Following a hike in global oil prices, and the unavailability of LNG, the government has decided to revive revoked petroleum exploration licences and extend their validity period to boost exploration and production of indigenous gas to ensure long-term energy security.
The government has received over 18 applications to extend the validity of exploration licences.
Since 2015, Pakistan has relied on imported LNG to fulfil its domestic needs. Countries usually import six to seven percent of their total energy needs as a stop-gap arrangement to meet demand.
When Pakistan started relying heavily on LNG and started importing 24%, investors keen towards the oil and gas exploration business in Pakistan became dissuaded resulting in a halt in discoveries of new gas.
Additionally, due to bureaucratic hurdles and unfavourable policies, almost all foreign companies left Pakistan. During that phase, the government revoked several exploration licences and stopped granting extensions in the validity of licences.
At present, the country is suffering due to a severe gas shortage. Pakistan LNG Limited (PLL) floated a tender for 12 LNG cargoes, however, no party participated in the bid. This is likely to result in an escalation of the energy crisis during this coming winter season.
In a meeting held on September 30, 2022, a summary regarding a revival of the revoked petroleum exploration licences was tabled before the Economic Coordination Committee (ECC) of the Cabinet.
However, consideration of the summary was deferred until the next meeting.
Another summary tabled was regarding an extension in the validity period of the development and production lease of Zamzama gas field located in district Dadu in Sindh.
The petroleum division informed that Pakistan was facing challenges in meeting its ever-growing energy needs due to an expanding population, natural depletion of major oil/gas fields, increase in demand and dearth of new discoveries.
It added that increasing exploration and development activities remains essential to overcoming the energy shortfall. Exploration activities are critical for the growth of Pakistan’s oil and gas industry, and for the long-term energy security of the country.
The following steps are required to resolve the energy crisis: to accelerate the exploration and development of new oil and gas fields, to increase domestic oil and gas production and to reduce the burden of imported energy on the balance of payments.
Read Oil demand sinks by 22% to 1.5m tons
They further stated that the government of Pakistan was taking various measures in this regard. One such step pertains to the extension of the validity period of already granted Development and Production Leases (D&PL) and Mining Leases (M.L) where various exploration and development activities are underway.
The Directorate General of Petroleum Concessions had received an extension request for the Zamzama D&PL as well, apprised the petroleum division. The Zamzama D&PL, covering an area of 535.79 sq km, located in district Dadu, was granted a lease for a period of twenty years w.e.f. April, 2002.
The Zamzama D&PL was governed under the Pakistan Petroleum (Exploration and Production) Rules, 1986. Before the expiry of the Zamzama D&PL, the company re-evaluated its hydrocarbon production potential and discovered that it still has the potential for further commercial production beyond April 2022 till 2027.
The extension case of Zamzama D&PL has been reviewed thoroughly taking into consideration the remaining recoverable reserves and economic evaluation of the said field. The petroleum division recommended a five-year extension with effect from April 29, 2022, for the Zamzama D&PL license on the existing terms and conditions.
The ECC considered the summary submitted by the petroleum division regarding “Grant of extension in the validity period of Development and Production Lease of Zamzama covering an area of 535.79 sq. km in District Dadu, Sindh” and approved the proposal.
