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Low Foreign Interest in Pakistan’s New Oil Blocks

The government of Pakistan has provisionally awarded exploration licenses for 50 oil blocks covering over 100,000 square kilometers and eyeing over $370 million in first-phase investment.

Foreign participation has been lower than hoped-for despite new incentives, with state-owned oil companies such as Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) winning rights for 39 blocks, while the bulk of the rest went to Mari Gas, Austria’s OMV and Tallahassee of Canada, among other smaller local groups.

Pakistani Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi said the government was forced to take a four-year hiatus from licensing due to residual problems surrounding a model concession agreement and petroleum rules which granted the provinces greater say in how their resources are divvied out.

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“These blocks have been awarded after going through a consultation process and a unified model petroleum concession agreement has been framed in this regard,” Abbasi said. “Issues with provinces (over energy reserves) have been resolved now.”

He said that 21 of the new exploration blocks were in Balochistan, 15 in Punjab, eight in Khyber Pakhtunkhwa and six in Sindh. The agreements were awarded after resolution of all issues between the provincial governments.

The government is hoping that the entrance of exploration companies into the Balochistan area would encourage other companies to move into even more volatile areas such as Kohlu.  

In the meantime, the government—disappointed by the lack of foreign participation in the licensing round—says it is working on a plan to encourage joint ventures between domestic and foreign companies to attract more investment.

Foreign exploration and production companies have invested about $2.02 billion for oil and gas exploration in the country during the last three years, since the government launched an investor friendly Petroleum Policy 2012 to attract further foreign investment to cope with the demand of oil and gas.

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Incentives offered in this regard include better gas price, windfall levy reduced from 5.0 percent to 40 percent, base price for crude oil and condensate increased from $30 per barrel to $40 per barrel.

Italy’s Eni will start work on offshore fields from next year, which requires an investment of $100 million, according to the Pakistani government.

According to government sources cited by Pakistani media, for fiscal year 2013-14, drilling of 59 exploration wells and 51 development wells have been planned for enhancement of oil and gas production in the country. Various exploration and production companies currently hold 125 exploration licenses across Pakistan.

By. Joao Peixe of Oilprice.com




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