Govt of KP brings energy security wonders for Pakistan

[Mirza Ghalib]

Govt of KP brings energy security wonders for Pakistan
18.6.2015

PESHAWAR: In just two years, the PTI Government in Khyber Pakhtunkhwa has done what the ANP/JUI or MMA Governments could not do in 10 years and other provincial governments have yet to take a start while Government of Khyber Pakhtunkhwa is far ahead. The Government of Khyber Pakhtunkhwa under the leadership of Pervez Khattak and corporate wizard Asad Umar established a public sector oil and gas Exploration & Production company to exploit the underground hidden black gold for the energy security of Pakistan.

The Government of Khyber Pakhtunkhwa is investing bullishly in oil and gas and bring more and more indigenous oil, gas and LPG not only to fuel its once fragile economy but also that of fuel guzzler and hungry Punjab. A 24 inch gas pipeline is being built from Kohat to Rai Jagir in the heartland of Punjab to carry newly successful wellheads.

Some 50,000 barrels per day (bpd) of crude oil daily worth Rs 30 crore is also being transported from Khyber Pakhtunkhwa to Punjab for refining every day. Two years ago crude oil production was less than 30,000 bpd thus a whopping 66% increase in 2 years. The annual foreign exchange saving increased by Rs 45 Billion under depressed oil prices scenario.

Had oil prices been around $100/barrel the saving would have been doubled. Gas production has increased to 400 million cubic feet per day. It seems to be untrue, but due to PTI catalyst chemistry the LPG (cylinder gas - the most costly fraction of a barrel of oil) production has gone up from meagre 10 tons per day to 470 tons per day thus easing pressure on balance of payment and keeping prices low. LPG is mostly used by the poor who don't have the luxury of gas.

Had the Federal not paid politics the LPG production would have increased to 600 TPD; but then that is our politics.

It is evident as daylight that there is no gas shedding in Khyber Pakhtunkhwa, all praise by the masses for PTI Government even by hard core PPP stalwarts. CNG stations are open 24/7 and gas is supplied to commercial and industrial sectors 24/7 a good reason to set up industries in Khyber Pakhtunkhwa.

Government of Khyber Pakhtunkhwa allowed transportation of more than 100 million cubic feet of gas per day to Punjab, a generous gesture enough to fuel the main industrial hubs of Punjab. Had not the Government of Khyber Pakhtunkhwa under the Chief Minister Pervez Khattak taken deep pains to ensure that production of oil and gas is on ever increasing trend the country would not only have lost much more precious foreign exchange on import of expensive oil but also the petrol pump prices would have been higher and gas bills even higher.

PTI developed systems to attract international and national investors, including Exploration & Production and service companies to work on fast track basis on oil, gas and LPG production and work over. The men behind all this are none less than Chairman Imran Khan, CM Pervez Khattak, Minister Atif Khan and Asad Umar MNA.

PTI has proven that merit and political non-interference can bring wonders even in the much shameful public sector; a lesson for the Federal Government and other provinces.

PTI established an oil and gas Exploration & Production company in the public sector, namely KPOGCL Khyber Pakhtunkhwa Oil and Gas Company Ltd. and installed an independent Board of Directors comprising professionals; thus achieved success in a very short time. Not only the Government of Khyber Pakhtunkhwa higher ups are fully supportive but even at the level of DC/DPO there is red carpet reception for oil and gas Exploration & Production companies.

Employees of Oil and gas Exploration & Production and service companies admit that corruption has vanished from Khyber Pakhtunkhwa, previously and in other provinces government officers, especially the Civil Administration, MNA/MPA/Senators and area notable would ask for money before allowing them to move in to explore for oil/gas but that is not the case in Khyber Pakhtunkhwa - a real change indeed.

KPOGCL, a Provincial Holding Government Company working under Energy and Power Department, Government of Khyber Pakhtunkhwa is operating on fast track basis as a one window operational facility in order to accelerate Exploration and Production activities in Khyber Pakhtunkhwa and results are coming out.

It also worth mentioning here that the PTI Government approved whopping Equity investment of Rs 7 billion into KPOGCL for next three years, which shows their commitment and dedication for the sustainable energy security of Pakistan. In the coming financial year FY 2015-16, the Government of Khyber Pakhtunkhwa will invest Rs. 1.42 Billion as Equity in KPOGCL, a landmark in the country's history.

The entire credit goes to the sitting PTI Government to rejuvenate the Exploration blocks that were dormant since last 10 years like Marwat, Kohat, Latambar, Gurgalot, Wali, Neshpa West, Bannu West and Tal West to became active for Exploration and Production activities. New petroleum blocks, such as Paharpur, Tirah, Orakzai, Peshawar East, Karak North, Baratai and Pezu are new geological frontiers.

Lakki petroleum concession block appears under the name of KPOGLC in Director General Petroleum Concession Pakistan Petroleum Information System PPIS map, a history in the making. Thus, Government of Khyber Pakhtunkhwa has well placed itself for joint venture with international and national companies. It is learnt that KPOGCL is carving 4 more blocks for exploration.

National and Multinational Companies initiated Seismic Acquisition and Drilling activities in number of Exploration blocks as a result of personal interest of CM and Chairman PTI. The Number of Drilling Rigs have increased 8 compared to just 1 two years ago and two robust seismic crews of 600 professionals each have landed in Khyber Pakhtunkhwa, which is a testimony of PTI success in the corporate systems.

Government of Khyber Pakhtunkhwa is negotiating to buy into producing fields to bring value addition to the famous Tal block. It is also buying a state of the art drilling rig and seismic recorder. KUFPEC, the international subsidiary of Kuwait Petroleum Company signed the Petroleum Concession Agreement PCA two months ago, a big catch from all dimensions.

Young unemployed Geologists, Geophysicts and Engineers of Pakistan are being employed on merit basis to take charge of oil and gas Exploration & Production. Unprecedented training of youngsters is one great effort by the Government of Khyber Pakhtunkhwa.

http://statesman.com.pk/index.php?pa...type=newspaper

[Mirza Ghalib]

KP wins, with a caveat

Khurram Husain, Dawn, 18.5.2015


OF all the provincial budgets announced thus far, the one from Khyber Pakhtunkhwa is the boldest and most forward-looking. For Sindh and Punjab, it is business as usual in spite of a change in finance minister in both provinces. But the PTI government in KP province is doing something the others have been unable to do in seven years: they are betting one third of their total expenditures on the local governments.

Here is what the numbers look like. Under the general public service head, which includes the cost of maintaining and running the provincial government, expenditures have been increased by 142pc. Last year, the provincial government budgeted Rs79 billion under this head but actually spent Rs70bn. This year the allocation is a massive Rs177bn. About Rs100bn of this is for transfers to the local government.

Additionally, in the annual development plan, there is an allocation of Rs18bn for local government capacity building. Then there is an additional district development plan allocation of Rs30bn, to be distributed amongst local government office holders to devise their own development plans.

This adds up to Rs148bn out of total budget outlay of Rs487bn that will be devolved to local governments next year.

This is a revolutionary step, and at a time when Sindh and Punjab have both presented very routine budgets, with their business-as-usual large allocations for mega projects and ‘social protection’ schemes in Sindh, KP stands out as the only provincial government taking a large risk and betting on the devolution of power to local levels as the way to bring about change. If this bet pays off, and there is perceptible material improvement in the quality of service delivery, the pay-off can be huge for the PTI in the next polls.

But there is one big problem that stands in the way: the revenue plan to back up this massive bet inspires little confidence. The budget sees expenditures hiked by Rs83bn, or 20pc, from last year. But most of the additional revenue is coming from areas that are experimental revenue lines or from sources that have been historically unreliable.

Here are some numbers from the revenue side. The largest source of revenue for the province, as with all provinces, is what they call the federal tax assignment, or funds transferred from the federal government under the NFC award. These total Rs260bn, where last year’s budget estimates were Rs227bn.
KP has taken a revolutionary step at a time when Sindh and Punjab have both presented very routine budgets.

But beyond the federal transfers, the province’s own revenue increases are largely coming from three heads. One is what they call Net Hydel Profit (NHP), which is money supposed to be paid to the KP government from the profits made from the generation of hydroelectric power from powerhouses located within the province. Last year, they budgeted Rs12bn from this head and actually received Rs9.4bn. This year they’re budgeting Rs17bn.

But the largest component of NHP is arrears. Under an old deal, dating back to the 1990s and revisited in 2005, the province is supposed to get arrears on all hydroelectric power generated from its waters from the early 1990s onwards.

Last year, they were claiming Rs32bn as arrears and next year these have risen to Rs52bn. Historically, the provincial government has had a very difficult time actually getting the federal government to release these funds, and last year they received nothing under this head.

The reason the provincial government is optimistic about receiving this amount this year is that as of April a draft agreement was reached with the federal government that resolved some outstanding issues regarding NHP payments. Once the draft agreement is vetted by the law ministry, they’re hoping payments will resume.

Looking at the other revenue heads reveals something interesting. Provincial taxes are just under 42pc of total provincial revenues, which come in at Rs54bn. The rest is non-tax revenue where the bulk of the incremental revenue from next year is supposed to come from.

Non-tax revenues have been budgeted to triple next year, going from Rs10bn in the last budget to Rs31bn this year. By comparison tax revenues are going up by 16pc. So where is the massive increase in non-tax revenue going to come from?

Two heads account for almost the entire increase in provincial own revenues, and they are unusual ones. One is forestry, which was budgeted to yield a paltry Rs770 million last year, but is budgeted to yield just under Rs8bn next year. That’s a 10-fold increase in one year! Second is housing, which was budgeted to yield no revenue last year, but is now expected to yield Rs14bn. These two heads alone explain the entire hike in non-tax revenue.

So what’s happening in forestry and housing to make them such massive cash cows for next year? Apparently, there is a public private partnership programme of sorts with land developers to develop Peshawar model city and one other project in which government land will be used by private sector developers to build housing schemes. In forestry, they are expecting the additional revenues from the felling of dead trees, what they call ‘dry windfall’, as well as levying penalties on illegal timber felling. Both of these revenue heads have question marks hanging over them.

Most other revenue heads are showing marginal changes. Little effort is being made to develop direct taxes as a source of provincial revenue, with most tax increases coming from the provincial GST, a trend shared by all the other provinces.

Nevertheless, the PTI government has announced a budget that is a radical departure from business as usual because it carries the process of devolution of power to its logical end. In doing so, it has credibly embarked on a transformative programme that its rival parties in Sindh and Punjab have only talked about, but not delivered despite being in power for seven years now. One wishes them all the best in this bold new venture they have started.

The writer is a member of staff.

khurram.husain@gmail.com