Regulatory Framework

Energy Sector of Pakistan

MUHAMMAD AZEEM
WORLD ENERGY MATTERS
0092512297000
 Regulatory Framework - Pakistan

GOP

Energy Sector

Power Sector Environment

Oil and Gas Sector

Oil and Gas Ministry of

Ministry of Water & Ministry of
Regulatory Petroleum & Natural
Power Environment
Authority Resources
 Upstream Regulatory Framework - Pakistan

Ministry of Petroleum &

Natural Resources Oil & Gas
Regulatory
Authority
Admin &
Minerals Wing Policy Wing
Development Wing

DG (Minerals)
DG Petroleum
DG GAS DG OIL DG (AD&SP)
Concessions

Autonomous Hydrocarbon Pakistan Mineral

Geological Survey
Bodies Development Development
of Pakistan
Institute of Pakistan Corporation

Public Limited Companies

PARCO PPL OGDCL PSO SSGC SNGPL LCDC SML GEMCP

 Regulatory Framework – Functions of Authorities
DGPC
(Directorate General of Petroleum
Concessions)
DG GAS
(Directorate General of Gas)
DG Oil
(Directorate General of Oil)
DG A & SP
(Directorate General of
Administration & Special Projects)
• Grant of petroleum rights
• Facilitation of E & P services to companies & activities
• Management & Promotion of Petroleum E & P operations
• Realization of the Government receipts
• Management of technical data
• Allocation of gas
• Gas price agreements
• Monitoring of receipts of GDS
• Transmission and distribution of gas
• Provision of data for gas pricing
• Allocation of oil/condensate to the buyers
• Oil and condensate sale & purchase agreements
• Refining & marketing of petroleum related products
• Overall support to DGPC, DG Oil and DG Gas
• To initiate and work on special projects relating Oil and Gas
• Sector such as Import Pipelines, establishment of new
refineries
 History- Petroleum Acts, Rules and Policies

Regulations of Mines and Oilfields &

Mineral Development
(Government Control) Act, 1948

Petroleum Policies
1991
Pakistan Petroleum (E&P) Rules 1993
1949 1994
1986 1997
2001 2001
2009 2007
Wellhead Regulations 2009 (OGRA) 2009
No legal sanctity unless notified.
(Supreme Court of Pakistan 2005)

Guidelines/Model Agreements
No Legal Binding
Issued by the DGPC in consultation with the PPEPCA
 Petroleum Related Legislation- Pakistan
Parent Legislation:
1. All surface and sub-surface minerals to be the property of Federal Government
1. Constitution of Pakistan – Article 172(2) - Provision for Offshore only
2. Minerals (Acquisition and Transfer) Order, 1961 for onshore
2. Regulations of Mines and Oilfields & Mineral Development (Government Control)
Act, 1948
➢ Act to provide basis for the provisions related to mines & oilfields and covers the
following activities;
➢ Grant or revocation of Exploration licences, mining leases
➢ The circumstances under which any license may be revoked, renewed or
extended
➢ Determination of rates of royalties, rents or taxes
➢ Control of production, storage and distribution of minerals oils
➢ Fixation of prices at which mineral oils may be bought or sold
➢ Concessions to be granted under the production sharing agreements
 Petroleum Related Legislation- Petroleum Rules
▪ Petroleum Rules are promulgated by the GoP in exercise of powers
conferred by the 1948 Act
➢ Onshore Rules – 1949, 1986, 2001, 2009
➢ Offshore Rules - 2003
▪ Rules are issued and notified by the Government in its official Gazette and
cover the following;
➢ Permit for reconnaissance surveys
➢ Licence for petroleum exploration
➢ Lease for petroleum development and Production
➢ Accounts, records, inspection and reports
➢ Standard of operations
➢ Miscellaneous – Environment etc.
 Petroleum Related Legislation- Petroleum Policies
▪ As per Supreme Court ruling – No legal sanctity unless notified by the
Government
▪ Periodically issued by the Government and addresses the following
➢ Licensing Process
➢ Exploration and Production Regimes
✓ PCA
✓ PSA
➢ Government participation
➢ Incentives for
✓ local E&P companies
✓ foreign E&P companies
✓ Conversion to new policy
➢ Pipeline construction and operations
➢ Oil and gas pricing, taxes, royalties
➢ Foreign exchange & remittances abroad
➢ Domestic supply obligations and allocation
 Petroleum Rules & Regulations
■ Promulgation of OGRA Ordinance in 2002. Became regulator of midstream &
downstream petroleum industry.
➢ Determination of revenue requirement of T&Ds
➢ Notification of prescribed prices and sale price
➢ Regulation and notification of petroleum product prices
➢ Issuance of licenses for
✓ Transmission, distribution and sale of gas, LPG, LNG or CNG
✓ Construction and operation of gas pipelines
✓ Construction and operation of testing &storage facilities of gas, LPG,
LNG or CNG
■ However, powers under Pakistan Petroleum (Refining, Blending & Marketing) Rules
1971 transferred to OGRA from DG Oil in March 2006 which includes
➢ Construction or operation of refinery, pipeline, storage facilities, blending
facilities and installation
➢ Marketing & storage of refined petroleum products
■ Wellhead gas price notification – transferred to OGRA from DG Gas
Acquiring Petroleum (E & P) Rights

Direct from Govt. of Pakistan

PCA PSA

Farm-in Agreement

Purchase of a company that

owns rights
 Life Cycle of Petroleum Operations

Unsolicited Applications – Applicants Right to Match

Application for Grant of Rights

Bidding

Award of Rights

Exploration & Appraisal

Declaration of Commerciality

D & P Lease
 Life Cycle of Petroleum Rights
Exploration Production Cycle
First production, if we have a discovery post 2009 policy will be 5~7 years from
bid round.
Typical Concession Time Line
Identify
& Apply

Bidding

PCA/License
Exploration &
Appraisal Commerciality,
GSA/GPA
- Identify/Apply 0.5 yr /COSA
- Bidding 0.5 yr Development &
- PCA/Licence 0.5 yr Production
- Expl & Appraisal 3.0 yr
- Comm./GSA/GPA
/COSA 1.5 yr
- Dev. Production 2.0 yr
- 1st Gas 8.0 yr

Policy 1997
Royalty, income tax and windfall levy
Royalty @ 12.5% on wellhead value
Tax @ 50-55%
Windfall levy
Not applicable
Government Participation
GHPL mandatory participate 15% -
25%
Carried during exploration
License Extension
No limit
Extended Well Testing
No specific provisions in the Policy
Guarantees for Licensing & Work
Committeemen
Parent company guarantee or bank
guarantee equivalent to 50% of
committed work program
Petroleum Policies - Comparison
Policy 2001
Royalty, income tax and windfall
levy
Royalty @ 12.5% on wellhead value
Tax @ 40%
Windfall levy oil
Applicable on crude oil sales
Government Participation
Local company or GHPL
participation
Not carried
License Extension
No limit
Extended Well Testing
No specific provisions in the Policy
Guarantees for Licensing & Work
Committeemen
Parent company guarantee or bank
guarantee equivalent to 50% of
committed work program
Policy 2009
Royalty, income tax and windfall levy
Royalty @ 12.5% on sale proceeds
Tax @ 40%
Windfall levy oil/condensate
Applicable on crude oil/condensate, gas
sale to third parties
Government Participation
Local company or GHPL participation
Not carried
License Extension
Maximum for 36 months
Extended Well Testing
Specific Provision – discounted gas price
Guarantees for Licensing & Work
Committeemen
Parent company guarantee or bank
guarantee equivalent to 25% of committed
work program
 Model Petroleum Concession Agreement

Petroleum Concession
Agreement Joint Operating
Agreement
Rights & liabilities (Appended with PCA) Accounting
Procedure
Work program • Working interest and (Appended with JOA)
Working interest voting rights
Discovery & development • Management & • General provision
Wellhead value operations • Charges to the Joint
Import & export • Rights, powers & Account
Management & operations duties of operator • Basis of charges to
Royalty • work program & the joint account
Taxation budget • Disposal of
Production Bonus • Sole risk equipments &
Social Welfare • Relationship of material
Training working interest • Inventories
Employment owners • Termination
 Model Gas Sale Agreements
Types • Buyer’s Nomination
• Seller’s Nomination
• Take or Pay

• Contract Period
• Pricing
• Commissioning

GSA
• Regular deliveries
• Termination
• Makeup gas
Salient features

• Quantity • Default gas

• Nominations • Off specification gas
• Take or pay- makeup &
default gas
• Payment
• Reserve dedication • Currency of payments
• Duties
• Quality
• Lead time
• Gas specification
• Pressure
• Other provisions
• Assignments
• Facilities
• Confidentiality
• Seller’s Facilities
• Force majeure
• Buyer’s facilities
• Dispute resolution
 Crude Oil / Condensate Sale Agreement

• Contract Period
• Quantities
• Quality
Salient features

• Delivery Points
• Pricing
• Payments

• Assignments
• Governing law
• Taxes
• Force majeure
• Arbitration
 Model Gas Pricing Agreement

Pricing
• Marker Price Calculation
Salient features • Fixing of Marker Price
• Publication of Notified Price

Other provisions
• Assignments
• Confidentiality
• Dispute resolution
• Governing law