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?