Pakistan's Energy Ministry Unveils New E&P Policy to Spur FDI

SINGAPORE Apr 12, 2007 Dow Jones Newswires

Pakistan's energy ministry unveiled a draft oil and natural gas exploration policy Thursday that includes allowing foreign and domestic exploration and production companies to sell oil and gas at higher prices in the domestic market.

Energy analysts said the approval could pave the way for increased foreign investment in oil and gas exploration, which has languished due to a lack of adequate incentives.

Pakistan is experiencing a severe energy shortage and imports over 80% of its oil.

The draft policy, approved by the cabinet earlier this week, pegs natural gas sold in the domestic market to an oil price band of $10-$45 a barrel. Under the current policy, it is pegged to an oil price band of $10-$36 a barrel.

With crude oil futures traded on the New York Mercantile Exchange currently hovering around $62 a barrel, the current band is considered too low, making it difficult to attract foreign direct investment, energy ministry officials said.

In addition to the revised gas pricing formula, the policy also permits E&P companies to build, own and operate pipeline infrastructure, though it gives third-party access to the pipeline system.

The draft policy is now up for comments from industry groups as well as other government ministries and will be submitted to the Cabinet's Economic Coordination Committee in May.

A committee that will oversee and implement the new policy will also be set up.

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