In a significant move to enhance exploration and production activities in tight gas, the Government of Pakistan has introduced the Tight Gas (Exploration & Production) Policy for the year 2024. The policy aims to facilitate the exploration of unconventional hydrocarbons by both local and foreign Exploration and Production (E&P) companies in a technically and commercially viable manner.
Recognizing the unique challenges associated with extracting optimum production from tight gas reservoirs, the government acknowledges the necessity of drilling multiple wells, in contrast to conventional wells that can yield significant gas production from a single well. The new policy strategically addresses these challenges, offering incentives to the oil and gas industry to invest in unconventional ventures.
The government is cognizant of the considerable challenges posed by extracting value from tight gas reservoirs, requiring state-of-the-art technologies for various processes such as seismic acquisition, drilling, reservoir stimulation, and the Field Development Plan (FDP). These processes involve substantial investments with longer recovery cycles.
Under the policy, incentives will apply to gas discoveries qualifying as “Tight Gas” under existing and future Exploration Licences (EL), Petroleum Concessions Agreements (PCA), and Development & Production Leases (D&P)/fields and Mining Leases (ML). The incentives will also extend to existing discoveries that have not been developed as of the policy’s effective date.
The pricing policy for tight gas reserves establishes a 40 percent premium on the respective zonal price of the Petroleum (Exploration and Production) Policy 2012. The incentive price will apply to tight gas discoveries under existing and future exploration licenses, PCAs, Mining Leases, and D&P leases that meet the qualification criteria.
The policy outlines royalty rates, tax loss carry-forward provisions, abandonment costs, windfall levy, and other fiscal levies for operators. It allows for suspending production for up to one year under certain conditions and provides guidelines for the remittance of proceeds abroad.
To encourage the transfer of technology and deployment of state-of-the-art equipment and machinery, the policy exempts equipment and machinery by the services sector from Customs duty or other duties.
The Tight Gas (Exploration & Production) Policy will be subject to review after five years, with provisions for periodic reviews of the List of Consultants / Laboratories. Operators or the Working Interest Owner (WIO) aggrieved by decisions under the policy have the right to make representations to the Petroleum Division within 30 days from the date of such decisions.
This comprehensive policy initiative is expected to drive investment in tight gas exploration and production, contributing to the energy security of Pakistan and addressing the unique challenges posed by unconventional resources.
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