Pakistan: Incentive-laden upstream petroleum policy prepared

The Ministry of Petroleum has prepared an incentive-laden upstream Petroleum Policy 2006, to secure investment for oil and gas sector. The petroleum ministry officials are busy with the consultant to give the new policy final shape before it is submitted to the federal cabinet for approval.

Pakistan has offered incentives to oil and gas companies in the Petroleum Policy 2001. It helped Pakistan secure sizeable investment in oil and gas sector during the last five years to expedite exploration work in different parts of the country.

But with surging oil and gas prices internationally it was strongly felt in Islamabad that Pakistan needs to put more efforts to increase its domestic oil and gas production and reduce dependence on imported fuel.

This approach stirred the policy makers for making major changes in petroleum policy for offering lucrative incentives to exploration and production (E&P) companies to ensure them better return on their investment.

The policy makers argue that Petroleum Policy 2001, was not attractive for E&P companies any more as it does not offer them good return on investment. They term low oil and gas prices as a big hurdle in wooing investment for exploration activities in on-shore and off-shore areas. Particularly, low gas price worries them.

The policy makers are convinced that the government needs to take gas prices to international level to ensure the investors that they will get better return if they prefer Pakistan over other countries for exploration activities.

Sources said the ministry of Petroleum had hired HIS, a London-based consultant, to study the incentives being offered to exploration and production (E&P) companies by other oil and gas producing countries and suggest Pakistan changes to make the new upstream petroleum policy promising for exploration and production companies.

Sources said the consultant submitted its report to the ministry sometimes back and now a 4-member consultant team was in Islamabad to brief the concerned officials on its contents. An official of the ministry told Business Recorder that the new policy will offer incentives to the investors in different areas such as taxation, import of machinery and vehicles used for exploration activities besides increasing their profit.