Need for Policy on Geothermal Energy in Pakistan
The main objectives of Pakistan’s Petroleum Policy of 2012 are: (a) to ensure energy security and self-sufficiency; and (b) to attract local and foreign investment in the upstream oil and gas sector, and accelerate exploration and production activities. These policy objectives can be accomplished, among others, through an efficient public administration and expert regulatory framework. Presently, the formulation and implementation of policy relating to the upstream oil and gas sector is administered by the Directorate General of Petroleum Concession (DGPC) – an administrative unit of the Federal Ministry of Energy (MOE). DGPC additionally acts as the regulator for the upstream sector and awards concessions, leases and other permits to upstream businesses. Likewise, MOE also houses the Directorate General of Oil (DG Oil) to regulate the import, demand and supply of petroleum products.
The concentration of multiple and conflicting roles relating to the upstream oil and gas sector in one governmental entity appears to be unsupportive for investor confidence and further development of the sector. There is a need for the separation of policy functions from regulation of the sector. This essentially means that the offices of DGPC and DG Oil may be reorganised to deal with the policy relating to exploration and production in the upstream oil and gas sector while the regulation of these activities may be vested in an independent regulatory entity outside the government in the same manner as OGRA regulates the midstream and downstream oil and gas activities, NEPRA regulates the power sector, PTA regulates the telecom sector, SBP regulates the banking business, and SECP regulates the securities market and certain other businesses.
The reorganisation of DGPC and DG Oil is an administrative matter and can be suitably done through executive decisions without the need for a legislative measure. However, legislation will quintessentially be required to establish an independent upstream regulator. This may be achieved through: (a) a new standalone legislation for the establishment and functioning of an independent upstream regulator; or (b) an amendment of the OGRA Ordinance of 2002 to vest the regulation of upstream oil and gas sector in OGRA. There are pros and cons for each legislative option which may be deliberated upon by stakeholders to arrive at the best solution.
On balance, it appears that an independent and dedicated regulatory authority for the upstream oil and gas activities will be more beneficial. Many believe that the independent upstream regulator will be the first step in the right direction and it must be complemented by reform of the compliance regime and review of fiscal incentives. Is it time to reorganise the upstream regulatory framework for the oil and gas sector?