Pakistan Oil And Gas Sector - Petroleum Exploration And Production Policy 2009

Author:Mr Robert Palmer
Profession:CMS Cameron McKenna LLP

The Government of Pakistan (GOP) has published a Petroleum

Exploration and Production Policy for 2009 (the Policy) in order to

promote investment in E&P activity in Pakistan. GOP is seeking

to attract direct foreign investment in the upstream sector on a

level playing field with domestic companies in order to accelerate

the exploitation of indigenous natural resources and reduce its

reliance on imported energy. The Policy sets out the means by which

companies may obtain onshore and offshore E&P rights in

Pakistan and details the procedures for companies to respond to

future invitations to bid for blocks.

Exploration licences

The Policy sets out four types of exploration licence that will

be available:

(i) Reconnaissance Permit - a one-year permit (with a one-year

option for extension) which allows companies to undertake

non-exclusive surveys and drill stratigraphic wells, but carries no

right to be converted into a petroleum concession or production

sharing agreement.

(ii) Petroleum Exploration Licence (PEL) - Onshore

(iii) PEL - Offshore Shallow Water

(iv) PEL - Offshore Deepwater and Ultra Deepwater

The three PELs have an initial five-year term. Corresponding

Development and Production Leases for all blocks have a term of 25

years with a five-year option for extension.

Onshore acreage

Onshore acreage in Pakistan is divided into three zones with

different economic terms on the basis of geological risk and

investment requirements. Zone 1 comprises the West Balochistan,

Pashin and Potowar basins, Zone 2 the Kirthar, East Balochistan,

Punjab platform and Suleman basins, and Zone 3 the Lower Indus

basin. A model Petroleum Concession Agreement (PCA) will apply to

all new licences in these onshore areas. A royalty of 12.5% of the

value of petroleum produced would be payable plus 40% income


Foreign E&P companies must offer stipulated minimum working

interests (15% in Zone 1 blocks, 20% in Zone 2 blocks and 25% in

Zone 3 blocks) to domestic companies under a joint venture. The

foreign companies shall be deemed to have fulfilled their

obligation with respect to the minimum Pakistani participation if

Pakistani incorporated companies and/or Government Holdings

(Private) Limited, which manages GOP's upstream ventures, do

not wish to take up any interest.

Offshore acreage

A model Production Sharing Agreement (PSA) will apply to

offshore blocks. In the offshore acreage, E&P companies'

profit splits with GOP will depend on the water depth (shallow,


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