Tight Gas Policy 2024: Pakistan offers investors $7.5 wellhead price for tight gas discovery

ISLAMABAD: The federal government has introduced the Tight Gas (Exploration & Production) Policy 2024, focusing on an innovative pricing strategy to encourage efforts in exploring and producing unconventional hydrocarbon reserves.

The policy aims to promote activities in this sector by offering a significant 40 per cent premium on the zonal price, defined in the Petroleum (Exploration and Production) Policy 2012.

The Council of Common Interests (CCI) approved the policy on Tuesday, and it would take effect upon official notification. The initiative applies to all qualifying tight gas discoveries, whether they are under existing licenses or those to be issued in future, including projects under petroleum concessions agreements (PCAs), mining leases and development and production (D&P) leases. Eligible projects must follow a specified qualification process.

Operators, with government approval and consent from the joint venture partners (JVPs), have the option to sell gas to third parties within Pakistan at mutually negotiated prices. However, these prices should not fall below the stipulated Tight Gas (Exploration & Production) Policy 2024 price, and the government retains the first right of refusal.

A senior official of Petroleum Division explained that offering 40pc premium on the respective zonal price of Petroleum (Exploration and Production) Policy 2012 means that wellhead price for tight gas would be at $7.5 per MMBTU as the technology and high tech are involved in it. So the government would get 40pc taxes and 12.5pc royalties out of it and the net wellhead price would be hovering at $5.50 per MMBTU. However, operating loss can be carried forward to a period not exceeding 15 years. “The 500-1000mmcfd tight gas will replace the import of costly RLNG of cost that stands at $13 per MMBTU, which also eats up the precious foreign exchange,” added the official. It’s important to note that the incentives outlined in this policy apply only to projects certified within 10 years from the policy’s notification, emphasizing the government’s commitment to prompt utilization of the country’s tight gas resources. The policy is expected to attract increased investment in tight gas exploration, a crucial step toward energy self-sufficiency and economic growth. The government aims to address challenges unique to unconventional sources, bridge the demand-supply gap, establish fair pricing and reduce reliance on imports, creating employment opportunities.