Business Recorder----------------------------Oct 27, 2011
The government intends to allow Exploration and Production (E&P) companies, operating in the oil and gas sector of Pakistan, to contract gas transmission/distribution companies and third parties for sale of their share of gas in Pakistan at negotiated prices in accordance with applicable laws, rules, and regulations.
The draft of the Petroleum Policy 2011, envisages not allowing E&P companies operating in Pakistan to contract the residential and commercial consumers.
On the request of E&P companies the government proposes in its policy draft to purchase 90 percent of the their share of pipeline specification gas through nominated buyer, which is effectively controlled by it in acceptable daily, monthly and yearly volumes to meet the internal demand in an economical manner provided there are no infrastructure constraints.
On the request of E&P companies the government proposes in its policy draft to purchase 90 percent of the their share of pipeline specification gas through nominated buyer, which is effectively controlled by it in acceptable daily, monthly and yearly volumes to meet the internal demand in an economical manner provided there are no infrastructure constraints.
The E&P companies would have the right to sell 10 percent of their share of pipeline specification of gas to any buyer with the prior consent of the government with the delivery point shall be at the outlet flange.
"GOP/gas buyer nominated by GOP shall pay the price for gas at the outlet flange as set out in this Policy In addition, the 'guaranteed percentage' for foreign exchange remittance as contained as mentioned above will apply to such sales" the draft adds.
"GOP/gas buyer nominated by GOP shall pay the price for gas at the outlet flange as set out in this Policy In addition, the 'guaranteed percentage' for foreign exchange remittance as contained as mentioned above will apply to such sales" the draft adds.
The companies would also be allowed to construct and operate pipelines for local requirements and for exports of their share of petroleum which shall be regulated by the regulator concerned in accordance with applicable laws, rules, regulations and the policy based on an open-access (third party) regime.
The E&P companies constructing such pipelines would be allowed priority access based on a firm utilisation plan.
The E&P companies constructing such pipelines would be allowed priority access based on a firm utilisation plan.
Irrespective of whether a connecting pipeline from outlet flange to the nearest transmission system is constructed and operated by a producer, a third party or a government nominated entity such a pipeline shall be regulated pursuant to the provisions above, unless the regulator concerned decides that the pipeline shall be a non-regulated pipeline, the draft notes.
If an inter-connecting pipeline is proposed to be constructed by a third party or the buyer, the producer will be required to confirm the requisite gas supply volumes, pressures, reserves and other technical parameters on standard supply term contract basis for a period to be agreed between the parties.
"The basis of the tariff allowed and paid monthly for delivery from outlet flange into the transmission system will be determined by the regulator based upon a 'rate of return on equity' basis at the rate of 12 percent with the capital cost being amortized over a minimum of 15 years.
Allowable costs will include operating cost and interest payable on the initial capital over the minimum 15 years amortisation period.
Post the repayment period the Operator will be able to make a 12 percent margin over operating costs.
If such pipeline is used by more than one shipper, the calculation basis for each year shall be done on an overall pipeline volume nomination basis at the start of each year, through the aggregation of all shippers' nomination.
Any shortfall or excess of volume delivered from the nomination in the year shall be deducted/ received from the tariff payment of that year or charged to the party responsible for such a shortfall" the draft policy adds.
Allowable costs will include operating cost and interest payable on the initial capital over the minimum 15 years amortisation period.
Post the repayment period the Operator will be able to make a 12 percent margin over operating costs.
If such pipeline is used by more than one shipper, the calculation basis for each year shall be done on an overall pipeline volume nomination basis at the start of each year, through the aggregation of all shippers' nomination.
Any shortfall or excess of volume delivered from the nomination in the year shall be deducted/ received from the tariff payment of that year or charged to the party responsible for such a shortfall" the draft policy adds.
Unless a pipeline is specifically constructed in order to facilitate a third party access agreement agreed between operators/contractors and a third party duly approved by the regulator all pipelines from field to outlet flange, in case of offshore, are proposed to be constructed with an excess capacity equal to thirty percent, depending upon projected plateau rates unless otherwise allowed by Directorate General of Petroleum Concessions (DGPC) based on an objective assessment of future likely use of such capacity.
E&P companies are proposed to exhaust options to make efficient use of the current transmission system and co-operate in the construction and operation of pipelines upstream of the outlet flange or transmission system.
Shared ownership and spare capacity is proposed to be based upon the combined planned coincidental shared plateau of the operators unless otherwise agreed by DGPC or the regulator concerned.
Companies would also be encouraged to co-operate in any extension of an initial system to ensure economies of scale, maximum utilisation and ensure that the overall pipeline stays below the tariff limit as specified.
Shared ownership and spare capacity is proposed to be based upon the combined planned coincidental shared plateau of the operators unless otherwise agreed by DGPC or the regulator concerned.
Companies would also be encouraged to co-operate in any extension of an initial system to ensure economies of scale, maximum utilisation and ensure that the overall pipeline stays below the tariff limit as specified.
In the event such pipeline is located in offshore area and the excess capacity is subsequently utilised by a third party, the tariff proposed to be charged by the party, providing access to such pipeline as approved by DGPC and revenues generated therefrom may be treated as a part of profit oil/profit gas for its production sharing purposes.
The tariff payable to any third party or the producer for pipeline connecting the outlet flange to the transmission system is proposed not to exceed $0.5/MMBTU in aggregate.
Any tariff in excess of this limit will be determined by the regulator on a case-to-case basis but only in exceptional circumstances, and subject to the approval of GOP.
The indexation of the tariff limit is to be based on OGRA's recommendation and approved by the government.
The public utility companies will continue receiving tariff under a separate tariff regime within the frame work of OGRA Ordinance.
Any tariff in excess of this limit will be determined by the regulator on a case-to-case basis but only in exceptional circumstances, and subject to the approval of GOP.
The indexation of the tariff limit is to be based on OGRA's recommendation and approved by the government.
The public utility companies will continue receiving tariff under a separate tariff regime within the frame work of OGRA Ordinance.