ISLAMABAD: A new controversy has emerged between the Sindh government and the state-run Oil & Gas Development Company Limited (OGDCL) as some federal government and company officials try to resist political pressures for transferring four ‘dormant’ gas fields of the largest petroleum producer to the Sindh government or its designated entity.
Informed sources said the issue had been politicised to the extent that the Economic Coordination Committee (ECC) of the cabinet led by Finance Minister Dr Abdul Hafeez Shaikh has referred it to the prime minister who himself remains undecided how to tackle it.
The sources said Minister for Petroleum and Natural Resources Dr Asim Hussain would have a detailed session with the prime minister over the next few days to persuade him to transfer gas fields to Sindh. Interestingly, OGDC has valid licences and legal rights over some of these fields until a decade later. In the absence of a full time managing director, the OGDC is finding it hard to resist and protect assets it had invested in for years to develop.
The sources said the ministry of petroleum has requested the ECC and the prime minister to allow lease of four dormant gas fields – Jakhro, Nur, Bagla and Sara West – to the government of Sindh in three different manners.
The matter was also a part of the agenda of ECC meeting last week but could not be discussed.
Interestingly, the ECC had decided in January this year that the gas from these fields should be allocated to Sindh government or its designated entity – proposed at the time to be Sindh Oil & Gas Company – subject to following terms and conditions.
(i) OGDC will be paid petroleum concession agreement/policy price for gas as well as products, if produced i.e. LPG and Condensate. (ii) Product disposal, by the buyer, would be in accordance with the prevalent rules and regulations and subject to all applicable taxes.
On the insistence of some politicians from Sindh, another summary was moved for the ECC that sought to review its earlier decision under which OGDC was to get the price of gas and gas was to be utilised on the recommendation of the Sindh government in accordance with transfer of rights and obligations to the provinces under the 18th Amendment.
Sindh wanted to have not only control over the asset but also to get the gas sale proceeds – an arrangement unacceptable to the OGDC.
In fact, the OGDC had already received about 10 bids for the sale of LPG and other products from these fields and was about to award the contract but the process had to be stalled owing to political pressures.
The petroleum ministry has now also forwarded a fresh summary to the ECC with request to transfer ownership along with sale proceeds to Sindh despite opposition from OGDC, wanting return on investment it had made on exploration and development of fields to production stage.
In the first case, it was proposed that the lease of Jakhro gas field, which had reverted to the federal government, should be granted to the Sindh government or its entity.
Jakhro Gas Condensate field located near Shahdadpur has an approximate daily quantity of 5.50 mmcfd having heating value of 797 British Thermal Unit (BTU).
Second, it was proposed that leases of Nur and Bagla gas fields, presently held by OGDC, should also be given to the Sindh government or its entity soon after expiry of OGDC lease in May 2011.
Nur condensate field near Badin has about daily gas production capacity of 2.32 mmcfd having heating value of about 1,018 BTU and estimated reserves of 13.5 BCF. Likewise, Bagla condensate field near Badin also has daily estimated production capacity of 5.28 mmcfd, having heating value of 1074 BTU. Both these fields were leased to OGDC in 1995.
Third, it was proposed that the lease of Sara West gas field, presently held by OGDC till 2021, should be revoked under Petroleum (E&P) Rules and granted to the Sindh government or its legal entity.
Sara West gas field near Ghotki, has daily production quantities of 60 mmcfd but was of non-pipeline quality gas.
The sources said that in view of heavy stakes, the prime minister had desired of the Syed Naveed Qamar in March this year to have a full picture of the situation before announcing a decision.
The meeting first scheduled for April 14, had been postponed repeatedly since then.
The Sindh government has been calling upon the federal government to use rule 42(1) of Pakistan Petroleum (E&P) Rules of 2001 under which the lease could be revoked if regular commercial production has not commenced within five years from thegrant of a lease.