It is briefed that Badin-IV South Block was awarded to the Messrs. Petroleum Exploration Limited (PEL) on 5^th January 2006 under the provisions of Petroleum Policy 2001 for Phase-I of three years, against a minimum work commitment including four exploratory wells. The Company after delay of seven to ten years drilled four wells. The Field Development Plans (FDPs) were approved and Development and Production Leases were granted by Petroleum Division to the three discoveries as per following details:

It must be known that the  projected gas production was allocated to Sui Southern Gas Company Limited. While submitting the Declaration of Commerciality, the Company claimed all the fields as marginal and sought incentives as envisaged under “Marginal/ Stranded Gas Fields- Gas Pricing Criteria and Guidelines, 2013”. The said guidelines were promulgated to provide incentives for development of marginal fields/discoveries which cannot be exploited economically under the existing E&P Policies, pricing structure and available technologies. In order to become eligible to claim incentives given in the said Guidelines, the producers of Marginal Fields were required to obtain a certification from an independent consultant for (i) confirmation that such gas qualifies as Marginal Gas as defined in this policy, and (ii) assessment of Marginal Gas reservoir and Marginal Gas reserves to be done in accordance with best international petroleum industry methods, and (iii) certification that such gas cannot be produced naturally through conventional methods at commercial rates.

As per the Guidelines, the Marginal Fields Gas Prices is set in accordance with Petroleum Exploration & Production Policy 2012 with an additional premium of US$ 0.25 MMBTU. Thus the marginal gas become expensive as compared to conventional gas.

More so,     Independent 3^rd party consultants were selected through competitive bidding in accordance with TORs prepared by regulator for carrying out the requisite certifications as required under the Guidelines. Messrs. AGR Tracs International was appointed for Ayesha field while Messrs. IPR International was appointed for Aminah and Ayesha North fields.  

The reports of Consultants were reviewed in house by Petroleum Explorationist as well as Financial Consultants and following shortcoming in the reports were observed:

1. Recovery factor was not in line with the other fields in the area
2. In Ayesha discovery, Only sand B was tested whereas no Drill Stem Test (DST) was carried out for sand A and C. Estimate of Gas Initially in Place (GIIP) of 20.2 BCF was questionable in the absence of DST of all the Sands
3. Most importantly the economics of the fields were worked out on standalone basis and on full cycle basis including past cost

Thereof,      DGPC Office was of the view that economic analysis should be on point forward basis (excluding past costs) in line with general industry practice and principles of Economics. Further, as all the fields are located in one Block and will be jointly developed as per field development plan submitted by Messrs. PEL, therefore economic analysis should also be done accordingly instead of standalone basis. On seeking clarifications, M/s PEL added cost of amine plant for the project, which was not included in the FDP. Moreover, PEL also provided contradictory number of past cost in different communication.        It was concluded that the joint economics of the Ayesha, Aminah and Ayesha North fields calculated on conventional price of Petroleum Policy 2012 was positive on point forward basis, therefore, these fields could not be declared as Marginal Fields. Accordingly, the Company’s contention of considering past cost, being sunk cost as per accepted principle of all economic studies which is being consistently being followed in all earlier precedents, was rejected.

With the formal approval of the Secretary Petroleum, Messrs. PEL was advised to develop the fields in accordance with approved field development plans and to immediately discharge all outstanding obligations on account of rent, social welfare program, training (exceeding US$ 400,000) in accordance with provisions of Petroleum Concessions Agreements and guidelines issued by respective federal and provincial governments as applicable.

It is also important to mention that Laying of 28 KM 8” dia transmission pipeline from these fields to SSGC system was delayed due to issues faced by SSGC in acquisition of right of way from district governments.

However, to independently evaluate the issue, Secretary Petroleum, Additional Secretary (Policy), Executive Director General as well as industry experts invited by the Division received a detailed presentation from DGPC on 22^nd January 2020. It was concluded that all regulatory and administrative approvals are in place and the Company was under obligation to commence gas production from the fields. Decision in the matter of claim for incentives under Marginal/ Stranded Gas Fields- Gas Pricing Criteria and Guidelines, 2013 has been taken on merits of case and cannot be attributed as a reason, in any manner whatsoever, for delay in commencement of gas production by the Company.

However, M/s PEL challenged the said decision and requested to review the same. To address the issue, SAPM chaired a meeting on 11^th June 2020 to improve approval process of 3^rd party consultant studies. It was decided that findings/ recommendations/ certification by the independent 3^rd party consultants will be final and binding in full conformity on the E&P Companies and DGPC. M/s PEL started gas supply to SSGC in February 2020. However, it is worth noting the M/s PEL has not installed amine plant to reduce CO2 in its gas supply and presently it is supplying gas with higher CO2 than approved specification by OGRA under a 6 months concession period allowed by SSGCDG.          M/s PEL has still not discharge its outstanding obligations on account of rent, social welfare program, training exceeding US$ 400,000 as required in the Petroleum Concessions Agreements and guidelines issued by respective federal and provincial governments.

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