PESHAWAR, June 15: The Khyber Pakhtunkhwa government is expecting its oil and gas proceeds will go up to Rs50 billion annually in four years enabling it to have greater fiscal space, according to the relevant officials.

The province will receive Rs22.2 billion oil and gas proceeds in financial year 2012-13 and according to its Medium Term Fiscal Framework (MTFF), they are calculated to go up to Rs26.6 billion in the next fiscal and Rs31.9 billion in 2014-15.

“We are expecting that Khyber Pakhtunkhwa’s receipts on account of straight transfers from the federal government will go up to Rs50 billion in a four year time or even much more than that,” a senior provincial manager told Dawn on Friday.Khyber Pakhtunkhwa receives royalty on oil, royalty on gas, gas development surcharge, and excise duty on gas in accordance with the Pakistan Petroleum (Exploration and Production) Rules-1986.

The finance department official based the government’s optimism on the basis of the steep rise the province recorded in its receipts under the oil and gas proceeds during the last few years, increasing from Rs4.1 billion in financial year 2007-08 to Rs17.5 billion in the outgoing fiscal.

According to the official, the province received merely Rs487 million under this head in financial year 2004-05 when it began receiving money from the centre through proceeds generated from oil and gas companies and levies regulating the sector and oil and gas consumers.

He said the receipts were bound to grow substantially during the next few years as the Oil and Gas Development Corporation Limited (OGDCL) and MOL, a Hungarian company, were carrying out drilling in three different places in the southern districts of the province.

The official said oil production in Khyber Pakhtunkhwa was estimated to increase to 13.3 million barrels in fiscal 2012-013 from slightly over 10 million barrels during the outgoing financial year.

“Same is the case with gas production that is also registering increase with every passing year, leaving us with hopes for a greater fiscal space in the years to come,” said the finance manager.

Of the 143,619 square kilometres area presently under exploration for oil and gas in the country, around 13.5 per cent, making 18,890 square kilometres, is in Khyber Pakhtunkhwa, according to a provincial government document. The increase in oil and gas proceeds will benefit the province and oil and gas producing districts.

The provincial government has been diverting five per cent of its annual straight transfers (oil and gas sector receipts) to the oil and gas producing districts; including Kohat, Hangu, and Karak, for improving social sector facilities.

The three districts will get their share increased to 10 per cent in the next financial year in line with an announcement by the provincial government. “The provincial government released over Rs828 million to the three districts in the outgoing financial year in accordance with their annual share calculated on five percent of the total provincial oil and gas proceeds,” said the official. The three districts, added the official, would get more than Rs1 billion since their share had been increased to 10 per cent, passing on the benefit of the natural resource to the oil and gas producing areas. The funds, he said, were being diverted to the oil and gas producing districts to improve their socio and economic conditions. In addition to the funds being diverted by the provincial government, the foreign company (MOL), with substantial business and commercial stakes in district Karak, provided $1.5 million from the proceeds of production bonus against its Tal block. The money was released to the district government in October last year, according to the official. The increase in oil and gas proceeds, said a development planner, could prove useful to set in motion economic growth by spending money on economically vital schemes. Similarly, the province could rescue itself by reducing its foreign loan liabilities that were growing at an alarming rate due to an escalating foreign currency exchange rate. “But the government is hardly pushed to plan ahead to utilise the opportunity,” said the planner, adding “in greater likelihood the fiscal space would be eaten up by the provincial growing salary and pension bill.”