Islamabad: The Economic Coordination Committee (ECC) is likely to allow the Taal block joint venture to sell gas to a third party at a higher price to reach an out-of-court settlement.
The Taal block is estimated to have 16.1 billion cubic feet (Bcf) of recoverable gas reserves, but the field could not start production due to litigation. It has not produced gas since 2017 due to a court dispute.
The exploration license for Tal Block, located in Zone-II of Khyber Pakhtunkhwa, was granted on 11 February 1999. MOL (field operator) holds 8.4% working interest, Oil and Gas Development Company 27.76%, Pakistan Petroleum Limited 27.76%, Government Holdings Private Limited 15% and Pakistan Oil Fields Limited 21%.
On 28 August 2015, the Petroleum Concession Agreement (PCA) plus a supplementary agreement was signed to allow changes to the 2012 Petroleum Policy. In 2017, the policy was amended to impose a windfall levy on oil/condensate produced under the Petroleum Policies of 1994 and 1997.
All exploration and production (E&P) companies, including the Tal joint venture, were advised to submit supplementary agreements for implementation within the stipulated period, incorporating amendments to the PCAs signed under the 1994 and 1997 policies. In case of failure, working interest holders will not be eligible for gas price incentives.
The E&P companies challenged the amendments in the Islamabad High Court and obtained an injunction. Since then the matter is under hearing.
On the direction of the court, the matter is being referred to the CCI for reconsideration of its earlier decision.
A new discovery, Mamikhel South, was made on July 14, 2020 in the Tal block with a condensate flow of 20 million standard cubic feet per day (mmscfd) and 4,300 barrels per day.
A three-year development and production lease was granted from January 14, 2021. However, due to litigation, this field could not go into production.
With a view to start production, a summary was prepared for the Economic Coordination Committee (ECC), proposing to allocate gas to Sui Northern Gas Pipelines Limited (SNGPL) at the price of gas under the Petroleum Policy 2012. was done
However, the summary was withdrawn following requests from the joint venture partners, who asked for a revision of the Petroleum Division’s recommendations.
Subsequently, several meetings were convened with operational stakeholders to discuss the initial commencement of gas production and sales.
Now, MOL has indicated that they have completed an arrangement to sell gas from Mamikhel South to a third party buyer under Article 10.1(iii) of the PCA, which states that “Zone-I and II For, working interest owners will be free to use the natural gas or sell it to a buyer, as they choose”.
The Petroleum Division informed the ECC that it has conducted a thorough review and obtained a legal opinion, where MOL’s stand for sale of gas to third parties is supported.
“This is the first time that a company has approached to invoke Article 10.1(iii) of the PCA,” it said.
The division added that sales of gas to third parties result in a windfall levy (40 per cent of the price under the Petroleum Policy 2012, or $9 per million British thermal units – Rs 5 billion based on the value of the mmbtu). ) will apply. national treasure.
The provincial government will also receive higher royalties due to higher gas prices, estimated at Rs 1.5 billion and selling to third parties at $9 per mmbtu.
In addition to estimated reserves of 16.1 bcf of gas, approximately 4,300 barrels per day of condensate will also be available. Additionally, “it will encourage investment in the upstream sector, which will result in more discoveries in the area”, the division said.
“There will be immediate availability of gas (20 mmscfd), resulting in an import substitution of approximately $241 million at an LNG price of $15 per mmbtu.”
He pointed out that state-owned enterprises have about 70 percent interest in Taal exploration licences, which will indirectly benefit the government in the form of increased profits and taxes.
“This will also be an opportunity to enable private sector participation and curb revolving debt. Owners interested in the work have expressed their intention for early monetization to ensure timely payments.”
In view of all this, the Petroleum Division recommended that under Article 10.1(iii) of the ECCPCA allow the Tal Joint Venture to sell the gas from the Mamikhel South discovery to a third party, which is was a sovereign document.
