Legal opinion sought in Centre-Balochistan dispute over Sui field ownership

Updated February 21, 2020

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The government on Thursday sought legal opinion of the Law Division to settle difference of opinion over shareholding of hydrocarbon resources between the centre and Balochistan that has hampered signing of a legal instrument over Sui field for almost five years. — File
The government on Thursday sought legal opinion of the Law Division to settle difference of opinion over shareholding of hydrocarbon resources between the centre and Balochistan that has hampered signing of a legal instrument over Sui field for almost five years. — File

ISLAMABAD: The government on Thursday sought legal opinion of the Law Division to settle difference of opinion over shareholding of hydrocarbon resources between the centre and Balochistan that has hampered signing of a legal instrument over Sui field for almost five years.

The decision to this effect was taken at a meeting presided over by Finance Adviser Dr Abdul Hafeez Shaikh and attended by Minister for Energy Omar Ayub Khan, Special Assistant to Prime Minister on Petroleum Nadeem Babar, Balochistan’s Secretary Energy and representatives of the Ministry of Inter-Provincial Coordination.

“The finance adviser decided that the representatives from the Government of Balochistan and the relevant federal ministers should hold further meetings with representatives of the Law Division for expert advice and firm up proposals with consensus that could benefit both the federal and provincial governments without violating the spirit of the 18th Constitutional Amendment and the interests of any private party involved in the business,” an official statement said.

They were expected to hold meeting within a month’s time to firm up appropriate proposals for submission before the competent forum for final approval.

In the meeting various issues regarding the extension of lease of gas fields of Balochistan, rights and share of the provincial government in the new and old oil and gas exploration business, rationalisation of gas tariff for the local population, gas allocation to power plants and the creation of training fund for Balochistan were discussed. For creating a training fund, it was decided that the matter shall be resolved within a fortnight.

The provincial government has been agitating the delay in signing of Development and Production (D&P) Lease of Sui gas field and delay in resolution of other matters related to oil & gas exploration for almost five years. It had registered reservations with the centre over the legality of Pakistan Petroleum Ltd (PPL) operations through statutory regulatory orders since June 1, 2015 when Sui field’s second 30-year mining lease expired.

The provincial government has also been demanding that PPL’s D&P lease should be signed under the Petroleum Policy 2012 as the 18th Amendment had shifted full ownership of provincial hydrocarbon resources to the provinces.

A memorandum of agreement (MoA) was signed between the federal and provincial government in May 2016 under which the PPL – the operator of Sui field –was to sign Petroleum Concession Agreement (PCA) with Balochistan and provide the field development plan. This did not happen even after a series of meetings and committees.

The Sui gas field, located in District Dera Bugti, was discovered in 1953. Its first mining lease was signed in June 1955, expiring in 1985. However, this was extended for another 30 years to 2015. Consequent upon the expiry of the lease, it was decided that Sui gas field would now be governed by the Petroleum Policy 2012 and Petroleum Rules 2013.

Under the MoA, the lease was to be extended for 10 years through Petroleum Concession Agreement and D&P Lease. However, the provincial government had expressed reservations over the draft of these agreements.

It said the Article 4.1.3 (6) of Petroleum Policy 2012 entitled the Federal Government Holding and Provincial Holding Company of Balochistan to 2.5pc shareholding. Also, section R of the MoA required the PPL to invest Rs20bn in exploration activities in Balochistan during lease period.

The provincial government complained that the draft agreement prepared by the centre was silent about this shareholding and PPL had been shown 100pc owner of D&P Lease. The provincial government believed this against the spirit of Article 172(3) that said “Subject to the existing commitments and obligations, mineral oil and natural gas within the province or the territorial waters adjacent thereto shall vest jointly and equally in that province and the federal government.”

Similarly, the allocation of gas, it said, was also not in line with Article 158 which required the province in which a well-head of natural gas was situated shall have precedence over other parts of Pakistan in meeting the requirements from that well-head.

Published in Dawn, February 21st, 2020