LNG Potential Pushes Petroleum Sector to New Heights in Pakistan

During the last four years, $10 billion were invested in Pakistan’s petroleum sector, even though international oil market still faces the menace of low prices. Officials told media sources that some international companies have showed interest regarding investments in the LNG sector which is, nowadays, considered an attractive field in Pakistan.

Government sources have revealed that many international investment groups are interested in developing their own terminals and building transmission networks to ensure proper supply of LNG to consumers. These officials indicated that a good news might go public in the coming days.

According the sources, a Polish company, PGNiG intends to implement its exploration and production (E&P) model which is likely to increase its business volume to Rs 100bn per year. PGNiG has plans to start an LNG trading office in the country.


Impact of LNG in Pakistan

At this stage, we are receiving 600 million cubic feet per day (mmcfd) LNG from Qatar which has provided much-needed support for a country which is in desperate need for energy. This supply has helped all gas-based power generation plants to function in full capacity. Currently, 1200 CNG stations have resumed services to consumers while industrial and fertiliser sectors are also getting continuous gas supply.

Prior to importing LNG from Qatar, Pakistan had to import 1m tonnes of fertiliser per year from different countries while now the country exports 6m tonnes of fertilizer to the world. At the same time, there is no interruption in gas supply to the power sector, even though Nandipur power plant also runs on LNG.

New LNG Deals

The sources revealed that Pakistan is in the process of striking LNG import deals with countries like China, Turkey, Russia, Malaysia and Oman. There are signs that this process will very soon culminate into a final deal.

Recoveries & Benefits

Ministry of Petroleum and Natural Resources has started making recoveries from E&P companies. It has already recovered Rs 4.7bn from the companies that are involved in oil and gas exploration and production activities. During the last four years, the ministry has recovered Rs 1,639.23mil as production bonus, Rs 1,988.25mil social welfare funds and Rs1,100.51m marine research fee from these companies.

“An amount of Rs4,727.99m has been recovered and deposited in accounts of concerned DCOs of oil and gas producing districts for carrying out welfare schemes for locals,” officials stated.

Oil and Gas producing Tehsils and Districts got their share from these companies in health and education sectors. At the same time, drainage and sewerage system were also improved in these areas.

New Social Guidelines

In a bid to improve local community’s participation in the process, ministry has made new amendments to the social welfare guidelines. Now all the schemes will be devised after consultation with local MNAs and representatives of local bodies or local administration.

This process also includes opening a joint bank account of E&P companies and local administration, which includes District Coordination Officers (DCOs) and Deputy Comm­issioners (DCs). After signing a Petroleum Concession Agreement (PCA), the companies will be bound to deposit social welfare contribution fund to the joint account within one month and subsequently by January 31 every year.

According the officials, “DCOs/DCs and E&P companies will sign cheques within a week after receiving complete requisitions from the concerned agency.” Members of parliament from the area and other authorities will take local population into confidence about these welfare schemes. They will not only hold public hearings but also publicize these schemes and will ensure that no undue delay occurs.

To make the process more transparent, these companies are required to provide annual audit certificates from their statutory auditors. This certificate will ensure that their social welfare duties have not been compromised and, in accordance with their PCA and social welfare guidelines, have followed the due process by transferring funds to the joint account.

As a measure to ensure additional transparency, provincial governments will be required to send reports about the completion of the projects to the federal and provincial ombudsmen and Human Rights Cell of the Supreme Court twice a year by the end of July and January.

After a scheme reaches the completion stage, concerned DCO or DC will issue a completion certificate within 30 days. An annual report about schemes of the previous year will also be sent to the ministry by March 31.