New Incentives Boost Interest In Pakistan Opportunities

January 2015, Vol. 242, No. 1

New incentives offered as part of Pakistan’s latest policies for petroleum resource production seem to be proving an attractive prospect for potential investors. However, an equally effective shale gas policy appears more unlikely, according to research and consulting firm GlobalData.

A report stated various alterations made to specific terms have improved the attractiveness of Pakistan’s exploration opportunities, and the government is only likely to continue offering more incentives as the country seeks to boost its domestic petroleum production.

The Petroleum Policy of 2012 and recently introduced policies for marginal fields, tight gas and low-energy gas have offered improved natural gas prices for government purchases. Jonathan Lacouture, GlobalData’s lead analyst for the Asia-Pacific region said, “These new incentives appear to have attracted many upstream firms. This is a promising result for the South Asian nation.”

Pakistan is believed to boast sizeable tight gas reserves and even larger shale gas reserves and wants to promote development of unconventional resources in an effort to curtail its energy shortages. It has already begun production of tight gas. However, the government’s financial limitations mean that the future of shale gas is uncertain.

“Recent studies carried out by Pakistan Petroleum Limited, in conjunction with Eni S.p.A of Italy, suggested that the break-even price point for shale gas would be about $14/MMBtu, which is much higher than the current domestic sales price,” noted Lacouture. “Given the subsidies in place, an effective policy would be unaffordable.

“Although policies for tight gas may succeed in promoting the exploitation of reserves, budgetary pressures may restrict the government’s ability to offer an effective shale gas policy in the short- to medium-term. Until the state narrows the disparity between consumer and producer prices, sufficient incentives in this area will not be possible,” he concluded.

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