2007-Pakistan Petroleum Exploration and Production Policy

i
PETROLEUM
EXPLORATION &
PRODUCTION
POLICY 2007
GOVERNMENT OF PAKISTAN
Ministry of Petroleum & Natural Resources
(OCTOBER 2007)
Petroleum Exploration & Production Policy 2007

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Contents
1 Introduction -1-
1.1 Background -1-
1.2 Previous Policies -1-
1.3 Policy Objectives -2-
1.4 Requirements of Policy -2-
1.5 Outline of Pakistan’s 2007 E&P Policy -3-
1.6 Promoting Involvement of Pakistani Companies in the Country’s Upstream

Petroleum Industry -3-
Section I – Licensing Process -4-
2 Map of Licensing Zones -4-
3. Pre-qualification of Applicants -5-
3.1 Basis for Pre-qualification of Applicants -5-
3.2 Direct Negotiation with Strategic Partners -8-
4. Licensing System -9-
4.1. Types of Exploration and Production Rights -9-
4.2. Procedure for the Granting of E&P Rights - 10 -
4.3 Formal Bid Assessment - 13 -
4.4 Post Award Process - 14 -
Section II – Exploration and Production Regimes - 15 -
5 Onshore Petroleum Concession Agreement (PCA) - 15 -
5.1 Royalty, Income Tax and Windfall Levy - 15 -
5.2 Block System - 19 -
5.3 Rentals - 19 -
5.4 Non Fulfilment of Work Obligations - 20 -
6. Offshore Production Sharing Agreement (PSA) - 21 -
6.1 Royalties, Corporate Tax and Windfall Levy - 21 -
6.2 Depreciation - 22 -

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6.3 Direct Government Participation - 22 -
6.4 Production Sharing - 22 -
6.5. Cost Limit - 23 -
6.6 Profit Oil and Profit Gas Splits - 23 -
6.7 Production Bonuses - 24 -
6.8 Import Duties and Taxes - 24 -
6.9 Marine Research and Coastal Area Development Fee - 24 -
6.10 Local Employment, Training and Social Welfare Contributions - 25 -
6.11 Exploration Period - 25 -
6.12 Extended Well Testing - 25 -
6.13 Retention Period - 26 -
6.14 Total Lease Term - 26 -
6.15 Five Year Lease Term Renewal - 26 -
6.16 Policy for Grant of Lease after Expiry of Lease Term - 27 -
6.17 Block System - 27 -
6.18 Rentals - 27 -
6.19 Non Fulfilment of Work Obligations - 27 -
Section III - Regulatory Process & Obligations - 28 -
7. Regulatory Process - 28 -
7.1 Miscellaneous - 28 -
7.2 Application Fees - 28 -
7.3 Non-compliance - 28 -
7.4 Confidentiality of Data and Records - 29 -
7.5 Performance Guarantees - 29 -
8 Foreign Exchange - 30 -
9 Assignment or Transfer of Interest - 31 -
10 Domestic Supply Obligation & Gas Allocation - 31 -

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10.1 Domestic Supply Obligation - 31 -
10.2 Remittance of Proceeds Abroad - 31 -
10.3 Delivery Point and Field Gate for Natural Gas - 31 -
10.4 Sale of Natural Gas within Pakistan - 32 -
10.5 Pipeline Construction and Operation - 32 -
Section IV – Pricing and Incentives for Petroleum Exploration & Production - 35 -
11 Oil and Gas Pricing - 35 -
11.1 Crude Oil, Condensate and Liquefied Petroleum Gas (LPG) Pricing - 35 -
11.2 Gas Pricing - 35 -
11.3 Associated Gas Pricing - 38 -
11.4 Royalty Calculation in case of Sale of Gas to Third Parties - 38 -
11.5 Extended Well Testing Gas Pricing - 38 -
11.6 Ring Fencing - 38 -
Section V – Implementation and Removal of Difficulties - 39 -
12 Implementation of the policy, removal of difficulties, addressing of

anomalies, framework for institutional development and strengthening
of the Policy Wing - 39 -
13 Applicability and Effect of Policy - 40 -
Section VI – Conversion to 2007 Policy - 41 -
14 Conversion of Regimes - 41 -
Annexures - 42 -
Annexure 1 - The Block System - 42 -
Annexure 2 – Block Maps of Pakistan - 46 -
Annexure 3 - Employment, Training and Social Welfare Program - 48 -
Annexure 4 – Pre-qualification Selection - 50 -
Annexure 5 – Concept of Work Units and Scoring Card - 53 -
Annexure 6 - Documentation for Block Award Process - 60 -

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1 Introduction
1.1 Background
The importance of the domestic petroleum industry to the economy of Pakistan cannot be
over-emphasized as an issue of national security, national self reliance and as a major source
of government revenue.
Pakistan’s average daily production of crude oil and gas in 2005 was 66,500 barrels and
3,800 million cubic feet, respectively. Pakistan’s current crude oil production meets only
17% of the total demand for domestic consumption. The balance requirement is imported
involving large expenditures of foreign exchange.
Domestic gas production and supply presently fails to meet the demand of domestic users, the
industrial sector and power generation. Furthermore, gas supply may soon become
insufficient due to increasing demand and depletion of present reserves. This, in turn, will
force Pakistan to soon begin importing large volumes of gas at international prices to feed
the domestic market.
The Government of Pakistan (GOP) is committed to accelerate an exploration and

development programme in order to reverse the decline in crude oil production, to increase
the domestic gas production and supply and to reduce the burden of imported energy which
otherwise will have adverse effect on the balance of payments & trade.
The purpose of this Petroleum Exploration and Production Policy 2007 (Policy) is to
establish the policies, procedures, tax and pricing regime in respect of petroleum exploration
and production (E&P) sector.
1.2 Previous Policies

In 1991, GOP introduced the first petroleum policy document. This was then followed by
new Petroleum Policies in 1993, 1994, 1997 and 2001. Whenever previous policies were
superseded by a subsequent policy document, the existing rights granted under
licences/Petroleum Concession Agreements (PCAs) / Production Sharing Agreements (PSAs)
were not affected.
The 1997 Policy, while preserving the provisions of the 1994 Policy with respect to onshore
areas, introduced a new offshore package of terms based on production sharing arrangements.
Under the 1997 Policy, existing licence holders in offshore areas were given an option to
convert their concession agreements into Production Sharing Agreements (PSAs).
The 1997 Policy was replaced in 2001 by Petroleum Policy 2001, coupled with Petroleum
(Exploration and Production) Rules 2001, a model offshore Production Sharing Agreement
and a model onshore Petroleum Concession Agreement. In 2003, a revised model offshore
production sharing agreement was introduced complemented by the Offshore Petroleum
(Exploration and Production) Rules 2003.
These petroleum policies have proved successful in attracting investment in exploration and
production in Pakistan. In light of recent significant changes in the international E&P sector,
notably in respect to escalating costs and the price of crude oil and gas, it is now considered

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necessary to review and modify, where necessary the current Policy to stimulate a significant
boost in investment in the Pakistan’s E&P sector.
1.3 Policy Objectives

The principal objectives of this Policy are:
1. To accelerate E&P activities in Pakistan with a view to achieve maximum self

sufficiency in energy by increasing oil and gas production.
2. To promote direct foreign investment in Pakistan by increasing the competitiveness

of its terms of investment in the upstream sector.
3. To promote the involvement of Pakistani oil and gas companies in the country’s
upstream investment opportunities.
4. To train the Pakistani professionals in E& P sector to international standards and

create favourable conditions for their retaining within the country.
5. To promote increased E&P activity in the onshore frontier areas by providing

globally competitive incentives.
6. To enable a more proactive management of resources through establishment of a

strengthened Directorate General of Petroleum Concessions (DGPC) and providing the
necessary control and procedures to enhance the effective management of Pakistan’s
petroleum reserves.
7. To undertake exploitation of oil and gas resources in a socially, economically and

environmentally sustainable and responsible manner.
1.4 Requirements of Policy

In order to achieve these objectives, it is necessary for this Policy to:
1. Provide stimuli for increasing exploration and production investment by modifying

current contracting terms and incentives while taking into consideration the market
conditions.
2. Adopt licensing terms, conditions and processes to attract newcomers including oil and
gas majors and independents, National Oil Companies (NOCs), and Pakistani private
companies.
3. Provide a balance between prices and incentives through the rationalization of the
pricing formula so as to suitably compensate exploration and production risk.
4. Implement pro-active policy management.
5. Successfully align the Policy with GOP’s objective to achieve maximum self
sufficiency in domestic energy resources for the larger public good.
6. Provide a transparent and non-discriminatory licensing and contracting system

managed by DGPC.

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1.5 Outline of Pakistan’s 2007 E&P Policy

The Petroleum Exploration & Production Policy 2007 maintains a system based upon the two
different types of agreements to obtain E&P rights in Pakistan:
• For onshore operations, a system based upon a Petroleum Concession Agreement

(PCA)
• For offshore operations, a system based upon a Production Sharing Agreement

(PSA)
The Policy further outlines details of the new biddable gas pricing formula and other
incentives.
This document is structured in six Sections:
• Section I: Licensing Process;
• Section II: Exploration and Production Regimes;
• Section III: Regulatory Process and Obligations;
• Sections IV: Pricing and Incentives for Petroleum Exploration & Production;
• Section V: Implementation and Removal of Difficulties;
• Section VI: Conversion to 2007 Policy.
This Policy has incorporated the significant achievements of the Pakistani petroleum industry
with established good international oilfield practices.
This Policy will be enhanced by DGPC’s continued active support of:
1. The implementation of best practices for assessing petroleum projects and efficient
regulatory process.
2. Vigorously promoting exploration and production investment opportunities within

Pakistan to both the domestic and the international petroleum industry.
3. Vigorously promote the access to and sale of public domain upstream geological and
engineering data sets both in Pakistan and abroad.
1.6 Promoting Involvement of Pakistani Companies in the

Country’s Upstream Petroleum Industry
GOP is also committed to promoting the active participation of Pakistani companies in oil
and gas activities in order to stimulate growth of domestic industry and capture the maximum
economic benefit for the country and its workforce.
Furthermore, GOP views the increased involvement of Pakistani companies in partnerships

with foreign companies, combined with the involvement of the local stakeholders, to be one

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of the keys to unlocking the potential of the petroleum reserves in the frontier areas for the
benefit of the country.
Section I – Licensing Process

2 Map of Licensing Zones
For the purposes of petroleum licensing, Pakistan will continue to be divided into three
onshore and one offshore Zones, on the basis of risk and investment requirements.
NED
FRONTIER UNDEFI
JAMMU&
KASHMIR
Disputed Territory
ZONE-II
ZONE-I
ZONE-III
ZONE-O
Offshore

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3. Pre-qualification of Applicants
1. GOP intends to maximise the exploitation of Pakistan’s petroleum resources. This can
only be achieved by matching the skills, experience and financial resources of the right
companies to the specific requirements of a particular investment opportunity.
Opportunities for investment exist in Pakistan that are suitable for all types of
companies, ranging from the multinational super-majors and both international and
domestic National Oil Companies to small niche players and local Pakistani
independents.
2. As part of the licensing system, DGPC will run a two-tier pre-qualification system, the
first tier of which will be based on the technical competence of the applicant. The
second tier concerns the financial strength of the applicant and its commitment to
invest in the upstream sector.
3. The two tier approach is to enable smaller local Pakistani companies to join consortia
with other E & P companies in order to gain the necessary industry experience to allow
them to expand their capacity to take on operating roles in future. In such consortia, the
nominated leading company must meet all necessary pre-qualification requirements.
4. DGPC will maintain a register of pre-qualified companies who will be eligible to

participate in bidding for grant of petroleum rights in Pakistan. After the announcement
of this Policy, DGPC will seek pre-qualification of the interested companies through a
press advertisement giving a period of ninety days to all interested companies to
become pre-qualified. In addition, any interested company can submit an application
for pre-qualification at any time; however, such companies must be pre-qualified at
least one month before close of Invitation to Bid. DGPC will accept or reject pre-
qualification applications within thirty days from date of close of initial pre-
qualification period of ninety days or from the date of filing of any application with
DGPC, as the case may be, unless such time is extended with the approval of the
Government.
5. Once pre-qualification status has been granted, it shall remain valid for a period of five
years from the approval. All pre-qualified companies are required to notify DGPC
whenever there is an adverse material change in their status following pre-qualification.
3.1 Basis for Pre-qualification of Applicants

3.1.1 Legal Capacity and Residence Requirements
1. The applicant company must:
a. Demonstrate that it is eligible to apply for a licence in accordance with the

applicable Rules and to execute any subsequent agreement, and that such status
is likely to remain valid for a period longer than the life of any subsequent
agreement plus one year;
b. Declare that there is no pending litigation, legal process or other circumstance

that might cause it to breach its obligations; and
c. Provide a sworn statement that it is not incapable of contracting with GOP

and/or Government Holdings (Private) Limited (GHPL).

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2. Within a period not exceeding ninety days after award of petroleum right to a pre-
qualified company, it must either become incorporated in Pakistan or obtain permission
to operate as a registered branch office of a foreign company to operate in Pakistan.
3.1.2 Financial Capacity

DGPC must be satisfied that any applicant company is solvent and is capable of meeting its
financial commitments for which following information will be required from the applicant
company wishing to be pre-qualified:
1. Copies of the last three annual reports and accounts, and, if appropriate, those of the
company's ultimate parent.
2. Trading profit and loss forecasts for the next five years (including projected balance
sheets and cash flow statements and any assumptions made in preparing the forecasts),
and if appropriate, how any deficit will be met.
3. If the company is a subsidiary of another company, DGPC will need a letter of support
from the authorized representative of the parent company stating that it will ensure that
adequate financial and technical resources will be made available to such company to
meet its share of obligations and liabilities in respect of applicable petroleum right. In
those circumstances the financial information about the parent company would also be
needed.
3.1.3 Technical Capacity

1. To pre-qualify as an Operator, a company will need to demonstrate to DGPC that it
understands the technical obligations and responsibilities commensurate with the
responsibilities of an Operator. An applicant seeking to become an Operator must
satisfy the minimum criteria set forth for this purpose in the Policy/Rules.
2. In the event, an applicant does not have requisite past operating experience, such
applicant shall be required to either produce an agreement with an internationally
renowned E&P/ services company acceptable to DGPC or a high calibre technical and
management team with proven track record of overseeing and managing operations in
the international petroleum industry. The prequalification depends on the company
maintaining the relationship until they themselves have the requisite experience to pre-
qualify. If the company substitutes the technical service company then the replacement
must be approved by DGPC.
3. Non-Operators will not need to demonstrate as high a level of technical expertise as

Operators, however, it is expected that such companies will have the requisite expertise
to participate in the deliberation of an operating committee and be able to exercise
responsible oversight.
3.1.4 New Local Entrants

Where a local company seeking to enter a licence or agreement is a newly incorporated E&P
company, DGPC will generally require the following information:
1. Registered name and contact details.

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2. Place of incorporation and/or its principal place of business including certificate of

incorporation and Article of Association and Memorandum.
3. Details of financial structure of the company.
4. Name and usual residential address and nationality of the members of the Board of
Directors or other governing body.
5. Details of capital & assets including details of all holdings of 5% or more in the equity
of any other company held by it. The company will also be required to provide details
of financing plans to meet its likely investment obligations including the source of
financing and bank references from AA rated banks approved by the State Bank of
Pakistan.
6. Details of the corporate structure with a diagram showing the relationship between the
company and its subsidiaries, affiliates and parents.
7. Main activities of the company, with particular reference to its oil and gas activities, if
any.
8. Details of Personnel, including numbers and disciplines (e.g. petroleum engineer,

geologist, geophysicist etc.) with emphasis on their relevant experience. The team
should comprise of at-least two geologists, two geophysicist, one petroleum engineer,
and one HSE professional each having at-least five years experience in the petroleum
industry. This proviso will not be applicable to any applicant who wishes to become
Non-Operator only.
3.1.5 Participation in bidding

An applicant will be eligible for participating in bidding provided it meets one of the
following conditions:-
i. Who individually pre-qualify as an Operator.
ii. Who form consortia with other nominated leading company meeting pre-
qualification criteria as an Operator.
iii. The local companies having credible technical and management team as required
pursuant to sub paragraph 3.1.4.8 above.
3.1.6 Formal Assessment of Applicants

Based on the required information provided by each applicant, DGPC will assess applicants
in a clear and transparent manner. An applicant will be pre-qualified as either an Operator or
non-operator should it satisfy the necessary benchmarks as set forth in Annexure 4.

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3.1.7 Operator Qualification

Applicant companies that seek to become an Operator in an onshore and/or offshore area
must meet each of the following benchmarks as per criteria laid down in the Policy/Rules:
1. Technical Capacity.
2. Operational Capacity (offshore and/or onshore).
3. Legal capacity and compliance with residential requirements.
4. Financial Capacity.
3.1.8 Non Operator Qualification
Applicants seeking non-operating rights in any licence/agreement offered by GOP (offshore

and/or onshore), must meet the following criteria:
1. Legal capacity and compliance with residence status requirements.
2. Financial Capacity.
3.1.9 Submission of Misleading Information or an Adverse

Material Change in Status
DGPC reserves the right to disqualify any company should there be an adverse material
change in the status of a company during or following the pre-qualification selection.
DGPC reserves the right to refuse authorisation to participate should erroneous or misleading
information be supplied by the applicant.
3.2 Direct Negotiation with Strategic Partners

GOP may assign the status of “Strategic Partner” to national oil companies representing
foreign governments. GOP will promote direct negotiations with selected strategic partners in
order to:
1. Explore and develop specific acreage selected by DGPC for strategic partnerships.
2. Develop acreage of significant petroleum potential identified by DGPC in regard to

which GOP considers that a strategic partnership would improve the exploitation of
any petroleum resources.
3. The party to whom block is awarded would remain the Operator and majority share
holder of such block(s). The block awarded to the strategic partner can only be farmed
out to Public Sector Companies of the same country acceptable to the GOP or Pakistani
Public Sector E&P companies including GHPL.
Strategic partners will be required to undergo the same pre-qualification procedure as other
companies outlined above; however, they will be given privileged award of petroleum rights
without following competitive bidding for certain blocks selected by DGPC on mutually
acceptable terms and conditions.

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4. Licensing System
4.1. Types of Exploration and Production Rights
Four different types of E&P rights will be available, as outlined in the table below:
Type Name Petroleum Right Granted Term Maximum
Acreage
1. Reconnaissance Non-exclusive right for 1 year initial term with Unlimited in open
Permit geophysical, geochemical possible renewal of 1 year. areas.
& geological operations,
including the drilling of
stratigraphic wells.
No rights to negotiate or
convert into onshore
Licence or offshore PSA
Petroleum Exclusive right for Five years initial term Maximum 2,500
2.
Exploration exploration, including divided in two phases, km2 with
Licence – Onshore drilling and production Phase I of three years and subsequent
testing, on terms specified Phase II of two year, with progressive area
in the licence, Rules and two possible renewals of relinquishment of
related agreement. two years (each) for 30% of the original
exploration. area after Phase I,
20% of the
For appraisal operations, a
remaining area
separate application can be after Phase II and
made under the Rules 10% of the
allowing a maximum period
remaining area on
of appraisal renewal for two
or before 2nd
years.
renewal.
Plus a possible additional
five years retention period1
for gas market in Zone I &
Zone II,
Development and Exclusive right to develop Up to 25 years with a Maximum acreage
Production Lease and produce hydrocarbons possibility of a renewal for retained under
from within a designated five years. development and
portion of a Petroleum and production lease as
Exploration Licence, issued defined in the
when conditions laid down Rules.
in the Rules are satisfied.
3. Petroleum Exclusive right for Five years initial term Maximum 2500
Exploration exploration, including divided in three phases, km2 with
Licence – Offshore drilling and production Phase I & II of two years subsequent area
Shallow Water testing, on terms specified each, and Phase III of one relinquishment of
in the licence, Rules and year, with two possible 30% of the original
related PSA renewals of two years each licence area at the
for exploration. end of Phase I,
30% of the
For appraisal operations, a
remaining licence
separate application can be
area at the end of
made under the Rules
Phase II and 20%
of the remaining
licence area at the
years over discovery area.
end of 1st renewal.
two five-year retention
periods2for gas market.

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Production Lease and produce hydrocarbons possibility of a renewal for retained for
portion of a Petroleum and production as
4. Petroleum Exclusive right and PSA for Five years initial term Maximum 2500
Exploration exploration, including divided in three phases, Sq. Kms with
Licence – Offshore drilling and production Phase I & II of two years subsequent area
Deepwater and testing, on terms specified each, and Phase III of one relinquishment of
Ultra Deep Water in the licence, Rules and year, with two possible 30% of the original
related PSA renewals of two years each contract area at the
for exploration. end of the initial
term, 20% of the
For appraisal operations, a remaining area at
separate application can be
the end of 1st
made under the Rules
renewal.
years, over discovery area.
two five-year retention
periods2 for gas market
Production Lease and produce hydrocarbons possibility of a renewal for retained for
portion of a Petroleum and production as
1
For details of the retention period for gas market arrangements, please see 5.1.7 below
2
For details of the retention period for gas market arrangements, please see 6.13 below
4.2. Procedure for the Granting of E&P Rights

Onshore and Offshore E&P rights will be awarded via three distinct procedures:
1. The granting of Petroleum Exploration Licences for entering into PCA or PSA in relation
to onshore and offshore blocks offered through competitive bidding as per procedure laid
down herein below.
2. The granting of Petroleum Exploration Licences for entering into PCA or PSA in relation
to onshore and offshore blocks without competitive bidding to Strategic Partner
Companies on Government to Government basis.
3. The granting of non-exclusive Reconnaissance Permits for undertaking studies and multi-
client surveys after direct negotiation.
An application for any offshore permit or licence will be filed to DGPC. However, GHPL
will hold the rights to such permit or licence and will contract the applicant company to
perform the required work via a Contractor agreement (PSA).
In order to further streamline the procedure for expeditious disposal of applications for the
grant of exploration licences for both onshore and offshore; DGPC will continue the
competitive bidding process as given below. In addition, the existing procedure for clearances
by Provincial Governments and security agencies through a predefined "White and Green

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Area Map" will continue. No area clearance would be required for concession blocks falling
inside white/green areas.
4.2.1 Call for Nomination

1. DGPC will invite and supervise a “Call for Nomination” as outlined herein below for the
grant of all Petroleum Exploration Licences for entering into PCAs or PSAs.
2. In the first week of January and June every year, or as and when required, DGPC will
invite through a press advertisement, a call for submission of nominations of open
acreage for grant of petroleum rights which will remain open for 60 days.
3. All E&P companies (pre-qualified as well as other interested companies fulfilling the
requirements set out in the Rules) will be eligible to make nomination. In the event a
company making a nomination is not pre-qualified, such company will be required to
secure pre-qualification in accordance with the Rules in order to be eligible for
participation in the competitive bidding.
4. In order to promote under-explored areas which either have not been explored during the
last three years or have remained un-contested in an Invitation to Bid during the last three
years, the first applicant would have “right to match” the highest bid for blocks
nominated in Zone-O and Zone-I. This shall however, not be claimed as a matter of right.
5. Subject to nominated blocks falling in a green area, DGPC will consider such nominated
blocks for inclusion in the next Invitation to Bid after completing the necessary internal
due diligence.
6. A Call for Nomination or any submission made in response thereto shall not constitute or
give rise to any obligation on the part of the company making the submission to
participate in Invitation to Bid or on the part of DGPC to make Invitation to Bid in
respect of nominated block.
7. Call for nomination will be issued as per format at Annexure 6 in national newspapers,
the MPNR website as well as a leading oil and gas publication of international repute.
4.2.2 Invitation to Bid

1. DGPC will issue an Invitation to Bid within 15 days of close of Call for Nomination, as
per the format at Annexure 6, in national newspapers, the MPNR website as well a
leading oil and gas publication of international repute. Invitation to Bid may cover the
nominated blocks and such additional blocks as DGPC may deem appropriate.
2. An Invitation to Bid will remain valid for at least 90 days and all pre-qualified companies
would be eligible to contest Invitation to Bid.
3. It is a pre-requisite that the standard Model Petroleum Concessions Agreement and

Model Production Sharing Agreement are followed by all companies participating in
Invitation to Bid. All the economic terms and conditions will remain fixed as defined in
this Policy, unless mutually agreed by the parties and approved by GOP. All participating
companies will be required to furnish an undertaking to the effect that in the event, they
are considered for the award of petroleum right by DGPC, they will not seek any change
or modification or amendment or revision to terms and conditions applicable to Invitation

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to Bid including that of Model Petroleum Concessions Agreement and Model Production
Sharing Agreement.
4. Upon a written request of an interested company, DGPC will make every effort to
provide bid documents within 15 days of the request, which will include but not be
limited to copies of: (a) the Policy; (b) the applicable Rules; (c) Model Petroleum
Concessions Agreement and Model Production Sharing Agreement, whichever is
applicable; and (d) information which is available or can be purchased.
5. Bids will be invited based on criteria of the highest work programme determined on the
basis of Work Units as set-out in Annexure 5 and a Gas Price Gradient (GPG).
6. Any pre-qualified company can submit a bid for any block included in Invitation to Bid
in accordance with the Policy/Rules.
7. All Bids will be opened publicly in the presence of authorized representatives of the
bidders should they chose to be present. If only one bid is received, the bidding company
can be considered for award in accordance with the Rules provided the company offers a
reasonable Work Programme commensurate with the prospectivity of the area.
8. Award of petroleum rights to Pakistani state owned companies will also be subject to the
same process mentioned herein above.
9. DGPC will ensure that the conditions and requirements concerning the exercise or
termination of the Invitation to Bid are established and made available to interested
companies along with the bid documents. Furthermore, any changes made to the
conditions and requirements in the course of the bid procedure are to be notified to all
interested companies immediately by means of bulletins posted to the website and
through registered mail to the companies buying bid documents.
10. Bids are to be submitted in a sealed envelope.
11. All bids are to be made in accordance with the applicable Rules.
12. All bidders are required to notify DGPC should there be an adverse material change in
their status following pre-qualification. GOP will retain the right to refuse the granting of
any rights when this material change prevents a company from meeting the original pre-
qualification requirements.
13. DGPC will make every effort to conclude and sign a Petroleum Concession Agreement or
Production Sharing Agreement as the case may be based strictly on the model provided
with the bid documents within 30 days after the closing date of Invitation to Bid subject
to completion of all documents to be submitted by the applicant companies.
14. The Government reserves the right to exercise the powers to accept or reject any
application and cancel or annul the bidding process.
15. DGPC reserves the right to call more bidding rounds as and when required.

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4.2.3 Direct Negotiation of Non-Exclusive Rights

A potential investor may apply, in accordance with the Rules, for a non-exclusive
Reconnaissance Permit via direct negotiation with DGPC in any area currently open and
considered by DGPC to be suitable for this purpose.
4.3 Formal Bid Assessment

Based on the bids submitted by applicant companies/consortia for each offered block, DGPC
will operate a balanced scorecard system providing a performance measurement tool to be
used by DGPC in order to evaluate companies against set performance criteria in a clear and
transparent manner. Pre-qualified companies/consortia are to be evaluated under the
following bid criteria:
1. Gas Price Gradient (GPG) for when the Reference Crude Price (see paragraph 11.2)
below) is above USD 45/bbl; with a minimum GPG set at 0.2 and a maximum GPG
allowed set at 1.0. No applicant company will bid GPG at less than 0.2 or more than 1.0
unless instructed to by DGPC prior to a rebid in the case of a draw as outlined in 4.3.2
below.
2. Firm Work Units for Phase I of the initial term offered at the time of bidding as per
Annexure 5.
4.3.1 Completion of Balanced Scorecard

1. To work out the gas price when the Reference Crude Price exceeds USD 45/bbl,
applicant companies/consortia are required to bid a factor in the gas price formula (see
section IV below). This factor, known as the Gas Price Gradient (GPG), is biddable so as
to give advantage to the party that offers the lowest price to sell available gas. For an
example, see Annexure 5.
2. The work commitment component of the bid round will comprise the following:
i. 3D and 2D seismic acquisition to be undertaken
ii. Exploratory wells to be drilled and the minimum depth below land surface/seabed
nominated
Seismic acquisition to be undertaken and exploratory wells to be drilled are defined in terms
of work units – see Annexure 5.
3. The balance scorecard to determine the winning bid for each block on offer will therefore
have the following components:
For all Zones:

Components Measures Main Weights
Gas Price Formula Gas Price Gradient (GPG) 20%
Work Commitment on
offered block Work Units 80%

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4.3.2 Bid Evaluation Procedure

1. Each bid must contain the necessary information as required in the balance scorecard
clearly indicating work units and GPG. The evaluation of work unit commitments will be
pro-rated from the value of the highest work unit commitment – see Annexure 5.
2. DGPC will numerically rank bids submitted by candidate companies with regard to each
individual category as stated in the balanced scorecard as per 4.3.1(3) above.
3. The bid with the highest weighted average score will be declared the winner.
4. If more than one bid achieves the highest mark and there is a draw, then the successful
bidder will be decided on the basis of bidder offering lower GPG. In such an event, if
GPG offered by the bidders is also same then:
a. Within 15 days of bid opening date, such bidders will be asked to re-bid the GPG
at no more than the previous GPG and with a lower limit of GPG=0 and work
commitment of not less than previously offered.
b. The process will be repeated until there is a clear winner.
4.4 Post Award Process

Following a successful bid, either a PCA for onshore acreage or a PSA for offshore acreage,
will be concluded between Government/ GHPL and the successful bidder as per the Model
PCA/PSA made available to the applicants at the time of the announcement of the invitation
for bids. No modification to the terms of the model agreement nor to the terms of the bid will
be allowed during the finalisation of execution copies of the PCA or PSA.

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Section II – Exploration and Production Regimes

5 Onshore Petroleum Concession Agreement (PCA)
The economic package for onshore licensing Zones I, II and III is detailed below and will be
included in a model PCA to be released in line with this Policy (see map of licensing Zones
in Section I above).
• Zone I West Balochistan, Pashin and Potowar Basins
• Zone II Kirthar, East Balochistan, Punjab platform and Suleman Basins
• Zone III Lower Indus basin
The onshore PCA will apply to all new licences in onshore areas.
The onshore fiscal package contained in this Policy as applied to future awards will be
reviewed from time to time in the light of additional information and may be adjusted to
maintain international competitiveness.
5.1 Royalty, Income Tax and Windfall Levy

1. Royalty will be payable at the rate of 12.5% of the value of petroleum at the field gate.
2. The royalty will be paid in cash or kind at the option of GOP on liquid and gaseous
hydrocarbons (such as LPG, NGL, Solvent oil, gasoline and others) as well as all
substances including sulphur, produced in association with such hydrocarbon. The lease
rent paid during the year shall not be deductible from the royalty payment.
3. Tax on income will be payable at the rate of 40% of profit or gains in accordance with
the Fifth Schedule of the Income Tax Ordinance, 2001. Royalties will be treated as an
expense for the purpose of determination of income tax liability.
4. Windfall Levy (WLO) will be applicable on crude oil and condensate using the following
formula:
WLO = 0.5 x (M-R) x (P-B)
Where:
WLO - Windfall Levy on crude oil and condensate;
M - Net production;
R - Royalty;
P - Market Price of crude oil and condensate as set out in paragraph 11
below;
B - Base Price, which will be as under:
a. The base price for crude oil and condensate will be USD 30 per bbl.
b. This base price for crude and condensate will escalate each calendar
year by USD 0.25 per barrel starting from the date of first
commercial production in contract area.
5. For sale of natural gas to parties other than GOP, Windfall Levy (WLG) will be
applicable on the difference between the applicable GOP Zone price and the 3rd party sale
price using the following formula:

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WLG = 0.5 x (PG-BR) x V

Where:
WLG - Windfall Levy on share of natural gas;
PG - Third Party Sale Price of natural gas;
BR - Base Price;
V - Volume of gas sold to third party excluding royalty.
The Base Price will be the applicable Zone price for sale to GOP as outlined in paragraph
11 below. Where the 3rd party sale price of gas is less or equal to the base price, the
windfall shall be zero. The windfall levy shall not apply on sales of natural gas made to
GOP.
5.1.1 Import Duties, Taxes and Fees

Incentives in respect of Import Duties/Taxes and Fees for the E&P companies and the
“service companies” are as per applicable SRO.
5.1.2 Production Bonuses

Production bonuses will be payable on a contract area basis as follows:
CUMULATIVE PRODUCTION AMOUNT
(MMBOE) (USD)
At start of commercial production 500,000
30 1,000,000
60 1,500,000
80 3,000,000
100 5,000,000
1. Local Operator companies will pay their share of production bonuses in the Pakistan
Rupees equivalent of United States Dollar converted at the prevailing exchange rate on
the day of transaction.
2. GHPL will not pay the production bonuses as long as GOP is the majority shareholder of
this company.
3. It is intended that production bonuses will be expended on social welfare projects in and
around the respective contract areas according to guidelines to be issued by GOP.
5.1.3 Incentives for Exploration and Production Companies

incorporated in Pakistan
There is a need to develop a strong indigenous base in Exploration and Production sector and
to minimize foreign exchange outlays. Therefore, the following incentives will continue to be
offered to pre-qualified E&P Companies incorporated in Pakistan, which pay dividends and
receive payments for petroleum sold in Pakistani currency.
1. Such E&P companies will be encouraged to operate exploration blocks with 100%
ownership.

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2. In case of joint ventures with foreign E&P companies, local E&P companies including
GHPL shall have working interest of 15% in Zone-I, 20% in Zone-II and 25% in Zone-III
on full participation basis (hereinafter referred to as “required minimum Pakistani
working interest”). The local E&P companies shall contribute their share of exploration
expenditure in Pakistani currency upto required minimum Pakistani working interest.
GHPL will remain non-operator in such joint ventures. In the event any local E&P
company, other than GHPL, subsequently intends to reduce its working interest in a joint
venture whereby the collective working interest(s) of local E&P companies (including
that of GHPL) becomes lower than the above threshold specified for required minimum
Pakistani Working Interest, GHPL shall have the first right to make up the balance
required minimum Pakistani working interest on point forward basis without
reimbursement or payment of any past cost.
3. Consortia of companies not meeting the minimum required Pakistani working interest can
still be granted an exploration licence provided such companies advertise in the press
within 15 days of the grant, inviting Pakistani incorporated companies and GHPL to
participate in the joint venture on the full participation basis under standard Joint
Operating Agreement. The Pakistani incorporated companies and GHPL shall have the
option to participate in the joint venture within 30 days.
4. The foreign E&P companies shall be deemed to have fulfilled their obligation with
respect to the minimum Pakistani participation if Pakistani incorporated companies
and/or GHPL do not take any interest fully or partially.
5. Local E&P companies will, on a case to case basis, be entitled during the exploration
phase to receive foreign exchange against payment in Pakistani currency to meet their
day to day obligations under permits, licences and PCAs/PSAs. After commercial
discovery, local E&P companies would be paid up to 30% of their sale proceeds in
foreign currency to meet their day to day operational requirements. For project financing
after commercial discovery, local E&P companies will be required to make their own
foreign exchange arrangements except for companies in which GOP holds majority
shareholding.
5.1.4 Local Employment, Training and Social Welfare

Local employment, training and social welfare obligations will be applicable as per
Annexure-3.
5.1.5 Exploration Period

See paragraph 4.1.above.
Upon a written request of an Operator DGPC may, on a case to case basis, extend the term of
the licence on the following grounds only:
a. If seismic and drilling services are not readily available in the country for the
timely discharge of minimum work obligation, a proof to this effect will be
required before the Government considers accepting or denying a request for
extension of an exploration licence. Such a request for extension will be required
to be made after the holder of the exploration licence has exhausted all other
options including but not limited to pooling resources to undertake coordinated
activities with other petroleum right holders, if possible;

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b. If a holder of an exploration licence commits to undertake additional work which

is equivalent to at least 20% more than the minimum work obligation of
subsequent phase or renewal;
c. If a holder of an exploration licence makes additional accelerated area

relinquishment equivalent to 20% of the original licence area; or
d. If the party was unable to perform work because of circumstances beyond his
control such as law and order situation or for unforeseeable reasons including but
not limited to a flood or earthquake etc.
Notwithstanding above, in no circumstances shall an extension or extensions cumulatively

exceed 36 months during the currency of an exploration licence.
5.1.6 Extended Well Testing

1. Subject to approval from DGPC, an Operator may be permitted to undertake extended
well testing (EWT) during the appraisal phase and before declaration of commerciality
and approval of the development plan. Such approval will be granted provided that the
Operator inter-alia complies with the requisite royalty, tax, rentals, and training/social
welfare commitments as applicable under the lease.
2. A request for approval of EWT (including associated temporary production facilities)

will be made to DGPC providing information with regard to (a) technical justification for
EWT; (b) proposed duration for EWT and (c) a plan with regard to disposal of gas during
the proposed EWT period. The duration of EWT will be allowed keeping in view the
reservoir uncertainty and the proposed investment outlay on EWT. DGPC will not grant
approval to undertake flaring for EWT for a period longer than 30 days if the gas
infrastructure is located within 25 kms radius of the discovery well, unless under
exceptional circumstances.
3. Where the specification and quality of the gas from an approved EWT is acceptable to
the buyer, the gas price shall entail a 15% discount from the applicable gas price for that
Zone.
4. The facilities that are required to undertake EWT shall be constructed and operated in
accordance with good international oilfield practices.
5.1.7 Retention Period

1. In the case of a significant gas discovery in Zone I or Zone II, a retention period of up to
5 years will be considered for onshore licences, on a case to case basis, provided such
discovery can be declared a commercial discovery when inter-alia adequate gas pipeline
transportation facilities are installed and gas markets have been sufficiently developed for
sale of natural gas on commercial basis.
2. A discovery containing oil and gas or oil, gas and condensate is considered to be a gas
discovery for the purposes of obtaining a retention period only when liquids production is
not considered economic without marketing the gas stream.

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5.1.8 Total Lease Term

Total term of an onshore development and production lease will be up to 25 years plus five
years renewal subject to paragraph 5.1.9 below.
5.1.9 Five Year Term Renewal

So as to provide the Operator with a suitable return on late term investment in the lease, the
production period of a lease may be renewed for one term of five years. A revised field
development plan will be required to be submitted for approval by DGPC. In order to obtain
such a renewal the Operator must meet the following conditions:
1. The submission of a request for a renewal has been submitted not less than three years
in advance of the expiry of initial term of the production period; and
2. That the exploitation area has been producing on a regular basis on the date of the
request.
5.1.10 Policy for Grant of Lease after Expiry of Lease Term

1. For grant of petroleum rights after the expiry of lease period, DGPC will invite bids
using the call for bids one year before the end of the lease period from pre-qualified
companies seeking to have a petroleum right over the lease area, in relation to any
producing field for an additional ten years. The bids will be evaluated on the basis of
Signature Bonus, which would be spent for social welfare of the area in which the field is
located. A procedure for transfer of funds generated through signature bonus would be
the same as being applicable for transfer of royalty.
2. Each bidder(s) shall provide a bid bond of 10% of the offered signature bonus at the time
of bidding.
3. DGPC shall be under no obligation to grant any extension.
4. The above policy for grant of lease after expiry of lease term shall also apply to leases
granted under Pakistan Petroleum (Exploration & Production) Rules of 1986 and 2001.
5.2 Block System

A block system based on latitudes and longitudes as indicated in Annexure 1 and 2 will be
followed for grants and relinquishments of all onshore acreage.
5.3 Rentals
1. All holders of exploration licence will be required to pay an advance rental charge at the
following rates:
a. In respect of the five years of the initial term of the licence; Rs.3500 per square
kilometre or part thereof; or in respect of each year of the initial term of the
licence; Rs.800 per square kilometre or part thereof;

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b. In respect of each renewal of the licence; Rs.5000 per square kilometre or part
thereof; or in respect of each year of the renewal of Licence; Rs.2750 per square
kilometre or part thereof.
2. During the lease period, the following annual advance rental charges will apply:
a. Rs.7,500 per square kilometre or part thereof covering the lease area during the
initial lease period.
b. Rs.10,000 per square kilometre or part thereof covering the lease area during the
renewal period of a lease and further lease term extension.
5.4 Non Fulfilment of Work Obligations

A holder of a reconnaissance permit or exploration licence will be liable to pay the
Government financial compensation for non-performance of work obligations (work units),
within the stipulated timeframe. In respect of an exploration licence, the compensation to be
paid will be calculated based upon the number of work units unfulfilled multiplied by the
applicable USD rate for work units whereas for a reconnaissance permit, such compensation
will be based on minimum expenditure obligation specified in the permit deed.

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6. Offshore Production Sharing Agreement (PSA)

The economic package for Licensing Zone O is detailed below and will be included in a
model PSA to be released in line with this Policy. Licensing Zone O covers three distinct
offshore areas; shallow, deep and ultra deep as defined in Annexure 2.
This Policy will apply to all new grants of offshore PSAs.
6.1 Royalties, Corporate Tax and Windfall Levy

6.1.1 Royalties
Following Royalty schedule will be applied:
• First 48 Calendar Months after Commencement No royalty

of Commercial Production
• Months 49 to 60 inclusive 5% of field gate price
• Calendar Months 61 to 72 inclusive 10% of field gate price
• Calendar Months 73 and greater 12.5% of field gate price
1. The royalty will be paid in cash or kind at the option of GOP on liquid and gaseous
hydrocarbons (such as LPG, NGL, Solvent oil, gasoline and others) as well as all
substances including sulphur, produced in association with such hydrocarbon. The lease
rent paid during the year shall not be deductible from the royalty payment.
2. Royalties will be treated as an expense for the purpose of determination of income tax
liability.
6.1.2 Corporate Income Tax

Subject to any incentives offered to Operators by GOP, corporate tax will be payable at the
rate of 40% of profit or gains in accordance with the Fifth Schedule of the Income Tax
Ordinance, 2001.
6.1.3 Windfall Levy

Windfall Levy (WLO) will be applicable on crude oil and condensate using the following
formula:
WLO = 0.5 x (P-R) x SRO
Where:
WLO - Windfall Levy on share of crude oil and condensate;
P - Market Price of crude oil and condensate as set out in paragraph 11
below;
SRO - Share of crude oil and condensate allocated to a Contractor;
R - Base Price, which will be as under:
a. The base price for crude oil and condensate will be USD 30 per bbl.

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b. This base price for crude and condensate will escalate each calendar
year by USD 0.25 per barrel starting from the date of first
commercial production in contract area.
For sale of natural gas to parties other than GOP, Windfall Levy (WLG) will be applicable on
the difference between the applicable GOP Zone price and the 3rd party sale price using the
following formula:
WLG = 0.5 x (PG-BR) x V
Where:
WLG - Windfall Levy on share of natural gas;
PG - Third Party Sale Price of natural gas;
BR - Base Price;
V - Volume of gas sold to third party excluding royalty.
The Base Price will be the applicable Zone price for sale to GOP as outlined in paragraph 11
below. Where the 3rd party sale price of gas is less or equal to the base price, the windfall
shall be zero. The windfall levy shall not apply on sales of natural gas made to GOP.
6.2 Depreciation
The following depreciation rates will apply:
• On successful exploration and development 25% on Straight Line

wells
Will be expensed immediately upon commencement

• On dry holes (exploratory wells)
of commercial production or relinquishment
whichever is earlier.
• Non-commercial well (exploration wells) Expensed upon relinquishment of licence
• On facilities and offshore platforms 20% Declining Balance
Carry forward of any unabsorbed depreciation until such depreciation is fully absorbed.
6.3 Direct Government Participation

A sliding scale production sharing arrangement will be used instead of direct government
participation.
6.4 Production Sharing

1. The agreement will be a sliding scale production sharing arrangement.
2. The production sharing agreement will be executed by the Contractor with GHPL who
will be granted the Exploration Licence and Development and Production Lease. The
Contractor will therefore initially receive the profit oil and profit gas shares and will be
responsible for the management of the production sharing agreements.

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6.5. Cost Limit

Cost limit is 85% including the royalty of 12.5%. The Contractor can recover 100% of the
costs from up to a maximum of 85% of the gross revenues.
6.6 Profit Oil and Profit Gas Splits

The profit split is set on the basis of a sliding scale for shallow, deep and ultra deep grid areas
as shown in Annexure 2. The sliding scale is based on cumulative production permitting a
rapid recovery of investments and a higher net present value.
1. Profit oil & gas share for wells in shallow grid area of less than 200m water depth
and depth to reservoir shallower than 4,000m
Cumulative Available Oil/ Government Holdings Share Contractor Share of Profit
Available Gas from Contract of Profit Oil/Profit Gas in Oil/Profit Gas in Contract
Area Contract Area Area
MMBOE Crude Oil/LPG/ Natural Crude Oil/LPG/ Natural

Condensate Gas Condensate Gas
0 – 100 20% 10% 80% 90%
> 100 – 200 25% 15% 75% 85%

> 200 – 400 40% 35% 60% 65%
> 400 – 800 60% 50% 40% 50%
> 800 – 1200 70% 70% 30% 30%
> 1200 80% 80% 20% 20%
2. Profit oil & gas share for wells in deep grid area of more than or equal to 200m and
less than 1,000m water depth or deeper than 4,000m to reservoir in shallow grid
area
MMBOE Crude Oil/LPG/ Natural Crude Oil/LPG/ Natural Gas

Condensate Gas Condensate
0 – 200 5% 5% 95% 95%
> 200 – 400 10% 10% 90% 90%

> 400 – 800 25% 25% 75% 75%
> 800 – 1200 35% 35% 65% 65%
> 1200 – 2400 50% 50% 50% 50%
> 2400 70% 70% 30% 30%

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3. Profit oil & gas share for wells in ultra deep grid area of more than or equal to
1,000m water depth

Crude Oil/LPG/ Natural Crude Oil/LPG/ Natural Gas

MMBOE
Condensate Gas Condensate
0 – 300 5% 5% 95% 95%
> 300 – 600 10% 10% 90% 90%

> 600 – 1200 25% 25% 75% 75%
> 1200 – 2400 35% 35% 65% 65%
> 2400 – 3600 45% 45% 55% 55%
> 3600 60% 60% 40% 40%
6.7 Production Bonuses

Production Bonuses will be as outlined in the table below.
CUMULATIVE PRODUCTION AMOUNT
(USD)
500,000
• Within 90 days of start of commercial production
1,000,000
• Upon reaching 60 MMBOE
1,500,000
3,000,000
5,000,000
1. The Production Bonus amount for offshore would be deposited in the Government
treasury and the same would be expensed in accordance with the guidelines to be issued by
the Government from time to time.
6.8 Import Duties and Taxes

Incentives in respect of Import Duties/Taxes and Fees for the E&P companies and the
“service companies” are as per applicable SRO.
6.9 Marine Research and Coastal Area Development Fee

A marine research and coastal area development fee will be applicable as per the following
schedule:

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• USD 50,000 per year - until first discovery
• USD 100,000 per year - thereafter until declaration of commerciality
• USD 250,000 per year - during development phase
• USD 500,000 per year - during production phase.
Out of the above fee 75% would be expensed on coastal area development and 25% for
marine research.
6.10 Local Employment, Training and Social Welfare

Contributions
Details of local employment, training and social welfare contributions for Pakistani nationals
are given in Annexure 3.
6.11 Exploration Period

See paragraph 4.1.above.
Upon a written request of an Operator DGPC may, on a case to case basis, extend the term of
the licence on the following grounds only:
a. If seismic and drilling services are not readily available in the country for the
timely discharge of minimum work obligation, a proof to this effect will be
required before the Government considers accepting or denying a request for
extension of an exploration licence. Such a request for extension will be required
to be made after the holder of the exploration licence has exhausted all other
options including but not limited to pooling resources to undertake coordinated
activities with other petroleum right holders, if possible;
b. If a holder of an exploration licence commits to undertake additional work which

is equivalent to at least 20% more than the minimum work obligation of
subsequent phase or renewal;
c. If a holder of an exploration licence makes additional accelerated area

relinquishment equivalent to 20% of the original licence area; or
d. If the party was unable to perform work because of circumstances beyond his
reasonable control such as law & order situation, unforeseeable reasons including
but not limited to flood, earthquake etc.
Notwithstanding above, in no circumstances shall an extension or extensions cumulatively

exceed 36 months during the currency of an exploration licence.
6.12 Extended Well Testing

1. Subject to approval from DGPC, a Contractor may be permitted to undertake extended
well testing (EWT) during the appraisal phase and before declaration of commerciality
and approval of the development plan. Such approval will be granted provided that the

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Operator inter-alia complies with the requisite royalty, tax, rentals, marine research &
coastal development fee and training/social welfare commitments as applicable under the
lease.
2. A request for approval of EWT (including associated temporary production facilities)

will be made to DGPC providing information with regard to (a) technical justification for
EWT; (b) proposed duration for EWT and (c) a plan with regard to disposal of gas during
the proposed EWT period. The duration of EWT will be allowed keeping in view the
reservoir uncertainty and the proposed investment outlay on EWT. DGPC will not grant
approval to undertake flaring for EWT for a period longer than 30 days if the gas
infrastructure is located within 25 kms radius of the discovery well, unless under
exceptional circumstances.
3. Where the specification and quality of the gas from an approved EWT is acceptable to
the buyer, the gas price shall entail a 15% discount from the applicable gas price for that
Zone.
4. The facilities that are required to undertake EWT shall be constructed and operated in
accordance with good international oilfield practices.
6.13 Retention Period

1. In the case of a significant gas discovery, a retention period of up to 5 years will be
considered for offshore licences, on a case to case basis, provided such discovery can be
declared a commercial discovery when inter-alia adequate gas pipeline transportation
facilities are installed and gas markets have been sufficiently developed for sale of natural
gas on commercial basis. A further period of up to 5 years will be available subject to
justification acceptable to DGPC. No such retention provision is available for an oil
discovery.
2. A discovery containing oil and gas or oil, gas and condensate is considered to
be a gas discovery for the purposes of obtaining a retention period only when liquid
production is not considered economic without marketing the gas stream.
6.14 Total Lease Term

Initial term of the development and production lease will be up to 25 years in offshore area
with one possible renewal of up to 5 years, subject to paragraph 6.15 below.
6.15 Five Year Lease Term Renewal

A Contractor may, on behalf and with the consent of GHPL, apply to DGPC for the
production period of a lease to be renewed for one term of five years. A revised field
development plan will be required to be submitted for approval by DGPC. In order to obtain
such a renewal the Operator must meet the following conditions:
1. The submission of a request for a renewal has been submitted not less than three years in
advance of expiry of initial term of the production period; and
2. That the exploitation area has been producing on a regular basis on the date of the
request.

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6.16 Policy for Grant of Lease after Expiry of Lease Term

1. DGPC will invite bids using the call for bids from pre-qualified companies seeking to act
as Contractor to GHPL, over the lease area, in relation to any producing field for an
additional ten years either one year before the end of the initial term of a lease or if a
renewal has been granted, one year before the end of the lease renewal. The bids will be
evaluated on the basis of Signature Bonuses, which would be spent in accordance with
the guidelines issued by GOP from time to time.
2. Each bidder(s) shall provide a bid bond of 10% of the offered signature bonus at the time
of bidding.
3. DGPC shall be under no obligation to grant any extension.
6.17 Block System

A block system based on latitudes and longitudes as indicated in Annexure 1 & 2 will be
followed for grants and relinquishments of all offshore acreage.
6.18 Rentals
Contractors will be required to pay an advance annual acreage rental for the area covered
under the PSA of fifty thousand US dollars plus a further rate of ten dollars per square
kilometre or a part thereof every year.
6.19 Non Fulfilment of Work Obligations

A Contractor working under an Exploration licence will be liable to pay GHPL financial
compensation for non-performance of work obligations (work units) not accomplished within
the stipulated timeframe. Such compensation will be deposited in Federal treasury by GHPL
within fortnight of receipt from defaulting Contractor. The compensation to be paid will be
calculated based upon the number of work units unfulfilled multiplied by applicable USD
amount for work units.

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Section III - Regulatory Process & Obligations

7. Regulatory Process
7.1 Miscellaneous
1. This Policy will be applicable to all petroleum operations including but not limited to
seismic activities, exploration, drilling, development and production, except coal bed
methane for which the concerned provincial regulator will be responsible for all matters
related thereto.
2. The Operator shall conduct all petroleum operations in accordance with Good
international oil field practices and the principles and standards as laid down in the
Rules. Consistent with this requirement, the Operator shall endeavour to minimize
exploration, development, production and operation costs and maximize the ultimate
economic recovery of Petroleum.
3. All definitions/terms in this document will be interpreted in line with the Rules, which
will prevail in case of any conflict.
4. In order to expedite commercialization of discoveries, model Sale and Purchase

Agreements for Gas, Condensate and Crude Oil will be finalized in consultation with the
industry and made part of bidding documents.
7.2 Application Fees

The following fees will be payable on application for the following rights:
• Reconnaissance Permit - Rs 50,000
• Exploration Licence - Rs 100,000
• Development and Production Lease – Rs 200,000
• In addition, the Government may require Contractor or Company holding petroleum

right to bear the cost of third party independent evaluation/ assessment of notice of
commercial discovery and proposed development plan submitted by the concerned
party for consideration and approval
7.3 Non-compliance
Any company non-compliant with the terms of a permit, licence, lease, agreement and/or the
Rules will result in enforcement action by DGPC.
Grounds for the suspension and/or revocation of any permit, licence or lease will be set out in
detail as part of the rules, permit, licence or lease.

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7.4 Confidentiality of Data and Records

1. All data and records concerning operations within the permit area, licence area or lease
area are required to be submitted to DGPC. All data is to be treated as confidential and
may not be disclosed by the parties except as provided for in the agreement or where the
data is in the public domain.
2. The parties may disclose data to affiliates and subcontractors, banks, bona fide intending
assignees and their employees, consultants, etc. in connection with petroleum operations,
and as required by laws and the applicable stock exchange regulations.
7.4.1 Geological & Geophysical Data

1. All data, including, but not limited to, well logs, maps, magnetic tapes, cores, samples
and any other geological and geophysical information obtained as a result of petroleum
operations under a permit, licence, lease or an agreement is the property of GOP and
must be delivered to DGPC as soon as it becomes available. The Operator/Contractor and
other interest owners retain the right to make use of such data, free of cost, in connection
with petroleum operations.
2. Geological and geophysical data is to be kept confidential by GOP for a period of three
years from the date of its acquisition, with the exception of disclosure required by the
laws and Rules of Pakistan. However, GOP may disclose data earlier if the Agreement
terminates or upon relinquishment of the area to which the data relates.
3. DGPC may agree to keep the data confidential for longer period if such data is gathered
for commercial purposes under a multi client arrangement with DGPC provided;
however, all such data will be made available by DGPC within five years.
4. DGPC reserves the right to charge a reasonable fee for the purchase of this data by third
parties to cover data storage, handling, reproduction and marketing costs.
7.4.2 Operational, Commercial & Financial Data

Operators and Contractors have the obligation to provide DGPC with relevant information
related to exploration and production activities.
DGPC will disclose information into the public domain according to the following
conditions:
1. Operational: daily, monthly and annually.
2. Commercial & financial: after five years, except commercial sensitive information which
may give unfair advantage to third-parties.
7.5 Performance Guarantees

DGPC shall require successful applicants for petroleum exploration licences to furnish, in an
acceptable form, a guarantee or guarantees, with respect to its work commitments on or
before the execution of the petroleum exploration licence. In the event, the successful

- 30 -
applicant elects to provide any guarantee other than a Parent Company Guarantee during
exploration phase, the guarantee so provided would only be released in case all work
obligations including but not limited to social welfare, training, data, rental etc. are fully
discharged. DGPC reserves the right to deduct payment for non-performance of all such
obligations from the performance guarantee.
The guarantee will be irrevocable and unconditional and in a standard format satisfactory to
DGPC such as the following:
1. Bank guarantee equal to 50% of the minimum financial obligation from a bank of
international repute acceptable to the Government on the prescribed format in
PCA/PSA.
2. Parent Company Guarantee
3. Petroleum production lien
4. First and preferred assets lien
5. Escrow Account
8 Foreign Exchange
1. Contractor/Operator will be required to contribute all funds required for the Expenditure
in respect of petroleum operations in foreign exchange and in Pakistani Rupees as
required.
2. Subject to domestic supply obligations and export duties, each foreign E&P Companies
shall be entitled to export its share of the petroleum acquired under an agreement, in
accordance with the applicable laws. Each foreign Contractor/Operator (and its registered
branch in Pakistan) shall have the right to retain abroad and to freely make use of sale
proceeds from the export of its share of petroleum.
3. Foreign E&P companies shall have the right to remit sale proceeds from the sale of
petroleum within Pakistan in foreign currency abroad in accordance with applicable
regulations of the State Bank of Pakistan. GOP shall ensure that the State Bank of
Pakistan shall permit all remittances of funds without any delay or additional cost to such
companies.
4. If a foreign working interest owner assigns its interest in a licence, lease and/or
agreement to a foreign entity with the consent of GOP, such working interest owner will
be allowed to retain abroad all proceeds resulting from such assignment.
5. E&P company shall have full right of control over movement of funds out of bank
accounts established for the purpose of petroleum operations but may be required to
provide to the State Bank of Pakistan or any Government designated office, bank
statements with an explanation of each deposit, or payment from such account, and shall
supply on a quarterly basis, in a form acceptable to the State Bank, or such designated
office full particulars of foreign exchange transactions related to an agreement.
6. For all currency conversion transactions and calculations in relation to petroleum

operations the rate of exchange shall be at the rate as established by the State Bank of

- 31 -
Pakistan (SBP) prevailing on the date of each transaction. In case SBP ceases to publish
this rate, the arithmetic average of the average inter-bank mid rate may be used.
7. For foreign currency provisions relating to Local Pakistani Companies, please refer to
sub-paragraph 5.1.3.5 above.
9 Assignment or Transfer of Interest

1. The working interest owner shall not sell, assign, transfer, convey or otherwise dispose of
all or any part of its rights and obligations under a licence, lease and/or an agreement, to
a third Party or any of its affiliates without the previous written consent of DGPC, which
shall not be unreasonably withheld.
2. In giving this consent DGPC may impose any such conditions as DGPC considers
appropriate including but not limited to conditions which are for the purpose of ensuring
full payment of royalty, corporate tax and windfall levy by the assignee in respect of the
interests assigned or transferred.
3. DGPC will require payment of an administration fee of Rs 50,000 in relation to any one
application for assignment or transfer of interest.
10 Domestic Supply Obligation & Gas Allocation

10.1 Domestic Supply Obligation
Subject to the considerations of internal requirements and national emergencies, E&P
companies will be allowed to export their share of crude oil and condensate as well as their
share of gas based on export licences to be granted by the concerned regulator. For the
purpose of the grant of such export licenses for gas, the export volumes will be determined in
accordance with “L15” concept provided a fair market value for such gas is realized at the
export point. Under the “L15” concept the gas reserves that exceed the net proven gas
reserves in Pakistan including the firm import commitments vis-à-vis the projected gas
demand for next fifteen years can be considered for export. Once gas has been dedicated for
exports, licenses for such export volumes shall not be subsequently revoked.
10.2 Remittance of Proceeds Abroad

1. If the foreign E&P Companies sell gas to third parties in Pakistan and want to remit sale
proceeds in foreign currency abroad, GOP shall allow these companies to freely remit a
“guaranteed percentage” of their sale proceeds.
2. The “guaranteed percentage” shall be 75% of the total gross revenues from any Lease in
Zone O and I, 70% of the total gross revenues from any Lease in Zone II and 65% of the
total gross revenues from any Lease in Zone III. The remaining gross income in Rupees
can be used to pay royalties, taxes, windfall levy and any other payments to the
Government as well as to meet local operating costs.
10.3 Delivery Point and Field Gate for Natural Gas

1. For the purpose of pricing and delivery obligations for natural gas, the field gate shall be
selected from the following two options:

- 32 -
(a) For Zones I,II and III: Anywhere within a 25-km radius from the outlet flange
of a production facility;
(b) For Zone O : At the nearest access point to an existing regulated transmission
system; or at the shore within Zone II or III coastal locations.
2. In the event there is more than one field located in a block; the secondary or subsequent
fields will be connected to either the transmission system, any point inside the outlet
flange of the production facility of the primary field or the pipeline connecting the
primary field to transmission system, as may be approved by DGPC.
3. All field gate locations will be approved by DGPC on case to case basis within the above
criteria following the submission of proposed field development plan by the concerned
company.
10.4 Sale of Natural Gas within Pakistan

1. E&P companies operating in Pakistan will be allowed to contract with gas transmission
and distribution companies and third parties, other than residential and commercial
consumers, for the sale of their share of gas in Pakistan at negotiated prices in accordance
with the applicable laws, rules, and regulations.
2. Subject to overall market demand, E&P Companies may request and GOP will purchase
their share of pipeline specification gas through a nominated buyer which is effectively
controlled by it in acceptable daily, monthly and yearly volumes to meet the internal
demand in an economical manner provided there are no infrastructure constraints. The
delivery point shall be at the field gate, as outlined in paragraph 10.3 (above). GOP/gas
buyer nominated by GOP shall pay the price for gas at the field gate as set out in this
Policy. In addition, the "guaranteed percentage" for foreign exchange remittance as
contained in sub paragraph 10.2.2 above will apply to such sales.
3. Where a government nominated buyer agrees in principle to purchase gas pursuant to sub
paragraph 10.4.2 above, the gas producer shall construct and operate and maintain the gas
pipeline connecting the field to the field gate in accordance with the Policy, applicable
law, rules and regulations. All costs associated with such pipeline will be borne by the
gas producer and no transportation tariff will be paid by the Government/ gas buyer
nominated by the Government for this purpose.
4. The gas producer can arrange for the construction and operation of the connecting gas
pipeline outlined in sub paragraph 10.4.3 above, through an independent third party
provided the title of such pipeline is transferable to the Government on expiry or early
termination of relevant petroleum rights. For avoidance of doubt, it may be noted that no
tariff will be payable by the Government/ gas buyer nominated by the Government for
this pipeline.
10.5 Pipeline Construction and Operation

1. E&P companies operating in Pakistan will be allowed to construct and operate pipelines
for local requirements and for exports of their share of petroleum which shall be
regulated by the regulator concerned in accordance with applicable laws, rules,
regulations and the Policy based on an open-access (third party) regime. The E&P

- 33 -
Companies constructing such pipelines would be allowed priority access based on a firm
utilization plan.
2. Whether a connecting pipeline from field gate to the nearest transmission system, is
constructed and operated by a producer, a third party or a government nominated entity;
such a pipeline shall be regulated pursuant to the provisions of sub paragraph 10.5.1
above, unless the regulator concerned decides that the pipeline shall be a non-regulated
pipeline.
3. At the request of the producer, the buyer nominated by GOP for purchase of the gas may
also consider laying the pipeline, if required, starting from the field gate to the nearest
transmission system, at his cost.
4. If an inter-connecting pipeline is proposed to be constructed by a third party or the buyer,

the producer will be required to confirm the requisite gas supply volumes, pressures,
reserves and other technical parameters on standard supply term contract basis for a
period to be agreed between the parties.
5. Subject to sub paragraph 10.5.9 below, the basis of the tariff allowed and paid monthly
for delivery from field gate into the transmission system will be determined by the
regulator based upon a ‘rate of return on equity’ basis at the rate of 12% with the capital
cost being amortized over a minimum of 15 years. Allowable costs will include operating
cost and interest payable on the initial capital over the minimum 15 year amortization
period. Post the repayment period the Operator will be able to make a 12% margin over
operating costs. If such pipeline is used by more than one shipper, the calculation basis
for each year shall be done on an overall pipeline volume nomination basis at the start of
each year, through the aggregation of all shippers nomination. Any shortfall or excess of
volume delivered from the nomination in the year shall be deducted/ received from the
tariff payment of that year or charged to the party responsible for such a shortfall.
6. Unless a pipeline is specifically constructed in order to facilitate a third party access

agreement agreed between Operators/Contractors and a third party duly approved by the
regulator; all pipelines from field to field gate, in case of offshore, shall be constructed
with an excess capacity equal to thirty percent, depending upon projected plateau rates
unless otherwise allowed by DGPC based on an objective assessment of future likely use
of such capacity.
7. E&P companies are expected to exhaust options to make efficient use of the current
transmission system and may co-operate in the construction and operation of pipelines
upstream of the field gate or transmission system. Shared ownership and spare capacity
shall be based upon the combined planned coincidental shared plateau of the Operators
unless otherwise agreed by DGPC or the regulator concerned. Companies are encouraged
to co-operate in any extension of an initial system to ensure economies of scale,
maximum utilization and to ensure that the overall pipeline stays below the tariff limit as
specified in para 10.5.9 hereunder.
8. In the event such pipeline is located in offshore area and the excess capacity is
subsequently utilized by a third party, the tariff will be charged by the party providing
access to such pipeline as approved by DGPC and revenues generated therefrom will be
treated as a part of profit oil/profit gas for its production sharing purposes.
9. The tariff payable to any third party or the producer for pipeline connecting the field gate
to the transmission system shall not exceed $0.5/MMBTU in aggregate. Any tariff in

- 34 -
excess of this limit will be determined by the regulator on a case to case basis but only in
exceptional circumstances, and subject to the approval of GOP. The indexation of the
tariff limit will be based on OGRA’s recommendation and approved by GOP. The public
utility companies will continue receiving tariff under a separate tariff regime within the
frame work of OGRA Ordinance.
10. Ownership/operation of the pipeline connecting field to the field gate and the field gate to
the transmission system shall pass to the government consequent upon the expiry or early
termination of the lease that initiated the pipeline unless such pipeline is not used for
shipment of gas from another adjacent area for which specific approval of the
Government and/or the regulator concerned will be required. The transfer should be free
of any lien or encumbrance or other liabilities.

- 35 -
Section IV – Pricing and Incentives for Petroleum

Exploration & Production
11 Oil and Gas Pricing
11.1 Crude Oil, Condensate and Liquefied Petroleum Gas
(LPG) Pricing
11.1.1 Crude Oil

The Producer Policy Price for crude oil delivered at the nearest refinery gate shall be based
on the Reference Crude Price (RCP) equal to C&F price of a comparable crude oil or a basket
of Arabian/Persian Gulf crude oils plus or minus a quality differential between the
comparable crude oil / a basket of crude oils and the local crude oil. No other adjustment or
discount will apply. C&F price will be arrived at on the basis of FOB price of imported crude
oils into Pakistan plus freight on AFRA, which is deemed chartered rate.
11.1.2 Condensate
The Producer Policy Price for condensate will be the FOB price of internationally quoted
comparable condensate delivered at the nearest refinery gate plus or minus a quality yield
differential, based on the value in the Arabian Gulf spot products market of the crude
oil/condensate. No other adjustment or discount will apply.
11.1.3 Liquefied Petroleum Gas

For new projects, the LPG producer price will be as notified by the regulator.
11.2 Gas Pricing

For all gas pricing, a Reference Crude Price (RCP) equal to the C&F price of a basket of
Arabian/Persian Gulf Crude Oils imported in Pakistan during the first six months period of
the seven months period immediately preceding the relevant price notification period as
published in an internationally recognized publication acceptable to the parties will be used.
C&F price will be arrived at on the basis of FOB price of imported crude oils into Pakistan
plus freight on AFRA, which is deemed chartered rate.
11.2.1 Mature Basin Price for Zone III

For Zone III, the Mature Basin Price shall be calculated using three linear formulae as
follows:
1. Reference Crude Price (RCP) equal to or greater than USD 10/bbl and up to and
including USD 20/bbl:
• When RCP is equal to USD 10/bbl (RC10)

Zone III price is equal to USD 1.50/MMBTU (Gas Price Floor (GPF));

- 36 -

Zone III price is equal to USD 2.50/MMBTU (GP20); and
• When RCP is greater than USD 10/bbl and less than USD 20/bbl
Zone III price is equal to GPF + (RCP – RC10) x [(GP20 – GPF) / (RC20 – RC10)].
For example when RCP = USD 15/bbl

Zone III (USD/MMBTU) = 1.50 + (15 – 10) x [(2.50 – 1.50) / (20 – 10)];
Zone III (USD/MMBTU) = 2.00
2. Reference Crude Price (RCP) greater than USD 20/bbl (RC20) and up to and including
USD 45/bbl:
• When the RCP is equal to USD 45/bbl (RC45)

Zone III price is equal to USD 3.00/MMBTU (Gas Price Ceiling (GPC)); and
Zone III price is equal to GP20 + (RCP – RC20) x [(GPC – GP20) / (RC45 –
RC20)].

Zone III price (USD/MMBTU) =2.50 + (30 – 20) x [(3.00 – 2.50) / (45 – 20)];
Zone III price (USD/MMBTU) = 2.70
3. Reference Crude Price (RCP) greater than USD 45/bbl:
• Zone III price is equal to GPC + (RCP – RC45) x GPG x [(GPC – GP20) / (RC45 –
RC20)]
Where GPG (gas price gradient) has a minimum value of 0.2 or as may be bid in the
bidding stage for the petroleum exploration licence, up to a maximum value of 1.0.
For example when RCP = USD 60/bbl and GPG = 0.20

Zone III price (USD/MMBTU) = 3.00 + (60 – 45) x 0.20 x [(3.00 – 2.50) / (45 – 20)]
Zone III price (USD/MMBTU) = 3.06
11.2.2 Gas Price for Zone II

For Zone II, the Gas Price for Zone II shall be calculated using additional premiums to
address the issue of more complex reservoir targets as follows:
Zone II = Zone III price + Zone II Premium
Zone II premiums shall be calculated as follows:
1. Reference Crude Price (RCP) is equal to or greater than USD 10/bbl and up to and

Zone II Premium floor is equal to USD 0.00/MMBTU (P10);

Zone II Premium ceiling is equal to USD 0.25/MMBTU (P45); and

- 37 -
Zone II Premium is equal to P10 + (RCP – RC10) x [(P45 – P10) / (RC45 – RC10)].

Zone III price (USD/MMBTU) = 2.70 (see example in sub paragraph 11.2.1 above)
Zone II Premium (USD/MMBTU) = 0.00 + (30 – 10) x [(0.25 – 0.00) / (45 – 10)];
Zone II Premium (USD/MMBTU) = 0.14
Gas price Zone II (USD/MMBTU) = 2.70 + 0.14
Gas price Zone II (USD/MMBTU) = 2.84
2. Reference Crude Price (RCP) greater than USD 45/bbl:
• Zone II Premium is equal to USD 0.25/MMBTU (P 45).
11.2.3 Frontier Areas Pricing Incentives

For Zone O and Zone I, the Frontier Area Price (FAP) shall be applicable and calculated
using pricing incentives (PI) as follows:
Frontier Area Price (FAP) = Zone III Gas price + PI
Pricing Incentives shall be calculated as follows:
1. Reference Crude Price (RCP) is equal to or greater than USD 10/bbl and up to and

PI floor is equal to USD 0.00/MMBTU (PI 10);

PI ceiling for Zone I is equal to USD 0.55/MMBTU
PI ceiling for Zone O Shallow Water is equal to USD 1.05/MMBTU
PI ceiling for Zone O Deep and Ultra Deep Water is equal to USD 1.40/MMBTU
and
PI is equal to PI 10 + (RCP – RC10) x [(PI 45 – PI10) / (RC45 – RC10)].

Zone III price (USD/MMBTU) = 2.70 (see example in sub paragraph 11.2.1 above)
PI (Zone I) (USD/MMBTU) = 0.00 + (30 – 10) x [(0.55 – 0.00) / (45 – 10)];
PI (Zone I) (USD/MMBTU) = 0 .31
FAP (Zone I) (USD/MMBTU) = 2.70 + 0.31
FAP (Zone I) (USD/MMBTU) = 3.01
2. Reference Crude Price (RCP) is greater than USD 45/bbl:
• PI is equal to respective PI 45 for Zone I, Zone O Shallow Water or Zone O Deep and
Ultra Deep Water.

- 38 -
11.3 Associated Gas Pricing

The price for associated gas shall be equal to the price of non-associated gas in the respective
Zones.
11.4 Royalty Calculation in case of Sale of Gas to Third

Parties
For the purpose of calculating the amount due by way of royalty, the value of the petroleum
produced and saved shall be determined by using actual selling price in the following
manner, namely:-
(a) If the petroleum is sold to the national market, the actual selling price means
the price determined in accordance with the relevant sale and purchase
agreement between the petroleum right holder and the Government or its
designee less allowed transportation cost beyond the delivery point.
(b) In all other cases, the actual selling price means the greater of-
(i) the price at which the petroleum is sold or otherwise disposed of less
allowed transportation costs; or
(ii) the fair market price received through arm’s length sales of the petroleum
less the allowed transportation costs; or
(iii) the price applicable to the sales made under sub-rule (a) above.
11.5 Extended Well Testing Gas Pricing

Gas from Extended Well Tests (EWT) will be priced as per paragraphs 5.1.6 and 6.12 above.
11.6 Ring Fencing

In accordance with the Fifth Schedule of the Income Tax Ordinance 2001, there will be no
ring fencing for the purpose of calculation of corporate tax.

- 39 -
Section V: - Implementation and Removal of

Difficulties:-
12 Implementation of the policy, removal of difficulties,
addressing of anomalies, framework for institutional
development and strengthening of the Policy Wing
1. A Committee shall be constituted to address the issues of the implementation of this
policy, removal of difficulties, addressing of anomalies and approving framework for
institutional development and strengthening of the Policy Wing to enhance its
professional competence for policy formulation and upstream regulation. The
committee shall comprise of the following:
Minister for Petroleum and Natural Resources Chairman
Deputy Chairman Planning Commission Member
Secretary, Finance Division Member
Secretary, Petroleum and Natural Resources Member
Director General Petroleum Concessions Member/Secretary
2. In order to meet the deadlines, a separate cell headed by Director General Petroleum
Concessions {DG(PC)}, as already provided in Petroleum (Exploration &
Production) Policy 2001, shall be maintained comprising the following
professionals on contract basis:
(a) Legal Advisor,
(b) Financial Consultant,
(c) Petroleum Economist,
(d) Petroleum Explorationist and
(e) Other professionals on need basis.
3. The funds generated through sale of technical data and unspent training amount
generated under PCAs and PSAs shall be utilized for capacity building, strengthening
of the Policy Wing of Ministry of Petroleum and Natural Resources, remunerations
of outside professionals engaged on contract, part time legal advisors/technical
consultants, policy promotional activities, workshops, seminars, conferences &
symposia etc.
4. Separate procedures/guidelines will be issued by the Ministry of Petroleum and

Natural Resources in relation to the provisions at paragraph 12.2 and 12.3
above.

- 40 -
13 Applicability and Effect of Policy

1. This Policy supersedes the 1991 Petroleum Policy, the 1993 Petroleum Exploration
and Production Policy, the 1994 Petroleum Policy, the 1997 Petroleum Policy and the
2001 Petroleum Policy to the extent applicable to exploration and production sector
only, without affecting the rights that may have accrued under the aforesaid policies.
2. In addition to the protection of the Policy under Regulation of Mines and Oilfields
and Mineral Development (Government Control) Act, 1948 and the Economic
Reforms Act, 1992, GOP will ensure/facilitate implementation of the agreements
by the Ministries/Divisions and Organizations concerned.
3. For implementation of this policy appropriate changes will be made in relevant rules,
regulations and model agreements.
4. GOP reserves the right to change terms of this Policy in response to changes in
national energy Policy or significant changes in the domestic or international
energy market. These changes will not affect any rights that may have previously
accrued under this Policy.
5. This Policy may be reviewed by GOP after 5 years for appropriate adjustments
keeping in view the then prevailing conditions.
6. The incentives of this Policy shall apply to E&P companies who will apply for new
petroleum rights after this Policy comes into effect as well as to those E&P
companies who opt for conversion to this Policy in accordance with section VI
hereof.

- 41 -
Section VI – Conversion to 2007 Policy

14 Conversion of Regimes
1 The option for conversion to this policy will be available to all new
exploration efforts made under the exploration licences & PCAs/PSAs:
(a) that stand granted/executed; or
(b) for which provisional award has already been made; or
(c) for which applications are pending and bids have been invited
before the date of approval of the Policy.
2 For the purpose of this section, new exploration efforts means
“Exploration Wells” under drilling and/or spudded, after the date of
approval of the Policy.
3 For all conversion pursuant to paragraph 14.1 above, GPG of 0.2 will be
applied in the gas price formula for areas falling in the corresponding
zones in accordance with this Policy.
4 All pending applications for which bidding process has not been initiated as of
the date of approval of this Policy, will be treated as blocks duly nominated
under a “call for nomination” procedure of this Policy as laid down in
paragraph 4.2.1 above. However, nothing contained herein will be construed
to have created any right for the applicant.
5 This Policy will not affect any obligation with regard to already agreed
minimum work programme and minimum expenditure obligation and the
State participation in an existing joint venture, if any.
6 The conversion under this Policy will be opted as a package and the companies
desirous of opting for conversion to this Policy shall be required to submit
their written request to DGPC within 90 days from the date of approval of the
policy failing which they will not remain eligible for the conversion. Similarly,
for those blocks for which the exploration licences have not yet been granted
and PCAs/PSAs have not been executed as mentioned in sub-paragraph 14.1
(b) and (c), the company concerned will have the option to apply, in writing,
for conversion under this Policy within 90 days from the date of grant of such
block. The option once exercised shall be final. The supplemental agreement
to give affect to the conversion shall be executed as soon as possible but no
later than 6 months from the date of exercise of the option.

- 42 -
Annexures
Annexure 1 - The Block System
All Zones
1. Blocks:
a. The Offshore/Onshore area will be divided into Blocks.
b. Blocks shall be bounded on the east and west sides by successive integer
meridians of longitude.
c. Blocks shall be bounded on the north and south sides by successive integer
parallels of latitude.
d. A Block shall be referred to by the degree latitude and longitude of the southwest
corner of the Block; for example, the Block with a southwest corner at 25 degrees
latitude and 64 degrees longitude would be referred to as Block 2564.
2. Grid Areas:
a. Every Block shall be divided into 144 Grid Areas
b. Grid Areas shall be bounded on the east and west sides by meridians spaced at
intervals of five minutes between the east and west boundaries of the Block.
c. Grid Areas shall be bounded on the north and south sides by parallels spaced at
intervals of five minutes between the north and south boundaries of the Block.
d. A Grid Area shall be identified by the letters to which it corresponds in the

following diagram:

- 43 -
NW NE
L La Ll
K Ka Kk
J Ja Jj
I Ia Ii
H Ha Hh
G Ga Gg
F Fa Ff
E Ea Ee
D Da Dd
C Ca Cc
B Ba Bb
A Aa Ab Ac Ad Ae Af Ag Ah Ai Aj Ak Al
a b c d e f G h i j k l
SW SE
3. Sections:
a. Every Grid Area shall be divided into 100 Sections.
b. Sections shall be bounded on the east and west sides by meridians spaced at
intervals of thirty seconds between the east and west boundaries of the Grid Area.
c. Sections shall be bounded on the north and south sides by parallels spaced at
intervals of thirty seconds between the north and south boundaries of the Gird
Area.
d. A Section shall be identified by the number to which it corresponds in the

following diagram:

- 44 -
NW NE
9 90 99
8 80 88
7 70 77
6 60 66
5 50 55
4 40 44
3 30 33
2 20 22
1 10 11
0 00 01 02 03 04 05 06 07 08 09
0 1 2 3 4 5 6 7 8 9
SW SE
4. Naming of Agreements, Sections and Wells:
a. An Agreement shall be referred to by the southwest corner of the Block in which

the southwest corner of the Original Contract Area of the Agreement is located,
separated by a hyphen, followed by the number (by historical signing date) of the
Agreement in that Block; for example, the fourth Agreement having its southwest
corner in Block 2564 would be referred to as "Production Sharing Agreement
2564-4".
b. Sections shall be referred to by specifying the Block, Grid Area and Section
number, separated by hyphens, in declining order of size; for example, the Section
81 located in Block 2564, Grid Area Bb would be referred to as "2564-Bb-81".
c. A well will be described by the Section location of its wellhead. If there is more
than one well drilled from the same Section, each well will be described by its
Section location, separated by a hyphen, followed by the number (by historical
spud-in date) of the well in that Section; for example, the first well drilled in
Section 2564-Bb-81 will be referred to as "2564-Bb-81.1".

- 45 -
Offshore Zones
1. The map of the Offshore of Pakistan (Annexure 2) shows each Grid Area as being either
"shallow" (having an average water depth of less than 200 metres) or "deep" (having an
average water depth greater than 200 metres) or ultra deep having an average water depth
greater than 1,000 metres.
2. Maximum Size
A Reconnaissance Permit may be granted for an offshore area of any size.
A Licence shall not be granted in respect of any area of more than 9,600 Sections.
A Lease shall not normally be granted in respect of any area of more than 150 Sections and
the maximum acreage assigned to any one field shall be defined as the vertical projection to
the surface of the outer limit of the reservoir(s).

- 46 -
Annexure 2 – Block Maps of Pakistan

Block Map of Offshore Pakistan
Description of Geological Attachment - I
Zone “O” of Annexure - VII
69°00'
2568
2468
2368
68°00'
2567
2467
2367
2267
67°00'
2566
2466
2266
2366
2166
66°00'
2565
2465
2265
2365
2165
65°00'
2564
2464
2264
2364
2164
64°00'
2563
2463
2163
2263
2363
63°00'
2262
2562
2462
2362
LEGEND
62°00'
2461
2361
SHALLOW (LESS THEN

200m WATER DEPTH)
DEEP (GREATER THEN 200m &

LESS THEN 1000m WATER DEPTH)
61°00'
Ultra DEEP (GREATER THEN

1000m WATER DEPTH)
60°00'
26°00'
25°00' 24°00'
23°00' 22°00'
21°00' 20°00'

- 47 -
Block Map of Onshore Pakistan
3672 3673 3674 3675

3671
3571
3577
3572 3574 3575 3576
3573
3476
3474 3475
3473
INED
FRONTIER UNDEF
3471 3472
JAMMU&
3374
KASHMIR
Disputed Territory
3371 3372 3373

3369 3370
3275
3271 3272 3273 3274

3269 3270
3170 3173 3174

3166 3171 3172
3168 3169
3167
3066 3067 3068 3069 3070 3071 3072 3073 3074
2961 2965 2966 2967 2968 2969 2970 2971 2972

2962 2963 2964 2973
2872
2862
2861 2863 2864 2865 2866 2867 2868 2870 2871
2869
2762 2764 2765

2763 2766 2767 2768 2769
2770 2771
2661 2670
2662 2663 2664 2665 2666 2667 2668 2669
2561
2566
2562 2563 2564 2565
2567 2568 2569
2570
2467 2468 2469 2470

- 48 -
Annexure 3 - Employment, Training and Social

Welfare Program
EMPLOYMENT
Employment programs for Pakistani nationals shall be agreed upon with DGPC on an annual
basis as per guidelines issued from time to time.
TRAINING
Training shall be provided for capacity building of Pakistani employees and GOP officials by
foreign and local E&P companies as per guidelines issued by DGPC from time to time. The
E&P companies shall incur following expenditures at different levels of their activity:
Onshore Zones
• USD 25,000 per year - during exploration phase
• USD 50,000 per year - during development and production
Offshore Zone O
• USD 50,000 per year - during exploration phase
• USD 250,000 per year - during development and production
This shall not form part of Government revenue and shall be used primarily for capacity
building and to meet expenditures connected with infrastructure development as mentioned in
Section V above for which separate guidelines shall be issued with the approval of the
Principal Accounting Officer.
SOCIAL WELFARE PROGRAM
The amount of social welfare funds pledged by the companies (local and foreign) in their
respective agreements must be utilized to give lasting benefit to the communities. Social
welfare projects must be agreed with the local community and the civil administration as per
guidelines issued by GOP from time to time.
The following minimum expenditure shall be incurred on welfare projects:
a. During exploration stage until Commercial USD 25,000 per Licence Year
Production
b. During Commercial Production Phase Amount/Lease Year (USD) (For all Zones)
(BOE/d)
Less than 2,000 50,000 (Zones O & I); 37,500 (Zones II & III)
2,000 - 5,000 100,000 (Zones O & I); 75,000 (Zones II & III)

- 49 -
More than 50,000 700,000 (Zones O & I); 525,000 (Zones II & III)
These amounts will be subject to review from time to time. Local E&P companies will incur
these expenditures in equivalent Pak Rupees.

- 50 -
Annexure 4 – Pre-qualification Selection

Pre-Qualification of Operators
1. The degree of scrutiny of a new prospective field Operator will depend on its existing track-
record, both in Pakistan and elsewhere, and on their technical, management and financial
competence. The type of work to initially be undertaken (surface reconnaissance exploration,
wildcat exploration, appraisal, development, production, field end life management, etc.) will
also play an important role in the selection of technically suitable Operators.
2. To be appointed Operator, a company will need to demonstrate to DGPC that it understands its
technical obligations and responsibilities in the field of health, safety and environment (HSE) and
that it is competent, both financially and technically, to discharge these under its agreements with
its partners. The company will need to be able to demonstrate a sound management structure
staffed by an established group of suitably experienced personnel. A prospective Operator would
normally be expected to have a proven track record of success in the operatorship of comparable
projects elsewhere and have an approach compatible with GOP's objectives including securing
optimum economic recovery from each field.
3. It is necessary that Operators maintain sufficient in-house staff to clearly understand and
supervise the key exploration, reservoir and facilities management issues and to direct the overall
exploration or field development plan, as relevant to the acreage and licence type.
4. Operatorship experience in Pakistan and elsewhere in the world should be described.
Information Required For Operators Pre-Qualification
The list below represents the necessary information DGPC will require in order to process an
operatorship prequalification application.
1. Company name and contact details: the name, address and nationality of the applicant
including information as to the identity of the person who will serve as liaison with the Pakistani
authorities.
2. Company Registration: A copy of the charter or constitution of the applicant and information
concerning its place of incorporation, its principal place of business, its board of directors, the
domicile and nationality of board members, its share capital and shareholdings.
3. Company Structure: A management structure showing clear lines of responsibility and clear
processes for upstream operations is essential. DGPC will look for, as applicable to the acreage
and licence type, strong exploration experience and success and a strong reservoir management
team with considerable experience and the minimum of vacancies in key positions. The key
operations staff should be based in Pakistan.
4. Health, Safety and Environmental Management (HSE): It is essential that all operations
within Pakistan are carried out in a manner that conforms to current HSE legislation and
regulations. Companies seeking new operatorship in Pakistan, therefore, will need to demonstrate
that their HSE management systems are compatible with all national requirements.
5. Management System: The applicant should describe, as relevant, how it will manage in practice
an exploration, development or production operation, clearly describing the division of

- 51 -
responsibility between the company's own staff and sub-contractors, if the latter are to be
employed.
6. Worldwide Operating Experience: Companies without substantial operating experience within

Pakistan should demonstrate their operating experience overseas to indicate track record of
effective exploration and/or field management.
7. Companies with no Previous Operating Experience: Companies with no previous operating

experience will be subject to particular scrutiny dependent on the type of licence they are
applying for and will need to demonstrate that they have an agreement with an internationally
renowned E&P/ services company acceptable to DGPC or have a high calibre technical and
management team with proven track record of overseeing and managing operations in the
international petroleum industry.
8. Field Management Resources: When relevant, provide details of the technical resources available
to the prospective Operator. The applicant’s own capacity to analyse all technical and financial data
including the potential of a field should also be explained.
9. Training Policy: Well trained staff is considered essential for effective operatorship of a block in
Pakistan. In this regard, a brief description of the company’s training policy for appropriate
human resource development may be provided.
10. Reserves and Economics Calculation: The methodology adopted by the company for reserve
estimation and field economics should be outlined.
11. Additional information: Additional information may be sought by DGPC following the receipt
of application.

- 52 -
Pre-qualification evaluation
The applicant companies will be evaluated on the basis of pre-qualification benchmarks which are
indicated as follows:
Pre-qualification benchmarks
Category Pre qualification measures Minimum
Benchmark
Technical Capacity Number of Geologists employed with a minimum of 5 years ≥ 2.0
experience
Number of Geophysicist employed with a minimum of 5 years ≥ 2.0
experience
Number of Petroleum Engineers/ Petro-physicist employed with a ≥ 1.0
minimum of 5 years experience
Number of HSE professionals employed with a minimum of 5 years ≥ 1.0
experience
Proven reserves (mmboe) onshore & offshore ≥ 3.0 (**)
Production (mboe/d) onshore & offshore ≥ 0.5 (**)
Worldwide average annual exploration and development investment ≥USD 10mm*
over last three years
Wells drilled in past 5 yrs (includes wells drilled by operator when ≥ 2.0*
company is non operator)
Operational Capacity - Years as offshore Operator worldwide or as offshore non-operator in ≥ 3.0
Offshore Pakistan together with Onshore operatorship of at least 2 years
Operational Capacity – Years as onshore or offshore Operator worldwide ≥ 3.0
Onshore
Or years as onshore or offshore non-operator in Pakistan to qualify > 3.0
as onshore Operator
Legal capacity and Local legal existence confirmation(for local companies and IOCs Yes
compliance with residential with domestic branch)
requirements
International legal existence confirmation (for IOCs without a
domestic branch) Yes
Return on capital employed (ROCE) ≥ 12% (*)
Financial Capacity (Based
on Audited Financial Liquidity Position ≥ 1.0
Statements)
Debt : Equity (Benchmark is maximum value) Not more than 80:20
*this criteria does not apply for a new local entrant, he must instead satisfy criteria as outlined in
section 3.1.4
** this would not apply to new local entrants and their pre-qualification would be done in
accordance with section 3.1.4. However, for others these criteria may be relaxed provided the
company can demonstrate adequate high calibre management team with previous experience of
this level as identified under section 3.1.3
DGPC reserves the right to alter the benchmark figures where a special technical expertise is required
for development.
An applicant not meeting the above technical and operational criteria will be allowed to put forward
the details of technical services agreements with an E&P company/service company or a high calibre
technical and management team as required pursuant to sub paragraph 3.1.4(8) above in order to
satisfy the technical and operational pre-qualification requirements.

- 53 -
Annexure 5 – Concept of Work Units and Scoring Card

Gas Price Formula: Graph (for details of gas pricing see paragraph 11.2 above)
Gas Prices at minimum GPG (0.2)
5.00
4.50
Zone O Deep and Ultradeep
4.00 Zone O Shallow Water
Zone I
3.50 Zone II
US$/MMBTU
Zone III
3.00
2.50
2.00
1.50
1.00
0.50
0.00
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
Reference Crude Oil Price, US$/bbl
Gas Prices at maximum GPG (1.0)
5.50
5.00
4.50 Zone O Deep and Ultradeep

Zone O Shallow Water
4.00
Zone I
US$/MMBTU
Zone II
3.50
Zone III
3.00
2.50
2.00
1.50
1.00
0.50
0.00
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
Reference Crude Oil Price, US$/bbl

- 54 -
Work Units
1. A "Work Unit" is a unit of work for the purpose of measuring the compliance with the minimum
work obligation under an agreement. Work Units are defined in terms of kilometres of seismic or
numbers of exploration wells drilled.
2. A work unit equates to an approximate expenditure of USD 10,000 and the units defined for each
Zone and sub zone are considered generic averages for those Zones. The current value of USD
10,000 represents the 2007 base value for each work unit. The value will be updated at a rate to
be decided by the Government from time to time before any bidding round. The value of
USD10,000 (or future equivalent value) will be used where units have not been fulfilled to
calculate the WIOs/Contractors unfulfilled obligations.
3. For the purposes of calculating work units only, "Well Depth" shall mean the well depth
measured along the well bore from the seabed/ocean floor to the total depth for offshore wells;
and the well depth measured along the well bore from the rotary table to the total depth for
onshore wells. In case the well is a deepening of an existing well, the well depth is measured
from the deepest point in the existing well to the new total depth. In case a well is side-tracked,
the depth shall not include any depth drilled below the kick off point of the side track, but shall
include the redrilled part of the well from the kick off point to the total depth. In case a well is
horizontally drilled or deviated, the length of the horizontal/deviated segment well shall be added
to the vertical well depth.
Equivalency of Work Units for Zone O (Offshore)
Type of Work Equivalent Work Unit
1 line-kilometre of 2D seismic 0.3

(acquired, processed, interpreted & mapped)
1 square kilometre of 3D seismic 1.0

1 exploration well with a 1,000 metres 300

surface location in
shallow water (< 200m) 2,000 metres 550
grid area with the
following well depths:
3,000 metres 1,000
4,000 metres 1,800
5,000 metres 3,200
6,000 metres 5,800
7,000 metres 10,000

- 55 -
surface location in deep

2,000 metres 900
water (=> 200m & <
1,000m Water Depth)
grid area with the 3,000 metres 1,600
4,000 metres 2,800
5,000 metres 5,100
6,000 metres 9,200
7,000 metres or more 16,000

surface location in ultra
deep water area 2,000 metres 1,300
(=> 1000m) with the
3,000 metres 2,200
4,000 metres 3,600
5,000 metres 6,400
6,000 metres 12,000
7,000 metres or more 21,000
Equivalency of Work Units for Zone I and II



surface location in
onshore with the 2,000 metres 200
3,000 metres 400
4,000 metres 600

- 56 -
5,000 metres 1,000
6,000 metres 2,000
7,000 metres 3,000
Equivalency of Work Units for Zone III



surface location in
onshore with the 2,000 metres 80
3,000 metres 100
4,000 metres 200
5,000 metres 330
6,000 metres 600
7,000 metres 900

- 57 -
Prequalification example
The following is an example of the prequalification scoring system
Pre-qualification of Companies A through E

Category Pre qualification measures Comp. E
Minimum Comp. Comp. Comp.
Comp. D inc Tech
Benchmark A B C
Partner(s)
Technical Number of Geologists employed with a

≥ 2.0 4 20 0 0 3
Capacity minimum of 5 years experience
Number of Geophysicist employed with a
≥ 2.0 2 5 0 0 2
minimum of 5 years experience
Number of Petroleum Engineers/ Petro-
physicist employed with a minimum of 5 ≥ 1.0 2 10 0 0 1
years experience
Number of HSE professionals employed with
≥ 1.0 1 5 0 0 1
a minimum of 5 years experience
Proven reserves (mmboe) onshore & offshore ≥ 3.0 100 2300 0 0 5
Production (mboe/d) onshore & offshore ≥ 0.5 20 100 0 0 1
Worldwide average annual exploration and ≥USD
20 100 0 0 10
development investment over last three years 10mm
Wells drilled in past 5 yrs ≥ 2.0 2 10 0 0 20
Operational Years as offshore Operator worldwide or as
Capacity - offshore non-operator in Pakistan together ≥ 3.0 10 0 0 0 0
Offshore with Onshore operatorship of at least 2 years
Operational Years as onshore or offshore Operator
≥ 3.0 12 12 0 0 0
Capacity – worldwide Or
Onshore
years as onshore or offshore non-operator in
> 3.0 13 10 3 4 5
Pakistan to qualify as onshore Operator
Legal capacity Local legal existence confirmation(for local
Yes Yes Yes Yes Yes Yes
and compliance companies and IOCs with domestic branch)
with residential
requirements International legal existence confirmation (for
Yes Yes Yes No No No
IOCs without a domestic branch)
Financial Return on capital employed (ROCE) ≥ 12% 15 22 N/A 13 14
Capacity
(Based on Liquidity Position ≥ 1.0 2 5 2 1.5 1.1
Audited Debt : Equity (Benchmark is maximum value)
Financial Not more
60:40 20:80 75:25 60:40 75:25
Statements) than 80:20
Approved as No (As no
Onshore Yes Yes No technical Yes
Operator expertise)
Approved as
Onshore Yes Yes Yes Yes Yes
Non-Operator
Approved as
Offshore Yes No No No No
Operator
Approved as
Offshore Non- Yes Yes Yes Yes Yes
Operator

- 58 -
Bid Scoring Criteria
The following scoring system is used for each of the criteria which should be enclosed with each bid
document:
Gas Price Gradient Work Units

(GPG)
Zone or Sub Zone Min Max Min Max
Zone III 0.2 1 100 Highest Bid
Zone II & I 0.2 1 100 Highest Bid
Zone O Shallow Water 0.2 1 200 Highest Bid
Zone O Deep Water 0.2 1 200 Highest Bid
Zone O Ultra Deep Water 0.2 1 200 Highest Bid
Intermediate scores are prorated linearly between the maximum and minimum of ranges above.
Equivalency of Work Units mentioned in Annexure-5 may be updated on a yearly basis taking into
account of the Seismic and Rig rates prevalent at the start of the year. Similarly the Minimum Work
Units indicated above may also be revised by DGPC before Invitation to Bid according to the size
and prospectivity of the area.
If more than one bid achieves the highest marks and there is a draw, then the successful bidder will be
decided on the basis of bidder offering lower GPG. In such an event, if GPG offered by the bidders is
also same then:
a) within 15 days of bid opening date, such bidders will be asked to re-bid the GPG at
no more than the previous GPG and with the lower limit of GPG=0 and work
commitment of not less than previously offered.
b) The process will be repeated until there is a clear winner.

- 59 -
Balance Scorecard Example for Zone III
Zone III Balanced Score Card Sheet (published post award)
ONSHORE BLOCK ____________, ZONE _______ SCORECARD
Gradient of Work Units

Formula Bid Score Bid Score
Company A 1 1.00 Company A 1000 3.06
Company B 0.2 5.00 Company B 1015 3.09
Company C 0.4 4.00 Company C 1672 4.59
Company D 0.5 3.50 Company D 1850 5.00
Company E 0.00 Company E 0.00
Company F 0.00 Company F 0.00
Company G 0.00 Company G 0.00
Company H 0.00 Company H 0.00
Company I 0.00 Company I 0.00
Company J 0.00 Company J 0.00
Company K 0.00 Company K 0.00
Gradient (GPG) Work Unit

Min Max Min Max
0.2 1 100 1850 Enter Highest Score
Score Score
Max Min Min Max
5 1 1 5
GPG values outside of the GPG range does not count toward the companies score
Work
Price Commitment on
Formula Bid offered block
20% 80% Overall Percentage
Score
Gradient of
Formula Work Units
Company A 1 3.06 2.65 52.91%
Company B 5 3.09 3.47 69.46%
Company C 4 4.59 4.47 89.49%
Company D 3.5 5.00 4.70 94.00%
Company E 0 0.00 0.00 0.00%
Company F 0 0.00 0.00 0.00%
Company G 0 0.00 0.00 0.00%
Company H 0 0.00 0.00 0.00%
Company I 0 0.00 0.00 0.00%
Company J 0 0.00 0.00 0.00%
Company K 0 0.00 0.00 0.00%

- 60 -
Annexure 6 - Documentation for Block Award Process

CALL FOR NOMINATIONS OF ACREAGE TO BE CONSIDERED FOR GRANT OF
PETROLEUM EXPLORATION RIGHTS
Nominations are invited for open acreage to be considered for the grant of exclusive petroleum rights
in accordance with the provisions of the Petroleum Exploration & Production Policy, 2007 and
Onshore Pakistan Petroleum (Exploration and Production) Rules 2007/Pakistan Offshore Petroleum
(Exploration and Production) Rules, 2007.
2. Applicants are required to submit an application under a sealed cover to DGPC, presently
located at 1019, Pak Plaza, Fazal-e-Haq Road, Blue Area, Islamabad by ___________ (time)
____________ (date).
3. Applicants making nominations are advised that after the Call for Nominations and before the
Invitation to Bids, the requested areas will be subject to a review by DGPC.
4. A Call for Nomination or any submission made in response to this Call for Nominations does
not constitute or give rise to any obligation on the part of the company making the submission to
participate in the accompanying Invitation to Bid or on the part of DGPC to make Invitation to Bid in
respect of nominated block(s).
5. DGPC anticipates the issue of the accompanying Invitation to Bids to be on or around

______ (date).
Director General, Petroleum Concessions
Ph: +92-51-9204176
Fax: +92-51-9213245
Government of Pakistan
Ministry of Petroleum & Natural Resources
(Directorate General of Petroleum Concessions)
Invitation to Bid for Grant of Petroleum Exploration Rights (Date:----------)
Applications are invited for grant of Petroleum exploration rights (Exploration Licence) over the
following blocks: -
Block No.
Block No.
Block No.
2. Bid Documents can be obtained from the office of Directorate General Petroleum Concessions
(DGPC) 1019-A, Pak Plaza, Fazal-e-Haq Road, Blue Area, Islamabad on a written request and
payment of a non-refundable fee of US $ 100(or equivalent in Pak Rupees) in favour of DGPC
through a bank draft.

- 61 -
3. Sealed applications should be submitted by the interested exploration and production

companies to DGPC, 1019-A Pak Plaza Fazal-e-Haq Road, Blue Area, Islamabad, by ---- a.m. (PST)
on -----, 200-. Applications will be opened publicly by the Bid Opening Committee the same day at ---
- a.m. in DGPC office in the presence of the applicants or their representatives.
4. Bids submitted by all applicants will be considered as irrevocable and unconditional. In case
any applicant states otherwise, his bid will not be accepted and will be treated as “non-responsive”
5. The bidding process will be governed by and construed under laws of Pakistan and any
question or dispute regarding grant of a Petroleum Right or any matter or thing connected therewith
shall be resolved by arbitration in Pakistan and in accordance with Pakistan laws as per Rule 77 of
Pakistan Onshore Petroleum (Exploration and Production) Rules, 2007 (in case of onshore areas) and
Rule 81 of Pakistan Offshore Petroleum (Exploration and Production) Rules, 2007 (in case of
Offshore areas).
6. The successful applicant will be selected in accordance with the provisions of the Petroleum
Exploration and Production Policy 2007 and Pakistan Onshore Petroleum (Exploration and
Production) Rules, 2007/Pakistan Offshore Petroleum (Exploration and Production) Rules, 2007and
the Bid Documents. The successful applicant will be notified as soon as possible.
7. In the event, any of the bidder(s) attempts to influence the DGPC in any manner whatsoever,
it shall result in the disqualification of such bidder(s).
8. The applications of only those parties would be considered who have been pre-qualified at
least one month before the close of Invitation to Bid as specified in sub para 3 (4) of Policy 2007.
9. The Government reserves the right to exercise the powers to accept or reject any application.
In the event of refusal to grant such petroleum right, the Government shall as far as possible provide
the reasons thereof. The Government also reserves the right to cancel or annul the bidding process
without specifying any reason thereof.

Ph: +92-51-9204176
Fax: +92-51-9213245
CALL FOR PREQUALIFICATION OF OPERATORS AND NON-OPERATING

COMPANIES IN THE UPSTREAM PETROLEUM SECTOR
Applications for Prequalification are invited from the interested Companies to be considered for
participation in bidding rounds for grant of exclusive Petroleum Rights, in accordance with the
provisions of the Offshore and Onshore Pakistan Petroleum (Exploration and Production) Rules 2007
(incase of Offshore & Onshore area respectively), and the Petroleum Exploration & Production
Policy, 2007.
2. Applicants are required to submit a prequalification application under a sealed cover to

DGPC, presently located at 1019-A, Pak Plaza, Fazal-e-Haq Road, Blue Area, Islamabad in
accordance with the Petroleum Exploration & Production Policy, 2007 and Pakistan Onshore
Petroleum (Exploration and Production) Rules, 2007/Pakistan Offshore Petroleum (Exploration and
Production) Rules, 2007 before any companies can bid for any block licences or leases.

- 62 -
3. Applicants submitting prequalification applications are advised that the approval of any
prequalification categories; Onshore Operator, Onshore Non-Operator, Offshore Operator or
Offshore Non-Operator, are at the sole judgement of DGPC as to whether the company meets the
necessary minimum qualification criteria for each category.
4. A Call for Prequalification or any submission made in response to this Call for
Prequalification does not constitute or give rise to any obligation on the part of the DGPC to grant
any petroleum licence or lease.
5. Prequalification forms and minimum criteria can be down loaded from Ministry of Petroleum
and Natural Resources website or obtained from DGPC.
Ph: +92-51-9204176
Fax: +92-51-9213245

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Ministry of Petroleum & Natural Resources

Petroleum Exploration & Production Policy 2007

1.1 Background -1-

1.2 Previous Policies -1-

1.3 Policy Objectives -2-

1.4 Requirements of Policy -2-

1.5 Outline of Pakistan’s 2007 E&P Policy -3-

1.6 Promoting Involvement of Pakistani Companies in the Country’s Upstream

Section I – Licensing Process -4-

2 Map of Licensing Zones -4-

3. Pre-qualification of Applicants -5-

3.1 Basis for Pre-qualification of Applicants -5-

3.2 Direct Negotiation with Strategic Partners -8-

4. Licensing System -9-

4.1. Types of Exploration and Production Rights -9-

4.2. Procedure for the Granting of E&P Rights - 10 -

4.3 Formal Bid Assessment - 13 -

4.4 Post Award Process - 14 -

Section II – Exploration and Production Regimes - 15 -

5 Onshore Petroleum Concession Agreement (PCA) - 15 -

5.1 Royalty, Income Tax and Windfall Levy - 15 -

5.2 Block System - 19 -

5.4 Non Fulfilment of Work Obligations - 20 -

6. Offshore Production Sharing Agreement (PSA) - 21 -

6.1 Royalties, Corporate Tax and Windfall Levy - 21 -

Petroleum Exploration & Production Policy 2007

6.3 Direct Government Participation - 22 -

6.4 Production Sharing - 22 -

6.5. Cost Limit - 23 -

6.6 Profit Oil and Profit Gas Splits - 23 -

6.7 Production Bonuses - 24 -

6.8 Import Duties and Taxes - 24 -

6.9 Marine Research and Coastal Area Development Fee - 24 -

6.10 Local Employment, Training and Social Welfare Contributions - 25 -

6.11 Exploration Period - 25 -

6.12 Extended Well Testing - 25 -

6.13 Retention Period - 26 -

6.14 Total Lease Term - 26 -

6.15 Five Year Lease Term Renewal - 26 -

6.16 Policy for Grant of Lease after Expiry of Lease Term - 27 -

6.17 Block System - 27 -

6.19 Non Fulfilment of Work Obligations - 27 -

Section III - Regulatory Process & Obligations - 28 -

7.2 Application Fees - 28 -

7.4 Confidentiality of Data and Records - 29 -

7.5 Performance Guarantees - 29 -

9 Assignment or Transfer of Interest - 31 -

10 Domestic Supply Obligation & Gas Allocation - 31 -

Petroleum Exploration & Production Policy 2007

10.1 Domestic Supply Obligation - 31 -

10.2 Remittance of Proceeds Abroad - 31 -

10.3 Delivery Point and Field Gate for Natural Gas - 31 -

10.4 Sale of Natural Gas within Pakistan - 32 -

10.5 Pipeline Construction and Operation - 32 -

Section IV – Pricing and Incentives for Petroleum Exploration & Production - 35 -

11 Oil and Gas Pricing - 35 -

11.2 Gas Pricing - 35 -

11.3 Associated Gas Pricing - 38 -