Pakistan Unveils New Tight Gas Policy to Boost Production
Staff Report
In a bid to stimulate the exploration and production of Tight Gas reserves, Pakistan has introduced a comprehensive policy outlining key provisions for lease terms, pricing incentives, and operational guidelines.
The policy, titled “Tight Gas (Exploration & Production) Policy 2024,” aims to encourage investment, technological advancements, and the efficient utilization of Tight Gas resources.
| Category | Details |
|---|---|
| Lease Terms | Up to 30-year initial development lease, extendable up to 10 years, with possible area extension based on technical justifications. Amendments for Tight Gas Reservoir rights. |
| Gas Pricing Incentives | 40% premium on zonal price; applicable to current/future licenses and agreements. Government’s first right of refusal for domestic gas sales. |
| Royalty and Tax Regulations | 12.5% royalty, 15-year carry-forward of operating losses, non-duplication of lease-related fees for conventional and tight gases. |
| Production Suspension and Review | Cumulative one-year production suspension, extendable based on justifications; mandatory policy review after five years. |
| Technology Transfer Incentives | Exemption of Customs duty for machinery promoting technology transfer; regulatory amendments for implementation. |
Lease Terms
The initial term of the development and production lease for Tight Gas will extend up to 30 years, aligning with the proposed Field Development Plan (FDP).
Renewal for an additional period, not exceeding 10 years, is possible with justifications deemed acceptable by the Government.
If the Tight Gas Reservoir extends into a free area, the lease area may be extended to the adjoining free area based on technical justifications.
In cases of discovering Tight Gas under existing Development and Production Leases (D&PL), amendments will be made to include rights for the Tight Gas Reservoir separately.
Upon expiration of conventional gas rights, the area held for conventional reservoir production will be relinquished, provided it does not impede gas pricing.
Gas Pricing Incentives
To exploit Tight Gas Reserves, a 40% premium on the zonal price of Petroleum (Exploration and Production) Policy 2012 will be applicable.
This pricing incentive applies to existing and future exploration licenses, Petroleum Concessions Agreements (PCAs), Mining Leases, and Development and Production (D&P) leases meeting Tight Gas qualifications under Section 4 of the policy.
The provisional incentive price will be notified by OGRA or any authority designated by the Federal Government once Initial Third-Party Certification confirms a Tight Gas discovery.
The final incentive price will be announced upon the granting of D&PL/OML. The Government, with the Operator’s consent, holds the first right of refusal for gas sales within Pakistan.
Royalty and Tax Regulations
A royalty of 12.5% of the petroleum’s value at the field gate will be payable. Operating losses can be carried forward for a maximum of fifteen (15) years.
In cases where both conventional and tight gases are produced from the same D&P lease, lease-related fees shall not be duplicated.
Production Suspension and Review
Operators are allowed a cumulative one-year suspension of production, subject to technical and economic justifications. The Regulator/Authority may grant further extensions on a case-by-case basis.
The Tight Gas Policy will undergo a mandatory review after five years, with periodic reviews of the List of Consultants/Laboratories (Section 7) during the policy term.CCI Approves Raise in Gas Sales to Third Parties
Technology Transfer Incentives
To encourage technology transfer and the use of state-of-the-art equipment, machinery by the services sector will be exempted from Customs duty or other duties.
Necessary amendments to existing regulations will be made to accommodate this provision.
This policy aims to create a conducive environment for the development of Tight Gas resources, fostering innovation, and ensuring sustainable utilization of Pakistan’s energy potential.
