Tight Gas Policy fix to unlock $2bn Chinese investment in MARI, OGDC, PPL

December 09, 2023 (MLN): China is ready to invest a substantial amount of $2 billion in Pakistan's Exploration and Production (E&P) sector, contingent upon the resolution of its "Tight Gas Policy”, Muhammad Ali, the Caretaker Minister of Energy shared this insight during an exclusive interview on a local TV program.

There is a formidable potential exists among top-tier E&P companies like Mari Petroleum Company Limited (PSX: MARI), Oil and Gas Development Corporation Limited (PSX: OGDC), and Pakistan Petroleum Limited (PSX: PPL) to potentially unlock one billion cubic feet of gas, he informed.

While expressing concerns regarding the current policy framework, he attributed the departure of international companies from Pakistan's exploration sector to its flawed policies.

Despite offering 10 blocks for auction recently, the government received only 6 bids, indicative of the fading interest from previously engaged companies due to delayed payments by the government.

Pakistan still owes $400 million to a Chinese company and the same company offered the investment in the E&P sector if the government improvises tight gas policy.

The minister further informed that the formulation of a new Tight Gas Policy is underway, poised for refinement before its submission to the Council of Common Interests (CCI) for approval.

Addressing the challenges of unexploited blocks, he cited pricing issues as a barrier preventing their integration into the system.

To address the E&P sector’s grievances to stimulate increased exploration in Pakistan's energy landscape, a workshop is scheduled for mid-December 2023, he added.

He also emphasized that Pakistan has untapped potential in the sector but there is a critical need for policy rectification to harness this opportunity effectively.

It is important to note that the existing Tight Gas Policy, contrary to its intended objective, has left companies highly vulnerable, prompting many to depart from this land packed with potential.

These companies are hesitant to invest due to the lengthy process involved in confirming prices for their explored, produced, and flared gas, discouraging them from committing further.

According to the reports, Pakistan has witnessed the drilling of over 1,400 exploration wells. Despite having a land area slightly exceeding 800,000 square kilometres, more than 75% remains unexplored.

Yet, the country maintains a global rank of 26th with a daily gas production of "three to four billion cubic feet." Despite this, Pakistan ranks 30th worldwide in terms of gas reserves.

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