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New petroleum policy - 1991.

Several steps are being taken for exploitation of new and renewable resources to meet the shortages of energy in the country. At present, 85 per cent of energy needs in rural areas are met by non-commercial sources. Rest of 15 per cent is met by Kerosene oil, diesel oil and electricity. In order to promote the use of new and renewable resources to encourage system which are easy to operate and maintain, subsidies the use of renewable energy technology and link it with rural development, encouraging investments under a leasing programme and duty-free import of equipment legal steps are being taken. For promotion of energy conservation duty free import of equipment will be allowed. For consultation, panel of experts will be constituted.

Shortage of energy is one of the most serious problems of Pakistan, and in commercial energy of the country petroleum and petroleum products play most important role. The shortage of crude petroleum and petroleum products is causing great anxiety to the Government. Domestic output, although showing upward trend, only meets 25 per cent of the domestic demand. As the demand for petroleum products is increasing, the burden on the limited foreign exchange resources is becoming intolerable. According to Ministry of Commerce, Government of Pakistan, in 1990-91, imports of petroleum and petroleum products, valued at $ 1691 million, were 22.2 per cent of all imports and headed the list of all major imported commodities.

New Petroleum Policy

The Government of Pakistan, during the last several years, has been applying all types of measures to increase domestic production of crude petroleum and petroleum products. Both public and private sectors have been contributing toward this end. However, so far, the success has been limited and the supply has been lagging behind the demand. In order to accelerated the pace of development for the exploration and production of indigenous crude petroleum and its processing within the country the Government approved on November 20, 1991, a new Petroleum Policy which was announced by the Federal Minister for Petroleum and Natural Resources Ch. Nisar Ali Khan on the same day in a press conference in Islamabad.

Initially, the Minister described the history of explorations of oil and gas in Pakistan before and after Independence. According to latest position, in 1988, exploration was planned with a liberal bias. Fortythree blocks were offered to international companies for competitive bidding. Twentyfour bids were received for 12 blocs, nine have since been awarded. In all, 44 exploration licences are now held by 22 companies. Pakistan now produces 65,000 barrels of oil and 1.5 billion cubic feet of gas per day saving Rs. 40 billion ($ 1600 million) of foreign exchange a year. Another 170,000 barrels of oil and products are imported.

The Minister added that exploration efforts have been dogged by bad luck and a Government policy which did not provide either adequate incentives or infrastructure for sustained investment. The silver lining in this gloomy picture is provided in the earlier years by the discovery of Sui and in the last decade by the oilfields in lower Sindh. Since November 1990, 23 concessions have been awarded to foreign prospectors and producers.

The object of present policy is to let the explorers, producers, refiners and traders over the world know the rules and procedures which would henceforth govern the hydrocarbon sector. Basic principles of the New Petroleum Policy are given below:-

a) Produce and procure oil and gas enough to sustain the

planned economic rate of growth; b) Step up exploration and development of indigenous oil

and gas resources; c) Mobilise domestic and external financial and technical

resources from private and public sectors, especially the

former, for the development of petroleum exploration,

refining, import, export, storage, distribution and marketing; d) Replace oil even by bulk import of gas but so to fix the

quantity imported as not to dampen the indigenous exploration

efforts; e) Strengthen the research, technical and administrative

capabilities of the Government agencies responsible for

making policies and their effective implementation; f) Progressively free the petroleum industry and trade

from Government controls; g) Create a competitive environment for giving the best

deal to the consumer in price and quality; h) Promote measures for protection of the environment

especially by reduction of lead in motor spirit and use of

CNG in vehicles.

The new Petroleum Policy covers the following aspects in detail: (a) Exploration and Development; (b) Oil Refining; (c) Lubes; (d) Marketing and distribution; (e) Research and development, (f) Use of CNG in Transport; (g) New and Renewable Resources in Energy; (h) Energy Conservation; (i) Consultations; (j) Safety; and (k) Welfare.

Liberal concessions have been provided for exploration and development. Major aspects are that all applications will be decided within three months by a Committee of Central and Provincial officials, incentives with regard to shares in investment and production incentives to indigenous investors, total provision of foreign exchange for imports, duty concession on imports of machinery and equipment, some equipment being duty-free, incentives for use of indigenous machinery, increased prices of newly discovered gas, international price for LPG, increased prices of associated gas, provision of marketing facilities, encouragement for off-shore drilling, and other concessions.

Similar liberal concessions have been provided for oil refining with present capacity of 140,000 barrels per day and intention to expand it to 250,000 barrels per day and more. Incentives cover absence of need for permission, debt-equity ratio of 80:20 instead of 70:30; prices for refined products on import price basis; concessions for expansion of existing refineries; permission to import crude for refining; and duty-concession for import of machinery not manufactured locally.

For production of lubes, concessions include liberty of pricing, no need for permission freedom for use of local and imported raw material, and some other concessions. In marketing and distribution, incentives of free market and quality for the consumers, concession of commission rates, private investment in infrastructure, permission to import POL products after marketing local output, check on adulteration and some other concessions.

Research and development of all types will be promoted for promotion of petroleum industry. Research will be conducted in the offices of the Director General of Petroleum Concessions, Hydrocarbon Institute of Pakistan, Geological Survey of Pakistan, Oil and Gas Training Institute, Universities and other educational institutions. Technical assistance will be provided by oil companies. The use of CNG in vehicles replacing petrol and diesel will be commercialized.

Several steps are being taken for exploitation of new and renewable resources to meet the shortages of energy in the country. At present, 85 per cent of energy needs in rural areas are met by non-commercial sources. Rest of 15 per cent is met by Kerosene oil, diesel oil and electricity. In order to promote the use of new and renewable resources to encourage system which are easy to operate and maintain, subsidies the use of renewable energy technology and link it with rural development, encouraging investment under a leasing programme and duty-free import of equipment legal steps are being taken. For promotion of energy conservation duty free import of equipment will be allowed. For consultation, panel of experts will be constituted.

Similarly, a standing task force will be set up to deal with fire and other hazards at the oil and gas fields and installations. The oil companies, in consultation with the Ministry of Petroleum and Natural Resources, will provide funds for social welfare of the people in various ways. These will include: (i) development of roads, water supply, health and educational facilities in the areas of their operation, eradication of illiteracy, rehabilitation of the mentally retarded and handicapped children, promotion of sports and fight against narcotics. For this purpose, rules will be amended to reflect the policy changes.
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Title Annotation:Pakistan energy policy
Author:Khan, Abdul Majid
Publication:Economic Review
Date:Feb 1, 1992
Words:1285
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