Government exempts E&P’s machinery from import duties

ISLAMABAD: Government on Wednesday decided to exempt imports of heavy machinery intended for oil and gas exploration and development in the country from custom duties and other levies in a major move to ramp up indigenous fuel production.

The Federal Cabinet that met with Prime Minister Imran Khan in the chair took the decision of exempting all the companies that want to do offshore oil and gas exploration and development in Pakistan from import duties.

Officials said now import of vessels, drill ships and helicopters will be imported without levy of any duty or charges whatsoever including customs duty. “The step will open new doors for multinational companies in Pakistan,” an official said.

The dispensation is extended to all companies and joint venture (JV) partners who are party to any production sharing agreement with government for offshore petroleum exploration and production activities. Ministry of Energy (Petroleum Division) earlier proposed the concessions for Italian multinational oil and gas company Eni and US ExxonMobil.

The exploration and production companies planned to start offshore drilling during the current month on an ultra-deep well in offshore Indus-G Block (2265-1) known as Kekra for the exploration of gas reservoirs. The site is around 300 kilometres off the coast of Sindh.

The equipment of both the companies have already arrived in Pakistan and have been waiting for customs clearance. The machinery includes three platform supply vessels, one fast support intervention vessel, two helicopters and one drillship.

“After the latest government’s decision, no customs duty will be applied on them and (they) would be cleared soon,” an official added. Yet, the duty exemption will also be applicable on all the production sharing agreements for offshore petroleum exploration and production activities.

Pakistan has become an energy deficit country with demand of gas, which is the prime fuel of choice, significantly rising. “The shortfall in gas is expected to reach 3,999 mmcfd (million metric cubic feet/day) by FY2019-20 and the gap will reach 6,611 mmcfd without imported gas by FY2029-30,” the Oil and Gas Regulatory Authority said in a latest annual report. The situation is not different when it comes to consumption of petroleum products that registered a growth of 9.7 percent in 2016/17 compared to 5.2 percent a year earlier. Total production by the refineries during FY2017 was 11.67 million tons compared to previous year’s 11.31 million tons, showing a growth of 3.2 percent.

State-owned Oil and Gas Development Company, which is the largest exploration and production firm in the country, produced 44,041 barrels/day of oil, 1.051 billion cubic feet/day of natural gas, 455 tons/day of liquefied petroleum gas and 63 tons/day of sulphur during the fiscal year of 2016/17.