Govt to regulate LPG prices, says minister

ISLAMABAD: Oil and Gas Regulatory Authority has failed to control the high rocketing LPG prices in the country owing to which the government has decided to regulate the LPG prices itself for which a summary has been sent to Council of Common Interests for its approval. Federal minister for petroleum and natural resources Shahid Khaqan Abbasi stated this while talking to the media persons during the signing of Petroleum Concession Agreement and Exploration Licence with Oil & Gas Development Corporation Limited (OGDCL) over Kulachi Block.


According to sources, in case the summary is approved, the government will slash down the LPG prices for domestic consumers by almost 50 percent for which it is going to introduce some changes in the LPG policy including the de-linking of local LPG producers’ price from CP (contract price) of Saudi Aramco.


The de-linking will provide big relief to consumers. The price of 11.8 kg cylinder for domestic consumption surges to Rs2000 during winter and the government wants keep the price of 11.8 kg cylinder for domestic consumers at Rs1000 for the whole year.


However, industry experts say that on the one hand the government wants to pull itself out of many businesses and has carved out an aggressive privatisation plan of all sick and profit-making entities and, on the other, it has not only indulged itself in the LNG business, but now it is going to regulate the deregulated sector of LPG, a huge contradiction in its economic policy. They say this will send a wrong signal to the investors in the LPG sector, as the decision will prove detrimental to the existing huge investment in the LPG sector, which is feared to evaporate.


Currently, the LPG prices are deregulated and this causes the hike in LP prices, an official argued. “So the government has decided to regulate the LPG price only for domestic sector. However for other categories the LPG prices will remain de-regulated,” he said adding: “if an investor imports LPG from Iran or other countries, he will set price on his own, not keeping in view the Saudi Aramco price. The investor can sell its product either to industrial sector or auto sector.”


The industrial and auto sectors will be provided imported LPG and to this effect the government will make long-term agreements for importing LPG even through private companies. The government is going to increase the LPG production from 1300 to 2000 metric tons per day.


To cater to the needs of those domestic consumers where LPG is not available, the government will install LPG AirMix plants.


Since the domestic sector eats up 700-800 mmcfd of gas the government wants not to extend gas allocation to more housing societies and more villages. Instead it will massively introduce LPG as fuel in new establishments including new housing sectors and big buildings.


The minister stated that Pakistan’s crude oil production has increased to over 100,000 barrels per day and the government is focusing on more exploration and production activities in the country. About the import of LNG, the minister stated that the government is in touch with Qatar, Malaysia and Brunei for import of LNG. He said that fast track LNG terminal being set up at Port Qasim by Engro will be operational by March 31 and the government will start importing LNG from April 1, 2015. About the gas tariff increase, the minister said that the government would issue the notification in the current month, which will be effective from January 1, 2015.


The minister also said that exploitation of indigenous hydrocarbon resources is the top priority of the present government to bridge the gap between demand and supply.


Kulachi block is located in D.I Khan (Khyber-Pakhtunkhwa), Layyah, DG Khan, and Bhakkar districts of Punjab. The total area of the block is 2495 sq. km and minimum firm work commitment is US $10.10 million. Apart from minimum work commitment, the company is obligated to spend a minimum of US $30,000 per annum in the block on social welfare schemes. The ministry of petroleum & natural resources after taking all provinces on board in finalising Model Petroleum Concession Agreement (MPCA) and Model Exploration Licence (MPCA), awarded 50 blocks on provisional basis to nine E & P companies of which 21 blocks are located in Balochistan, 15 in Punjab, 6 in Sindh, 7 blocks in Khyber-Pakhtunkhwa province and one in FATA. The ministry has already signed (44) ELs and PCAs in a short span of time. Due to grant of 45 new blocks during the tenure of the current Government the area under exploration has increased from 269,152 to 362117 Sq Km, which is about 44% of total sedimentary area.


The minister informed the media that 154 wells have been spudded and 45 discoveries made so far during the tenure of this government while 500 MMCFD of gas and around 34000 barrels of oil per day has been added into the system. “Oil production in the country has crossed 100,000 barrel per day which is the highest oil production level achieved so far”, the minister announced. He also highlighted that during the previous fiscal year 103 well were spudded, 28 discoveries were made, 43 oil exploration liences and 14 lease agreements were granted.


Jam Kamal Khan, minister of state for petroleum & NR, secretary petroleum, Abid Saeed, Zahid Muzaffar, advisor to ministry of petroleum & natural resources, director general (PC) and managing director OGDCL were also present during the signing ceremony.


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