Loss of $50m incurred due to hampering production of cheaper gas

ISLAMABAD: In a new development, Petroleum Division has done away with the decision that hindered the production of cheaper gas for 7 months from Badin-IV South Gas Fields earlier adopted by former in charge of director general Petroleum Concessions. The decision is taken amid the notices the prime minister and NAB have taken about the said glaring violation of Marginal Pricing guidelines 2013 that caused the $50 million loss to national kitty.

The country braved the loss of $50 million on account of impeding the cheaper gas production from Badin-IV South Gas Fields from May-June 2019 under the decision taken by former in-charge of DGPC, but later on verbal assurance by the SAPM and energy minister, the gas was connected to the national grid in January 2020 from the Badin-IV.

Petroleum Division has also stopped the DGPC from wrongly using the arbitrary powers in violation of the Marginal/Stranded Gas Fields- Gas Pricing Criteria and Guidelines, 2013. Petroleum Division has already removed Imran Ahmed from the post of the DGPC as his appointment was not as per the law.

Under latest scenario, according to the documents, the 7-member committee headed by Special Assistant to Prime Minister on Petroleum Nadeem Babar has issued the policy decision under which DGPC and the relevant oil and gas exploration company have been made bound to accept the report of the international third party about its findings if the gas field is marginal or conventional. The Petroleum Division will send a summary to CCoE (Cabinet Committee on Energy) with regard to resolution of all the problems Exploration and Production (E&P) companies are facing to this effect. The Petroleum Division has also decided to appoint a regular DGPC and consultant through Federal Public Service Commission (FPSC).

As per the documents, Director General Petroleum Concessions (DGPC) when Imran Ahmad was the DG who had emerged as impediment in the way of connecting the gas with the national transmission system of the country depriving the masses from cheaper gas which is available at $4 per MMBTU as against the imported RLNG being given to countrymen at over $10 per MMBTU. The inaction by DGPC over marginal Price incentive allowed in 2013 guidelines had caused the colossal loss of $50 million to the national kitty, as the gas supply from the said gas fields was to connect the national system, 6 month before, but on this front zero progress was observed. NAB is also very active on this particular issue and is currently probing into the $50 million loss incurred owing to the DGPC’ questionable decision.

DGPC Imran Ahmad had rejected the report of the company—IPR International Limited Pakistan that he himself appointed to probe into the issue. And more importantly, the exploration and production companies from Canada and Kuwait have invested a massive amount of $60 million in the Badin-IV South Gas Fields. And on account of non-availability of 30 mmcfd gas, the Industrial, CNG sector faced zero supply gas in the ongoing gas crisis that gripped the country from the month of December.

However, documents further say that DGPC Imran Ahmad disallowed the gas supply connection to the national system in the wake of dispute of 25 cents per MMBTU. The Third Party in the light of gas pricing guidelines 2013 had advised the DGPC the price of gas from Badin-IV South Gas Field at $6.25 per MMBTU saying the said fields are Marginal Gas Fields, but DGPC Imran Ahmad and his consultant has disputed the amount of 25 cents per MMBTU owing to which the gas supply to the national system has delayed inflicting loss of $50 million.

It is pertinent to mention the people of area from where the gas hydrocarbons are produced get employment, the province get the royalty of 12.5 percent whereas the federal government manages the sales tax of 17 percent and in addition exploration and production company also pays the corporate tax and if all taxes are deducted the price of gas come to at $4 per MMBTU whereas the government is importing RLNG at the cost of $10 per MMBTU.

It was DGPC Imran Ahmad who assigned the IPR International Limited Pakistan and AGR Traces International to assess the gas price from the said fields prior to ink gas sales purchase agreement with the exploration and production companies. IPR International Limited Pakistan in the report declared the fields as Marginal Gas Fields and proposed the price of the gas at $6.25 per MMBTU.

DGPC rejected the report and asked IPR International Energy Group to examine the fields. It also submitted its report saying the fields are Marginal ones. GDPC in its version said that on the findings of IPR and AGR Traces, third party PEL has also submitted its report and the decision about 25 cents per MMBTU will be made under the exploration and production policy 2012.

The then DGPC Imran Ahmad in his written reply to The News had said the joint economics of the Ayesha, Ayesha North and Aminah fields calculated on conventional price is positive on point forward basis, therefore, these fields could not be declared as Marginal Fields. However, under new scenarios, the 7-member committee headed by SAPM Nadeem Babar has now barred, under policy decision, the DGPC from using the powers against the report of international third party report under Marginal Pricing guidelines 2013. This issue that the then GDPC Imran’s version that had deposited with The News has been declared wrong by the 7-member committee.