20000316

Govt rejects Lasmo's

gas pricing formula

ISLAMABAD: Ministry of Petroleum and Natural Resources has rejected a gas pricing proposal presented by Britain's oil and gas exploration company LASMO asking for same price which the government agreed with OMV, operators of Miano gas field, in August 1999, reliable sources on Wednesday said.

Chief Executive LASMO Joe Darby, who visited Islamabad last month and gave proposal to Minister of Petroleum and Natural Resources Usman Aminuddin, outlined LASMO's proposals for its 250 million dollars investment in Pakistan. It was expected there would be no hesitation on the part of the government to approve the formula, as it was the same, which was earlier signed with the OMV.

According to the formula when per barrel oil price in international market would be between 10 dollars to 16 dollars the producers will be paid according to 1994 petroleum policy. But when prices are above 16 and up to 21 dollars the policy price would go up by 50 percent, by 30 percent for above 21 dollars and by 20 percent when oil prices went above 26 dollars per barrel.

The refusal was aimed at asking gas producers to agree on the old formula which was altered by the government and signed the new one with OMV. Negotiations were said to be on to reach an agreement on gas pricing formula between the two parties, sources said.

The government refusal will not only delay LASMO's investment initially of 250 million dollars to develop gas fields but also send negative signal to potential foreign investors intending to take part in oil and gas exploration in Pakistan.

Gas pricing was linked with the international oil prices in the 1994 petroleum policy and government was signing gas deals with foreign companies at 67.5 percent of price per barrel of oil in the international market.

Sensing high prices of oil in the international market it devised a new mechanism that when oil prices per barrel is 10 dollars to 15 dollars producer gets 50 percent of the increased amount, by 30 percent for above 20 dollars and by 20 percent when oil prices went above 25 dollars a barrel in the international market. However, the formula was later altered to sign gas purchase deal with OMV.

LASMO plans to develop its new fields Ñ Andhra, Bhadra and Kirthar West in Sindh province in the coming years. LASMO and Kirthar Pakistan, subsidiary of Holland's Shell Group has equal states in the Bhit gas field in Sindh province. The discovery was announced in March 1999 with estimated reserves of one trillion cubic feet of gas.

Upto nine trillion cubic feet of gas is estimated to have been discovered in six to seven fields in Pakistan in the last three years, but most of the development work has stalled because of delays in setting a gas price.

Pakistan produces two billion cubic feet of gas per day and 2002 could add upto 900 million cubic feet after the newly discovered gas comes on stream.ÑPPI