ISLAMABAD, March 20: The Ministry of Petroleum formally announced on Friday the ‘Petroleum policy 2009’ which empowers legislators and district administrations to spend the ‘production bonus’ on social development in their areas.

Earlier, the federal government had the authority to spend the ‘bonus’.

Officials told Dawn that under the new policy committees headed by district coordination officers would be set up and would include MNAs from the areas as members.

The policy sets varying rates for gas exploration by companies in different zones. The average rate is $1 per million British thermal unit (MMBTU) which is higher than the rate fixed in the 2007 policy. The government will issue about 50 new exploration licences.

The Economic Coordination Committee of the cabinet had formed an eight-member committee to discuss the policy with the stakeholders and finalise the draft. The process was completed on Friday and the policy was placed on the official website of the Ministry of Petroleum and Natural Resources.

The policy envisages payment of royalty at the rate of 12.5 per cent of the value of petroleum at the field gate. The royalty will be paid on liquid and gaseous hydrocarbons (LPG, NGL, Solvent oil, gasoline and others) as well as substances like sulphur produced in association with the hydrocarbons.

The lease rent will not be deducted from the royalty. Tax on income will be payable at a rate of 40 per cent of profit or gains in accordance with the Fifth Schedule of the Income Tax Ordinance, 2001. Royalties will be treated as an expense for the purpose of determination of income tax liability.

Small local companies will be allowed to join consortiums with exploration and production (E&P) companies as non-operator in order to gain necessary industry experience and expand their capacity to take on operating roles in future.If a local company does not have requisite operating experience it will be required to enter into an agreement with an internationally renowned E&P/services company or produce a technical and management team of calibre with proven track record of overseeing and managing operations in the international petroleum industry.

The government may assign the status of “strategic partner” to national oil companies representing foreign governments. It will promote direct negotiations with selected strategic partners in order to explore and develop specific acreage selected for strategic partnerships and develop acreage of significant petroleum potential identified in regard to which the government considers that a strategic partnership will improve the exploitation of any petroleum resources.

The party to whom a block is awarded would remain the operator and majority shareholder of the block. The block awarded to the strategic partner can only be farmed out to public sector companies of the same country acceptable to the government or Pakistani public sector E&P companies.

Strategic partners will be required to undergo the same procedure as other companies do. However, they will be given privileged award of petroleum rights without following competitive bidding for certain blocks selected on mutually agreed terms and conditions.
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