We demand Onwership not royality of Oil and Gas Resources of Sindh

by Khalid Hashmani, McLean, Virginia

It is encouraging that various stakeholders in Sindh’s welfare have begun converging on strategies and broader goals that will alleviate poverty from Sindh. I understand that some members in the National/Federal  Assembly have moved a set of constitutional amendments in the Assembly to eliminate the concurrent list and restore provincial autonomy as envisioned in the 1940 Resolution.

The report that follows this message was forwarded by ishaksoomro@ yahoo.com, describes a great example of this convergence and recognition that the people of Sindh will only succeed if they are united. The failure will remain a possibility if the stakeholders in Sindh’s welfare remain divided.

I hope this movement towards the convergence of unified view on the welfare of Sindh will pickup more speed and result in some tangible and positive achievements to enable Sindh to catch up to the progress that Punjab has achieved using the resources of Sindh.

The following e-mail was forwarded by ishaksoomro@ yahoo.com

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We demand Onwership not royality of Oil and Gas Resources of Sindh

I attended a Conference today here in Karachi, organized by Participatory Development Initiative (PDI) a Karachi based NGO on “Oil and Gas Exploration in Sindh: Issues in Royalty, Production Bonus and Corporate Social Responsibility” .

The Program was very informative; a good number of civil society activists, media organizations, politicians and experts attended the program.

Among the prominent speakers were:

Mr. Nisar Khuhro, Speaker Sindh Assembly
Syed Sardar Ahmad, Parliamentary leader of MQM
Jam Madad Ali, Leader of Opposition in Sindh Assembly
Syed Jala Mahmood Shah, chairman Sindh United Party (SUP)
Advocate Abdul Khaliq Junejo, Chairman Jeay Sindh Mahaz
Taj Haider, Former Senator PPP
Dr. Sikandar Mendhro, Member of Sindh Assembly (PPP)
Naseer Memon, expert and technocrate
Zulfiqar Halepoto, Writer & Policy Advisor to TRDP
Ishaq Soomro, Program Officer PDI

The Program had two sessions, one was technical session in which experts presented their papers on oil and gas production in Sindh and associated problems of royalty, Bonus and job for local community.

In Second session, politicians spoke on the matter and presented their party position on these issues.

The Following were important points that I noted:

1. Sindh is largest producer of oil and gas in country, currently Sindh is producing 71% of gas and 56% of oil.

2. Country may face shortage of gas by year 2015.

3. Sindh is contributing gas to country since last 30 years.

4. First gas reserves were discovered in Balochistan in early 1950s. of all the gas produced from Balochistan, the province itself consumes less than 6% for commercial and household usage, while only 1% is consumed for industrial production.

5. At present Balochistan produces 22% of gas in country.

6. Sindh consumes 45% of the gas it produces while Punjab consumes 930% of gas it produces.

7. Though Sindh produce 56% of oil production but it has 76% of known oil reserves.

8. Speakers highlighted the fact Gas and Oil Companies have violated agreements with Pakistani government.

9. The Conference passed three resolutions unanimously:

i. Sindh Provincial Assembly should pass a resolution calling on Federal Government to Recognize Ownership rights of provinces on natural resources of oil and gas.

ii. Provincial Government should establish “Sindh Oil and Gas Development Corporation” to take control of production and distribution of oil and gas.

iii. 50% of the royalty income should be given to district which produces the oil and gas (Note Sindh receives above Rs 32 billion in as 12.5% royalty on oil and gas) If 50% of this amount (that would be RS 16 billion) is given to four districts from where oil and gas is produced which includes Badin, Khairpur, Dadu and Ghotki, these districts can provide free education and health to local population).
10. Other recommendations called upon Central and provincial government to establish “Training Institute” for students of the province to produce skilled and trained human power for these two sectors of oil and Gas.

11. One of the speakers Taj Haider (former Senator of PPP) called for establishing “Provincial Power Generation and Distribution Authority”, MQM and opposition leader Jam Madad supported his idea.

12. Taj Haider also pleaded before the audience that “MNCs should be banned in country; we should develop our capacities to utilize our own resources.

13. Abdul Khaliq Junejo of Jeay Sindh Quami Mahaz said that 1973 constitution does not give equal rights to provinces; he also said resolutions of Sindh Assembly are not respected by federal government, while the same assembly passed resolution in favour of Pakistan in 1947 with simple majority, country was created.
About PDI: It is small NGO headed by Sikandar Brohi, a renowned journalist/writer and expert on development issues. PDI has small group of young people who run it, a group not exceeding 10 people, they have their office in Gizri Karachi, but with their commitment and expertise have made difference in the way Political parties in Sindh see the issue of oil and gas, they have successfully lobbied for this issue and made Sindh Assembly to pass a unanimous resolution calling upon MNC-Oil Companies to implement Corporate Social Responsibility, ensure hiring local people in the jobs.

For further detail, please read Mr. Naseer Memon’s research article in Dawn
http://www.dawn. com/2009/01/05/ebr12.htm

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Sharing oil and gas resources
By Naseer Memon

The opposition to privatisation of the Qadirpur Gas field has rejuvenated the debate for ownership of natural resources, especially of oil and gas. The question of ownership of these resources has been at the centre of discourses in the province-federation relationship in Sindh and Balochistan.

Civil society and political parties in both provinces have been complaining of unfair treatment and the issue has provoked a civil war in Balochistan. Sentiments in Sindh are equally severe.

Statistics on oil and gas sector reveal the genesis of the conflict. According to the Pakistan Energy Year Book 2007, published by the Ministry of Petroleum and Natural Resources, Sindh’s share in the total national oil production stood at 56 per cent during 2006-07(table 1) In the same period, Sindh produced 71 per cent of the total national gas output. (table 2)

These tables highlight that Sindh is the largest oil producing province, followed by Punjab; Sindh is the largest gas producing province followed by Balochistan. and Sindh and Balochistan together with almost 94 per cent of the national gas production constitute the country’s energy basket.

However, Sindh and Balochistan consume only a small portion of their production and much of the gas produced by them is consumed in Punjab. According to official statistics, Sindh consumed only 46 per cent of its production whereas Balochistan consumed just 25 per cent of its output.

Punjab utilised a staggering 930 per cent against its production in the national output of gas. Higher consumption of energy is considered as a major indicator of higher level of development. Table 3 provides revealing details of consumption pattern of gas.

In case of Sindh consumption details are not provided in the document, which is again concentrated mostly in urban and peri-urban centers. A larger part of rural Sindh which produces this wealth of resources, is far behind in development indicators. This raises a major policy issue.

The federal government controls the oil and gas fields located in the provinces and doles out 12.5 per cent royalty to provinces based on the well head price. The amount becomes a part of provincial income.

There is no policy to ensure that the oil and gas producing talukas/districts get a certain part from that royalty. That’s why oil and gas producing talukas/districts of Sindh and Balochistan are marked conspicuous by poor indicators of human development. Major oil and gas producing areas of Sindh such as Badin, Nara in Khairpur, Ghotki, Sehwan and Thano Bola Khan in Jamshoro and Johi in Dadu are mostly under developed and communities surrounding the oil and gas fields live in the primitive age.

This situation is evident from the Millennium Development Goals Report 2005 issued by the government. It shows the ranking of three major oil and gas producing districts of Sindh against key development indicators (table 4).

The areas contributing a wealth of oil and gas resources do not receive their due share in the fruits of development. A responsible state has to make sure that all citizens receive their justified share in the fruits of development.

Local employment is a matter of serious concern. Oil and gas fields are mostly located in remote and underdeveloped areas like the desert belt in the east and hilly tracks in the west of Sindh. Oil and gas companies have their head offices in big cities like Islamabad and Karachi where Sindhi or Balochi speaking staff hardly makes a small fraction of their human resource.

Field staff is mostly low paid labour. The oil and gas companies often say that they do not find qualified and experienced people from rural Sindh and Balochistan even though the provinces have reputed universities and technical colleges producing a sizeable number of professionals with required qualification.

It is an obligation of the companies to invest in development of local human resources, to enable them to compete for mid-level and senior positions in the companies. Some of the companies have made some appreciable investments in human resource, but on a very limited scale.

In mid-90s, oil concession agreements made it obligatory for companies to invest in community development in and around the concession areas. The amount spent makes a small fraction of the hefty profits from the concession areas. However, only a few companies manage this portfolio professionally. National companies, especially have a poor track record on this account. Discretionary corporate funds are mostly spent on advertisements, gala dinners, sports events and other such entertainment activities.

These funds can also be utilised for development of local communities. Production Bonus is another provision for community development which is never utilised. According to the petroleum policy, the oil and gas companies have to pay an amount of $500,000 as Production Bonus to the federal government. This fund is meant for social welfare of the communities in and around the concession areas. Companies claim that they have been paying this amount to the federal government but the same has never been invested in the development of local communities.

Environmental violations are another common concern. The communities living around the oil and gas producing fields often complain that the companies’ operations pollute their natural resources and cause severe damage to the ambient environment. Some of the companies are operating in environmentally sensitive areas where environmental examinations and impact assessment are a legal requirement. However poor regulatory systems and non-professional consultants leave enough space for companies to temper with environmental obligations. Local communities have to pay the price of poor governance.

The present energy crisis calls for a better governance of oil and gas sectors and judicious sharing of profits accruing from the oil and gas resources among its stakeholders, primarily with the people of the area where these resources are located. Unless all benefits are shared judiciously, the sources of conflict over the right on natural resources will not go away.

2 thoughts on “We demand Onwership not royality of Oil and Gas Resources of Sindh”

  1. Oil and Natural Gas Corporation Ltd., once again, has been entrusted to organize the 9th International Oil & Gas Conference and Exhibition, PETROTECH-2010 under the aegis of Ministry of Petroleum & Natural Gas, Govt. of India. PETROTECH 2010 has been scheduled to be held in New Delhi during October 31 thru’ November 3, 2010. The theme of the conference is ‘Global Energy Equilibrium’.

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