Crude oil, natural gas: provinces to get less royalty

Posted on June 17, 2011. Filed under: Finance, Fossil fuels, Natural Gas |

JUNE 17, 2011

ASMA RAZAQ

The budget for fiscal year 2011-12 envisages a reduction in the royalty on crude and natural gas, documents reveal. In 2011-12, royalty on crude oil is estimated at 14.8 billion rupees – 4.4 billion rupees lower than in the current fiscal year while royalty on natural gas for next year is estimated at 32.1 billion rupees – 2.4 billion rupees less than in the current fiscal year.

Well-placed sources told Business Recorder here on Thursday that, “the overall gas production in Pakistan is decreasing with each passing day. These days, about 200 MMCF shortfall in gas output has been observed. The overall gas production is now 3.6 billion MMCF per day reduced from 4 billion MMCF per day. Similarly, oil production has declined from 65,000 barrels to 61,000 barrels per day”.

Sources disclosed that the main reason behind lower gas and oil production is attributed to exploration activities that are simply not gearing up in Balochistan and Khyber Pakhtoonkhwa (KPK) – provinces beset with law and order issues that have put an effective stop to new foreign investments for exploration of gas and oil. Secondly, most of the old gas and oil wells are steadily losing their production capacity. The risks are simply too high in exploration in the oil and gas fields in KPK and Balochistan, sources added.

“When ‘Petroleum Policy 2001’ came into force, 84 areas throughout the country were identified for the exploration of oil and gas wells. Out of these 84, just 2 blocks have now been discovered but work on these two is still pending due to the negligence of the government and these oil and gas reserves have started depleting”, sources further revealed.

The government paid Rs 53.7 billion on account of royalty on oil and gas in 2010-11 while the total amount of royalty receipts paid to provinces on oil and gas during the last four years (2007-11) is Rs 165.4 billion. During 2010-11, Rs 8.6 billion were paid to Sindh province as royalty on crude oil; Rs 8 billion to Khyber Pakhtoonkhawa (KPK), Rs 2.7 billion to Punjab and Rs 2 million to Balochistan while a total amount of Rs 19.2 billion was paid as royalty on crude oil to the provinces in the current fiscal 2010-11.

Sources said, “During the last four years (2007-11), Rs 54.2 billion has been paid to the provinces as royalty on crude oil. The total share of Sindh in royalty receipts paid by the government during the last four years was Rs 18.6 billion; share of Punjab was Rs 8 billion, Rs 8.2 billion was given to KPK and Rs 6 million to Balochistan”.

Sources disclosed that Rs 4.4 billion was extended to Sindh as royalty, Rs 2.1 billion to KPK, Rs 1.7 billion to Punjab and Rs 2 million to Balochistan were paid as royalty on crude oil in the last fiscal 2009-10. Rs 34.5 billion has been paid as royalty on gas to the provinces during the current financial year with Sindh receiving Rs 25.9 billion, Balochistan Rs 3.9 billion, KPK Rs 3.6 billion and Punjab Rs 932 billion share in royalty on gas.

“During the last four years ( from 2007-11), Rs 111.2 billion have been provided as royalty on gas to the provinces with Sindh receiving Rs 57.6 billion, KPK Rs 2.5 billion , Balochistan Rs 13.2 billion and Punjab Rs 3.3 billion”, sources said. During 2009-10, total royalty paid to the provinces on gas stood at Rs 24.05 billion, with Sindh receiving Rs 17.2 billion, KPK Rs 1.2 billion, Balochistan Rs 4.5 billion and Punjab Rs 932 million.

Copyright Business Recorder, 2011

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