration industry called for a new incentive package containing more guarantees and exemptions from compulsory contributions and taxes to accelerate oil and gas production from existing and depleting fields, it is learnt. A senior petroleum ministry official confirmed that the demand for a new package was made after Prime Minister Shaukat Aziz asked oil and gas companies to expedite production and use up old fields to their maximum capacity. He said the industry’s response was being examined.
Pakistan expects severe gas shortfalls beyond 2007-08 and is currently pursuing options of gas imports from Iran, Qatar and Turkmenistan besides opting for liquefied petroleum gas for long-term economic objectives. It wants enhanced production from all operating fields and further investment in depleting fields to meet short-term objectives.
The representative body of about 26 exploration and development companies, Pakistan Petroleum Exploration & Production Companies Association (PPEPCA) submitted a seven-point formula in this regard.
“Taking extra production from existing fields is a challenging task, gravity of which may vary from field to field. However, in most of the cases substantial additional investment and other risks are involved,” says the association.
The industry wants improvement in terms of income tax, royalty, production bonus, land lease rentals, import duties on service industries, payroll taxes and WWF and WPPF and an increase in gas price for incremental production.
Under the new package, producers of existing fields should be given option to bring new development plans to offer the most viable annual committed quantity for bringing production at front end rather than depleting the field over the period of 10-30 years.
Similarly, existing fields having no quantity commitments and take-or-pay clauses be given fresh terms on the basis of revised accelerated production plan.
The industry also wants a clear policy statement from the government that use of local gas would be given first preference even in case of import pipelines or LNG imports. Also to reduce the market risk, a higher take-or-pay of 90 per cent (instead of existing 70-80 per cent) of committed quantities would be offered to existing producers in case of increased production.
The PPEPCA says that under the existing policy, producers are not able to recover all reserves from their fields and a significant portion of the reserves are left underground. For enhancing production from existing depleted or near depletion field, the government should offer attractive prices and waiver of training and social welfare obligations for rejuvenating these fields as production from these fields can come quickly.
The industry wants the government to design a policy for optimum utilization of gas transmission network, irrespective of the current of SSGCL and SNGPL divide with a simple mechanism for gas swaps from one utility to the other. Currently, any shortfall in the contractual supply of one utility is met by substitute expensive fuels even through where surplus capacity exists with the other utility.
It quoted a set of risks like additional investment in seismic and drilling facilities and pipelines reduces the investment efficiency and increases the risk profile (higher investment on the same reserve base. Higher production reduces time cycle to acquire knowledge of reservoir behaviour from the production pattern leading to higher reservoir risk and higher production rate will reduce the plateau periods, leading to reduction in capacity utilization.
