Tuesday, November 28, 2017

Balochistan demands 2.5% share in Sui gas field


By Zafar Bhutta

Published: November 28, 2017

Citing national interest, the then Ministry of Petroleum extended the Sui lease on the same terms and conditions for one year as an interim arrangement, which was further extended from time to time. PHOTO: FILE

ISLAMABADThe central and Balochistan governments have differed over the grant of fresh development and production lease for Sui field as being the producing province the latter wants a share in the field as well as allocation of gas.

According to a senior government official, the Balochistan government is seeking 2.5% share in the Sui field for a provincial holding company and allocation of gas for its consumers in line with Article 158 of the Constitution which gives first right of use to the province where energy has been discovered.

Pakistan Petroleum Limited (PPL), the operator of the Sui field, has prepared a field development plan and draft concession agreement as well as submitted an application for the development and production lease which will come into effect retrospectively from June 1, 2015.


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The documents, prepared by PPL, were reviewed by a team of the Director General Petroleum Concessions (DGPC) in consultation with the provincial director of Balochistan. They agreed on making some changes to the draft petroleum concession agreement in line with the Memorandum of Agreement.

However, the provincial director expressed his inability to come up with any arguments without approval of the energy secretary of Balochistan, said the government official.

The provincial director then sent the documents to the energy secretary for approval.

However, the energy secretary expressed reservations about participation of the provincial holding company in exploration efforts and the right of petroleum acquisition under Article 158 of the Constitution. These issues were discussed between the provincial director of Balochistan and the DGPC team, where the former argued that in accordance with para 4.1.3 (6) of the 2012 petroleum policy, the provincial holding company was entitled to a 2.5% share in each licence and lease.

The second issue pertained to Article 158 of the Constitution for the allocation of gas in the Memorandum of Agreement and its exclusion from the draft petroleum concession agreement. Under this article, the producing province has the first right over gas under the 18th Constitutional Amendment.

Dismissing the observations, the DGPC team argued that the working interest was related to full participation in the exploration phase. If the provincial holding company opts for 2.5% working interest with full participation in the exploration phase, it would become eligible for similar working interest in the lease to be granted for new discoveries.

Accordingly, it said, the assertion of 2.5% working interest in Sui could not be agreed. However, the holding company may be offered 2.5% working interest in new exploratory efforts to be undertaken within the Sui lease.

The DGPC team also pointed out that the article did not pertain to the exploration and production companies, which had to offer gas supply to the government that, in turn, allocated gas to the designated buyers. In the case of Sui field, the designated buyers were Sui Northern Gas Pipelines and Sui Southern Gas Company.

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As PPL had no control over the distribution of Sui gas downstream, the aspect was not required to be incorporated into the petroleum concession agreement, the DGPC team said.

Sui field’s lease expired on May 31, 2015, prompting the need for putting in place an arrangement for continuing gas production from the field.

Citing national interest, the then Ministry of Petroleum extended the Sui lease on the same terms and conditions for one year as an interim arrangement, which was further extended from time to time. However, the government of Balochistan raised concern over the grant of extension without its involvement.

Consequently, the provincial government was invited to the discussions in a bid to reach an understanding on the Memorandum of Agreement. Its objective was to recognise and set forth responsibilities of the parties and define procedures for collaboration in order to extend the Sui gas lease.

Published in The Express Tribune, November 28th, 2017

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