PESHAWAR: Khyber Pakhtunkhwa suffered Rs600 million loss as the federal authorities reduced the production of crude oil and gas from their wellheads located in the province last December.

The local officials told Dawn that the federal authorities managing the nationwide production and supply of crude oil and gas had slashed the production of crude oil by 10,000 barrels per day and that of gas by 80 million cubic feet in Dec 2017.

They however didn’t know how much the production was cut in Nov 2017 and Jan and Feb 2018.

“The slashing of oil and gas production was considerably reduced in Jan and Feb but the exact details are not available,” a senior government official said.

Local officials claim move meant to promote LNG

The official said the provincial government learned about the matter only after the federal government began disseminating the production details in light of a decision made by the Council of Common Interest.

The officials termed the reduction ‘deliberate’ meant to promote the use of LNG in the country.

“We’ve written a letter to the relevant federal authorities asking them to explain the production dip but the response is awaited. They usually do not respond to such entreaties from the provinces,” an official said.

Officials at the energy and power department said the production dip was going to hit the province and oil and gas royalty.

They said the province was receiving 12.5 per cent royalty per barrel from the province and oil and gas royalty combined, accounted for Rs22 billion in the province’s receipts.

The officials, however, said reduction in production was also going to hit the province’s oil and gas royalty transfers.

“Less oil and gas production means less money for the province,” he said, adding that the cost of dip would be higher than Rs600 million.

The official said the choking of production was not only bad for the province but also for the whole country.

He said in case of the reducing oil and gas production from the province, the country’s LNG bill would go up and thus, draining the foreign exchange reserves, while on the other hand, imported LNG would increase the consumers’ power bills.

When contacted, KP Oil and Gas Company Limited (OGCL) chief executive officer Mohammad Raziuddin said the company had only the data of December, which showed the province’s crude oil production had cut down by 10,000 barrels per day, while gas production was curtailed 80 million cubic feet of gas.

He said besides the huge financial loss to the province, the step also caused the financial burden amounting to Rs6 billion to the national kitty in the foreign exchange as the reduction in local production directly caused the import of LNG.

Mr Razi feared that the federal government’s interventions had damaged the wellhead infrastructure, as the wells were prone to such moves.

He said the provincial government had written a letter to the relevant federal authorities on the matter in Feb but had yet to receive a response.

The KP Oil and Gas Company Limited says the province has a recoverable potential of 1.1 billion barrel oil and 16 trillion cubic feet of gas. It currently produces around 55 per cent of the country’s total crude oil.

Published in Dawn, March 16th, 2018