There Is No Single “Petroleum Act” That Tells the Whole Story

A foreign company approaching Pakistan’s upstream petroleum sector for the first time can be forgiven for expecting to find one comprehensive Petroleum Act from which the principal rights, fiscal obligations, licensing procedures and operational rules can be derived.

Pakistan does not work that way.

The legal position instead emerges from a hierarchy of constitutional provisions, primary legislation, statutory rules, Government petroleum policies, individual petroleum rights, Petroleum Concession Agreements (“PCAs”) or Production Sharing Agreements (“PSAs”), Joint Operating Agreements (“JOAs”), supplemental agreements, Government notifications and generally applicable Pakistani laws.

That distinction is fundamental.

A multinational may correctly identify the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013 as the present principal onshore E&P rules and still reach the wrong conclusion about a particular field because that asset derives from an older concession whose contractual and fiscal rights were preserved.

It may correctly identify the Petroleum Exploration and Production Policy 2012, as amended, and nevertheless overlook that a qualifying tight-gas discovery is subject to the specialist Tight Gas (Exploration and Production) Policy 2024.

It may purchase shares in a company rather than directly acquire a petroleum right and nevertheless encounter a regulatory consent requirement because the transaction alters effective control.

It may sign a farm-out agreement which is perfectly valid as between seller and buyer but incapable of achieving the intended regulatory transfer until DGPC approval has been obtained.

And it may discover a petroleum agreement drafted decades ago whose governing fiscal package bears little resemblance to the terms currently advertised for new acreage.

The first task in Pakistan petroleum law is therefore not to identify the newest regulation. It is to identify the legal generation of the particular petroleum right.

That proposition was central to the earlier practitioner work on which this series is based. The original treatment separately examined the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act 1948, the 1949 and 1986 petroleum rules, successive model agreements and then-emerging regulatory developments.

More than two decades later, that method has become even more important.

You may also want to read  “Pakistan’s Oil & Gas Sector in 2026: A Foreign Investor’s Guide” which is the introductory page of this series

Pakistan’s Oil & Gas Sector : Legal, Regulatory, Investment and Compliance Guide for Foreign Companies

The Legal Hierarchy at a Glance

For a foreign investor, the Pakistani upstream regime can usefully be visualised as follows:

A competent legal review works through these layers in order, rather than selecting whichever instrument happens to appear most recent.

The Constitutional Foundation: Article 172

The constitutional treatment of petroleum is now indispensable to understanding Pakistan’s upstream regime.

The Eighteenth Constitutional Amendment, enacted in 2010, materially altered Article 172. Article 172(3) now provides that, subject to existing commitments and obligations, mineral oil and natural gas within a Province or the territorial waters adjacent to it vest jointly and equally in that Province and the Federal Government. The Amendment also changed Article 172(2) so that lands, minerals and other things of value within the continental shelf or underlying the ocean beyond Pakistan’s territorial waters vest in the Federal Government.

For petroleum transactions, the words “subject to the existing commitments and obligations” matter almost as much as the new federal-provincial ownership arrangement.

They recognise that constitutional restructuring did not simply erase pre-existing petroleum commitments.

This is another reason why an historic PCA, licence, lease or Government agreement should never be dismissed merely because it predates the Eighteenth Amendment.

Article 172(3) also explains why modern petroleum arrangements contain much more visible provincial participation than older concession structures. The Petroleum Policy 2012 itself was designed around a reorganised DGPC comprising federal and provincial representation, and modern policy arrangements expressly contemplate Provincial Holding Companies and provincial economic interests.

Yet constitutional ownership does not mean that each Province independently operates a completely separate upstream licensing system.

The principal upstream regulatory machinery continues to operate through the Federal Ministry of Energy (Petroleum Division) and the Directorate General of Petroleum Concessions.

That distinction between resource ownership, regulatory administration and contractual participation must remain clear.

The Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act, 1948

Despite its age, the Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act, 1948 remains the statutory foundation of Pakistan’s upstream petroleum regime.

A foreign lawyer opening the Act for the first time may be surprised by its brevity. Its significance is not measured by page count.

Section 2 gives the “appropriate Government” power to make rules dealing with matters including applications for and renewal of exploration or prospecting licences and mining leases; the conditions governing grants and renewals; refusal and revocation; royalties, rents and taxes; refining; control of production, storage and distribution; petroleum pricing; and ancillary matters.

Those powers are broad enough to sustain the detailed modern regulatory architecture developed under successive petroleum rules.

Section 3A is particularly important for offshore and production-sharing arrangements. It authorises the President to enter into an agreement with a company, whether incorporated in Pakistan or outside Pakistan, for the grant of a licence or lease to explore, prospect and mine petroleum on a production-sharing basis.

Section 3B addresses concessions available to petroleum exploration companies and is accompanied by a statutory Schedule containing protections and fiscal provisions relevant to petroleum arrangements.

Section 4 gives rules and orders made under the Act overriding effect where inconsistent with other enactments or instruments, subject of course to the constitutional hierarchy and later applicable law.

Section 5 provides an exemption power.

Section 6 defines the “appropriate Government”, in relation to oilfields, gas fields, mineral oil and gas, as the Federal Government.

The latter provision now has to be read intelligently alongside Article 172(3) and the post-Eighteenth-Amendment institutional arrangements rather than in constitutional isolation.

For foreign transaction counsel, the principal lesson is that the 1948 Act has not become a historical curiosity. Modern onshore and offshore petroleum rules expressly derive their authority from it.

The Pakistan Offshore Petroleum (Exploration and Production) Rules, 2023, for example, were made under powers conferred by the 1948 Act together with section 14 of the Territorial Waters and Maritime Zones Act 1976.

The Evolution of Pakistan’s Petroleum Rules

Pakistan’s regulatory framework has evolved through several generations.

The Petroleum Division presently maintains official access to petroleum E&P rules dating from 1949, 1986, 2001 and 2009, together with the modern 2013 onshore rules and the 2023 offshore rules.

That archive has considerable practical importance.

The fact that a set of rules has been superseded for future awards does not necessarily mean it has ceased to matter to every petroleum interest originally created under it.

An existing licence, lease, mining lease, PCA, supplemental agreement or conversion instrument may preserve aspects of an older legal regime.

This creates what might be described as regulatory stratigraphy.

A petroleum lawyer must read down through the historical layers until the legal foundation of the asset has been established.

A company acquiring a producing field should therefore request:

the original petroleum right;

the original PCA;

every renewal;

every lease;

every supplemental agreement;

every assignment approval;

every policy conversion agreement;

every material DGPC approval;

the current JOA;

the development plan and amendments;

and material Government correspondence affecting the continuing validity or economics of the right.

A due-diligence report that merely states “the Pakistan Onshore Petroleum Rules 2013 apply” without asking how the asset arrived in 2013 is potentially incomplete.

The Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013

For present-day onshore petroleum operations, the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013 constitute a central regulatory instrument.

The Rules apply to Pakistan’s onshore areas and regulate petroleum rights, except coal-bed methane. They define the “Authority” as DGPC or another officer or authority appointed by the Federal Government to exercise DGPC’s powers and functions.

The Rules regulate far more than licence applications.

They address matters including:

petroleum-right applications;

qualification;

operatorship;

assignments;

surrender;

reconnaissance;

exploration;

work obligations;

relinquishment;

appraisal;

early commercial production;

commercial discovery;

development and production;

leases;

rentals and royalties;

national-market deliveries;

measurement;

records and reports;

petroleum data;

inspections;

drilling;

conservation;

flaring;

local goods and services;

employment and training;

unitisation;

default;

revocation;

closing-down obligations;

indemnities;

force majeure; and

arbitration.

The consolidated official text also records amendments made since 2013, including significant amendments in 2020, 2023 and 2024.

This is why a transaction lawyer should use the current consolidated Rules, not an unamended copy downloaded from an old data room.

DGPC: The Central Upstream Regulatory Authority

The Directorate General of Petroleum Concessions is the principal regulatory authority for upstream E&P activity.

The Petroleum Division describes DGPC as responsible for granting petroleum rights including Reconnaissance Permits, Exploration Licences and Development and Production Leases; facilitating E&P activities; analysing petroleum fiscal regimes; negotiating with local and foreign petroleum companies; negotiating PCAs and PSAs; managing exploration, development and production activities; and ensuring Government revenues including royalty, rent and related receipts.

For a foreign investor this means that DGPC involvement does not end when acreage is awarded.

Regulatory contact continues throughout the petroleum lifecycle.

DGPC approval can become relevant to operatorship, work programmes, extensions, relinquishment, appraisal, development plans, commerciality, drilling, production, transfers, field operations and eventual abandonment.

A petroleum right is therefore a regulated relationship, not merely a Government-issued property certificate.

Petroleum Policy 2012 — Still Central, but Now Amended

Pakistan’s Petroleum Exploration and Production Policy 2012 continues to form the principal policy architecture for conventional E&P, but it should now be read in its amended form.

The Petroleum Division currently publishes the “Pakistan Exploration & Production Policy 2012 (Amended)” together with the original policy and subsequent specialist policies.

The amended Policy states that its purpose is to establish policies, procedures, tax and pricing arrangements for Pakistan’s upstream petroleum sector. Its stated objectives include accelerating E&P activity, encouraging foreign investment, promoting Pakistani company participation, increasing exploration in frontier areas, enhancing indigenous production and creating a transparent and non-discriminatory licensing regime administered by DGPC.

The Policy maintains two principal contractual architectures:

onshore operations — Petroleum Concession Agreement;

offshore operations — Production Sharing Agreement.

This distinction is among the most important structural features of Pakistan’s contemporary upstream system.

Policy Is Not the Same Thing as Statute

Foreign investors sometimes refer to “Petroleum Policy 2012” as though it were itself the complete source of petroleum law.

That is not correct.

A policy describes the Government’s investment, fiscal, pricing and licensing framework. Statutory authority arises through the Constitution, legislation and properly promulgated rules.

The actual rights of an E&P company then crystallise through the specific petroleum right and the PCA or PSA executed with the Governmental counterparties.

Consequently, three documents can legitimately say different things because they perform different legal functions.

The Act creates legislative authority.

The Rules regulate petroleum rights.

The Policy describes the commercial and policy package.

The licence or lease grants a specific statutory right.

The PCA or PSA creates contractual rights and liabilities.

The JOA allocates rights and obligations between co-venturers.

A supplemental agreement may subsequently alter the package.

The correct legal answer frequently requires reading all of them together.

Pakistan’s Principal Petroleum Rights

The amended Petroleum Policy describes four principal categories within its licensing system.

For onshore operations, the three most important are the Reconnaissance Permit, Petroleum Exploration Licence and Development and Production Lease. The Policy also separately addresses offshore exploration licences under the PSA system.

Reconnaissance Permit

A Reconnaissance Permit provides a non-exclusive right to undertake geological, geochemical and geophysical activity and other permitted reconnaissance operations.

Under the 2013 Rules, the Authority may grant such a permit on conditions it determines. The grant does not entitle the permit holder automatically to an Exploration Licence over the same acreage. The permit generally has a one-year term and may be renewed for up to another year.

That distinction matters commercially.

A company conducting reconnaissance does not possess an option over the acreage merely because it has invested in acquiring or interpreting data.

The petroleum right must therefore be characterised accurately in representations to investors and financiers.

Petroleum Exploration Licence

An Exploration Licence is fundamentally different.

The 2013 Rules provide that DGPC may grant an exclusive exploration licence over an area, subject to the prescribed and additional conditions. The licence holder has the exclusive right to undertake reconnaissance and exploration activities, including drilling, but may not simply commence unrestricted commercial extraction by virtue of the exploration licence alone.

The initial exploration term may not exceed five years, divided into:

Phase I — three years; and

Phase II — two years.

Entry into Phase II requires the prescribed work commitment, including a firm exploration well or equivalent work units.

The Rules permit up to two further renewals, each of up to one year, subject to satisfaction of the applicable work and other obligations.

The licence also carries progressive relinquishment obligations.

The current Rules provide for relinquishment generally of:

30 per cent of the original licence area at the end of Phase I;

20 per cent of the remaining area at the end of Phase II; and

10 per cent of the remaining area on or before commencement of the second renewal,

subject to the Rules and available retention mechanisms.

From an investment perspective, this means acreage is not static.

A buyer reviewing a licence should ask not only how large the original block was, but what acreage remains after historic relinquishments and what relinquishment obligations are approaching.

Work Commitments Are Legal Obligations, Not Aspirational Exploration Budgets

The minimum work programme sits at the heart of the exploration system.

The Policy’s competitive bidding regime evaluates bids principally through committed Work Units, and the Model PCA converts those commitments into enforceable obligations.

The current Model PCA provides for an initial five-year term divided into the same three-year and two-year phases and requires minimum work commitments. It also contains compensation consequences for undischarged Work Units and provisions requiring bank or parent-company guarantees.

This is important in farm-in transactions.

An incoming company does not merely acquire upside.

It can also acquire an economic share in undischarged work commitments.

A farm-in agreement should therefore identify precisely:

which work commitments have been satisfied;

which remain outstanding;

the estimated cost of satisfying them;

the status of any performance guarantee;

whether substitute work has been approved;

what happens if a well is not drilled;

and which party bears liability for historic non-performance.

A percentage working interest without a work-obligation schedule tells only half the story.

Appraisal, Commerciality and Early Production

Discovery does not automatically create a producing lease.

The regulatory lifecycle moves through appraisal and commerciality.

The modern Rules also permit mechanisms such as early commercial production in appropriate circumstances before the formal grant of the Development and Production Lease, subject to DGPC approval and payment of applicable production bonuses, royalties and other lease-equivalent obligations.

The Rules additionally allow a significant gas discovery in specified zones to receive a retention period where infrastructure or an adequate commercial market does not yet exist.

Those provisions illustrate an important commercial principle.

A technically successful well and a legally commercial field are not the same thing.

A foreign investor evaluating a discovery should ascertain:

whether the discovery has been formally notified;

whether appraisal obligations have been discharged;

whether commerciality has been declared;

whether the declaration has been accepted or processed appropriately;

whether a development plan has been submitted and approved;

whether early production has been authorised;

and whether an application for a lease is pending.

Regulatory status should be verified from documentary evidence rather than inferred from investor presentations.

Development and Production Lease

A Development and Production Lease is the statutory right through which commercial development and production proceed.

The 2013 Rules provide for the grant of a lease following satisfaction of licence obligations and the applicable commerciality and development-plan requirements.

The present Rule 34 allows a lease for the period supported by the relevant technical information, subject to a maximum initial period of 25 years. If initially granted for less than 25 years, it may be extended for the remaining period where commercial production continues.

The petroleum framework has also continued to evolve in relation to mature fields. Amendments reflected in the consolidated Rules now address renewal or re-grant after expiry and the circumstances in which production may continue while a field remains commercially viable.

This is particularly relevant to acquisitions of older producing assets.

The remaining legal life of the lease may be as important to valuation as remaining reserves.

An investor should therefore model:

remaining lease term;

available renewal or re-grant rights;

conditions attached to continuation;

Government payments triggered by extension;

remaining recoverable reserves;

decommissioning liability; and

whether field economics survive the fiscal terms applicable to the extended period.

Competitive Bidding Is the Normal Route for New Acreage

The Petroleum Policy provides three principal routes for E&P rights:

competitive bidding for onshore and offshore blocks;

non-competitive awards in specified Government-to-Government strategic-partner situations; and

direct negotiation for non-exclusive reconnaissance rights.

For ordinary new acreage, competitive bidding is therefore the principal model.

DGPC issues invitations to bid, and the Policy presently contemplates bid evaluation principally through offered Work Units. It also requires use of the standard model PCA or PSA forming part of the bidding package.

This has an important consequence for overseas bidders.

The invitation to bid is not merely a marketing document.

It forms part of the legal architecture of the eventual award.

The bidder should therefore have Pakistani counsel review:

the invitation;

the applicable Rules;

the Petroleum Policy;

the model agreement;

work-unit commitments;

participating interests;

bid guarantees;

security requirements;

qualification representations;

corporate structure;

local participation;

and the proposed operator.

Negotiating “commercial points” only after selection may be too late because the Policy expressly limits modification of the model and bid terms following the award.

Qualification of Foreign Companies

The current Policy expressly contemplates foreign participation.

Foreign companies not presently operating in Pakistan but with petroleum concession experience elsewhere may acquire petroleum rights subject to demonstrating the necessary technical and financial capacity.

Applicants must provide corporate, ownership, capital, financial and technical information.

The Policy further states that within 90 days after award to a qualified company, the successful company must either become incorporated in Pakistan or obtain permission to operate through a registered foreign-company branch.

This is an important sequencing point.

The petroleum qualification and corporate-entry workstreams should be coordinated.

Whether a foreign participant should use a Pakistani subsidiary or registered branch requires assessment of much more than incorporation convenience. Taxation, petroleum participation, liability, financing, employment, repatriation and future divestment should all be considered.

The Onshore Petroleum Concession Agreement

For new onshore acreage, the PCA is the principal Government contract sitting alongside the Exploration Licence and any subsequent lease.

The Petroleum Division presently publishes the Model Petroleum Concession Agreement 2013, amended January 2024.

The Model PCA is comprehensive.

Its parties may include:

the President of the Islamic Republic of Pakistan;

the foreign E&P company;

a Pakistani E&P company;

Government Holdings (Private) Limited where applicable; and

the relevant Provincial Holding Company where applicable.

The Agreement addresses matters extending well beyond licence duration.

These include:

working-interest ownership;

operatorship;

work programmes;

guarantees;

appraisal;

commerciality;

development;

production;

joint operations;

Government participation;

measurement;

royalty;

pricing;

local employment;

training;

procurement;

data;

accounting;

audit;

insurance;

indemnities;

assignments;

force majeure;

and dispute resolution.

A sophisticated foreign investor should therefore regard the PCA as one of the principal constitutional documents of the project.

Local Working Interest and Provincial Participation

Modern Pakistani petroleum policy deliberately promotes domestic participation.

The current Model PCA defines the required minimum local working-interest threshold as:

15% in Zone I and Zone I(F);

20% in Zone II; and

25% in Zone III

where a Pakistani E&P company participates in a joint venture with foreign companies.

The Petroleum Policy also contains mechanisms involving GHPL and Provincial Government Holding Companies and provides, in specified circumstances, first rights to make up deficiencies in required Pakistani participation. It additionally provides for a 2.5% working interest for GHPL on full participation basis and a 2.5% carried working interest for the Provincial Government Holding Company during the exploration phase, subject to the applicable arrangements.

These provisions affect transaction economics.

Foreign bidders should therefore distinguish between:

gross block interest;

foreign investor working interest;

local participant interest;

GHPL interest;

PHC interest;

carried interest; and

cost-bearing interest at each stage.

A percentage quoted casually in a term sheet can be highly misleading without that breakdown.

Operatorship Requires Regulatory Approval

The operator is not simply whichever joint-venture participant happens to own the largest percentage.

The 2013 Rules provide that co-holders appoint an operator with the approval of the Authority and that operatorship cannot be changed without prior regulatory approval.

The Model PCA similarly provides that the nominated operator acts subject to the JOA and that no change of operatorship occurs without DGPC consent.

This makes technical capability a legal as well as commercial issue.

A proposed buyer seeking operatorship should therefore confirm whether it independently satisfies DGPC’s technical, managerial and financial qualification expectations.

Purchasing a controlling economic interest does not automatically guarantee operatorship.

Assignment of Petroleum Rights Requires Prior Approval

Rule 9 of the Onshore Rules is direct: a petroleum right or any working interest in it may not be assigned without previous written approval of the Authority.

The assignment application must provide information on the proposed assignee comparable to that required from an applicant for the petroleum right itself.

A farm-out therefore has two dimensions.

There is a private transaction between assignor and assignee.

And there is the public-law question whether DGPC will recognise the proposed transferee as a petroleum-right holder.

A well-drafted farm-out agreement must bridge those two dimensions through appropriate conditions precedent, cooperation obligations, long-stop arrangements and risk allocation.

Indirect Change of Control Can Also Matter

Foreign investors should be particularly careful about indirect acquisitions.

The Onshore Rules include regulatory consequences where, without prior Authority consent, a disposition of the share capital of the petroleum-right holder or its parent causes the person previously exercising effective control to cease having that control.

This means the regulatory question does not disappear merely because the licence-holding subsidiary itself remains unchanged.

A global merger, private-equity acquisition, intra-group reorganisation or parent-level sale can potentially require Pakistan petroleum analysis.

International transaction counsel should therefore include Pakistani petroleum rights in the change-of-control schedule at the beginning of the transaction, not shortly before closing.

Offshore Petroleum: A Separate PSA Architecture

Offshore petroleum operations now operate under the Pakistan Offshore Petroleum (Exploration and Production) Rules, 2023.

Those Rules apply to Pakistan’s offshore areas and define the production-sharing agreement as an agreement between the President, GHPL and the contractor for offshore petroleum exploration, development and production.

The Petroleum Policy likewise distinguishes the offshore regime from onshore concessions and provides that offshore operations proceed through a PSA architecture.

This distinction should be respected.

A lawyer experienced in a Pakistani onshore PCA should not assume that an offshore PSA merely changes the title page.

The fiscal structure, Government/contractor relationship, production sharing, cost allocation, marine operations and offshore regulatory obligations require their own analysis.

Our dedicated offshore petroleum page in this series will address those issues separately.

Tight Gas Policy 2024: A Specialist Regime Capable of Altering the General Position

One of the clearest examples of why petroleum law cannot be understood through one general agreement is the Tight Gas (Exploration and Production) Policy 2024.

The Policy was notified through S.R.O. 191(I)/2024 following approval by the Council of Common Interests.

It was developed after the Government concluded that the earlier 2011 tight-gas regime had not attracted the desired investment.

The 2024 Policy applies to qualifying tight-gas discoveries under existing and future Exploration Licences, PCAs, Development and Production Leases and Mining Leases, including specified undeveloped existing discoveries.

Most significantly from a legal-structuring perspective, the Policy states that where its general tight-gas terms conflict with an existing PCA, Oil Mining Lease or Development and Production Lease, the 2024 Tight Gas Policy prevails in relation to Tight Gas, while other operator rights continue under the underlying petroleum documents. It also contemplates execution of a supplemental agreement to obtain the incentives.

That is precisely the kind of regulatory overlay that must be identified in due diligence.

Marginal Fields and Other Specialist Regimes

Pakistan also operates specialist arrangements for resources that may be technically discovered but economically difficult to develop under ordinary contractual terms.

The Marginal Field Guidelines 2013, for example, were designed to accelerate development of discovered marginal reservoirs, encourage redevelopment and infield drilling, attract investment into uneconomic discoveries and increase domestic production.

The Petroleum Division additionally maintains policy materials concerning Low BTU gas and other specialist upstream matters.

A foreign investor should therefore ask whether the target reservoir is:

conventional;

tight gas;

low-BTU gas;

marginal;

an older producing field;

a field under enhanced-recovery development; or

otherwise subject to a specialised incentive package.

Reservoir classification can have legal and pricing consequences.

Legacy Rights and “Frozen” Contractual Regimes

This is perhaps the most important concept for investors acquiring existing petroleum assets.

Pakistan has repeatedly introduced new Petroleum Policies without simply extinguishing contractual rights under earlier concessions.

The amended Petroleum Policy itself records that, when earlier petroleum policies were superseded, existing rights granted under licences, PCAs and PSAs were not affected.

The 1948 Act’s statutory Schedule also contains protection against later inconsistent rule or tax changes to the extent specified there and subject to the actual agreement and applicable legislation.

This creates a recurring transaction question:

Has the field remained under its original fiscal and contractual package, or has it subsequently elected or agreed to convert into a newer regime?

The Petroleum Division continues to publish model supplemental arrangements dealing with conversion of older petroleum concessions to the Petroleum Policy 2012 package. Its 2024 downloads also include model supplemental arrangements dealing with Rule 35, Zone I(F) and conversion matters.

Accordingly, the asset file should be searched for every supplemental agreement and policy-election notice.

A petroleum field can have a long legal biography.

Valuing it without reading that biography is hazardous.

Data Belongs to the Government Under the Rules

Technical petroleum information presents another unusual legal feature.

Rule 50 of the Onshore Rules provides that data obtained by the petroleum-right holder—including well logs, maps, magnetic tapes, cores, samples and geological and geophysical information—is property of the Federal Government and must be submitted to the Authority.

The Rules also impose extensive record-keeping and reporting requirements.

Original records are generally to remain in Pakistan unless otherwise approved; annual, quarterly, daily drilling and occasional reports are prescribed.

This has direct M&A implications.

A seller may possess physical or electronic copies of technical data but not necessarily unrestricted proprietary rights to disclose, sublicense or export it.

A data-room protocol should therefore identify:

Government-owned data;

proprietary interpretation;

licensed seismic material;

third-party contractor data;

export restrictions;

confidentiality provisions;

and permitted post-closing use.

Technical due diligence and legal data-rights diligence should be coordinated.

Local Goods, Services, Employment and Training

The petroleum regime contains domestic-capacity obligations.

The Onshore Rules require preference for Pakistani goods and services where competitive as to relevant commercial criteria and require qualified local producers to be included in tendering.

They also require preference for Pakistani nationals in employment and training and impose requirements concerning local unskilled labour in areas of operation.

These obligations should be incorporated into:

procurement policies;

contractor onboarding;

HR planning;

annual compliance reporting;

tender documentation;

and acquisition diligence.

They are not merely aspirational statements of local-content policy.

National-Market Deliveries and Government Control of Production

Upstream investors should also be aware that petroleum production is not treated as an entirely unrestricted private commodity.

Rule 43 permits the Federal Government to require lease holders to deliver petroleum for national-market requirements in accordance with the applicable arrangements, with obligations applied as far as practicable on a pro rata basis among producing lease holders. Pricing is determined in accordance with the relevant agreement.

The economic consequences must therefore be assessed through the relevant PCA, sales arrangements and pricing regime.

An investor should not assume that a discovery can simply be exported at whichever international price produces the highest return.

Revocation and Default Risk

Petroleum rights are capable of being revoked.

The Rules address defaults ranging from work-programme failure and non-payment to insolvency, unauthorised control changes and operational failures.

For a Development and Production Lease, Rule 45 provides, among other matters, for possible revocation where regular commercial production has not commenced within five years of the grant or where production has ceased for more than 90 days without prior written approval, subject to force majeure and applicable exceptions.

This is important in distressed-asset acquisitions.

A company may believe it is purchasing a valuable “licence” when the actual asset is already in regulatory default.

Due diligence should therefore review not simply the formal expiry date but all circumstances capable of triggering suspension, revocation or Government remedies.

Closing Down and Decommissioning Obligations

The end of a petroleum project is also regulated.

Upon termination, surrender or expiry, the Rules contain provisions concerning restoration, installations, equipment and orderly closing down.

A lease holder must submit a closing-down and abandonment plan in advance of termination, and the Government may have rights in relation to installations and equipment or require their removal at the holder’s expense.

Decommissioning is therefore a present valuation issue, not merely a future operational matter.

For mature fields the buyer should quantify abandonment exposure before agreeing price.

Petroleum Compliance Is a Lifecycle, Not an Application Form

For foreign companies, the regulatory lifecycle can be summarised as follows:

This is why sophisticated foreign operators increasingly use local counsel on a continuing regulatory basis rather than engaging counsel only when litigation occurs.

A Foreign Investor’s Petroleum Title Checklist

Before acquiring a Pakistani upstream interest, international counsel should ordinarily ask for at least the following:

1. Original award documentation

Invitation to bid, bid submission, award letter and qualification documents.

2. Petroleum right

Reconnaissance Permit, Exploration Licence, Development and Production Lease or Mining Lease.

3. PCA or PSA

Complete executed version, not merely the public model.

4. Supplemental agreements

Every amendment, conversion, extension, pricing agreement and policy-election instrument.

5. Assignment history

All historic farm-outs, assignments and DGPC approvals.

6. Ownership history

Current and historic working-interest schedule.

7. Operatorship

Operator appointment and DGPC approval.

8. JOA

Current Joint Operating Agreement and accounting procedure.

9. Work programme

Committed and completed Work Units, wells and seismic obligations.

10. Guarantees

Parent-company guarantees, bank guarantees and releases.

11. Relinquishment history

Maps and approvals confirming acreage surrendered and retained.

12. Discovery documentation

Discovery notice and appraisal programme.

13. Commerciality

Declaration of Commerciality and regulatory correspondence.

14. Development

Field Development Plan and amendments.

15. Production

Production profile, measurement approvals and material operational notices.

16. Fiscal

Royalty, rental, production bonus, training, social-welfare and other payment records.

17. Data

Technical data ownership and disclosure rights.

18. Environmental and HSE

Approvals, incidents, flaring, waste and environmental liabilities.

19. Litigation and regulatory notices

Defaults, show-cause notices, disputes, claims and outstanding inspections.

20. End-of-life obligations

Abandonment plan, restoration obligations and decommissioning estimates.

If these documents cannot be produced, that fact itself belongs in the due-diligence report.

Why the Executed PCA or PSA Matters More Than the Model

Public model agreements are excellent starting points.

They are not substitutes for the executed agreement.

The current Model PCA has been amended and reflects present policy architecture, but an older petroleum right may have been negotiated under a different model and later supplemented selectively rather than entirely replaced.

An investor should therefore compare:

the executed PCA against the model applicable when it was signed;

the PCA against subsequent supplemental agreements;

the petroleum right against the PCA;

the current Rules against the historic Rules; and

the current transaction against all consent restrictions.

This comparative exercise often reveals rights or obligations that cannot be discovered from the current Petroleum Division website alone.

The Most Dangerous Phrase in Petroleum Due Diligence: “Current Law Applies”

Sometimes it does.

Sometimes only partially.

Sometimes a newer public-law regulation applies while an older contractual fiscal entitlement remains protected.

Sometimes the operator has voluntarily converted into a later Policy.

Sometimes a specialist 2024 policy applies only to one reservoir within a field otherwise governed by an older PCA.

Sometimes a new corporate-law requirement applies to the licence holder even though the petroleum economics remain frozen under an older concession.

The phrase “current law applies” is therefore too imprecise for serious petroleum work.

A better formulation is:

Which current laws apply to the company and its operations, and which historical petroleum rights or contractual terms continue to govern the economic and proprietary characteristics of the particular asset?

That is the question local counsel should answer.

Foreign Counsel Should Build the Pakistan Regulatory Workstream Early

A typical cross-border acquisition may involve:

international transaction counsel;

reserve engineers;

tax advisers;

environmental consultants;

financial advisers;

sanctions counsel;

insurance specialists; and

Pakistan local counsel.

Local counsel should not be brought in merely to produce a two-page “good standing” opinion shortly before completion.

Pakistan regulatory findings can affect the structure of the SPA itself.

They may determine:

• whether the deal should be structured as a share sale or asset transfer;
• which Government approvals are conditions precedent;
• whether operatorship can transfer;
• what warranties are needed;
• how historic work obligations are allocated;
• whether a parent-company guarantee must be replaced;
• how long the long-stop date should be;
• what happens if DGPC approval is conditional;
• whether a policy-conversion right is transferable;
• whether local-participation percentages change;
• and what decommissioning indemnity the seller should provide.
• In other words, local law is capable of changing the economics of the global deal.

Practical Red Flags for Foreign E&P Investors

The following should trigger enhanced review:

• A licence approaching expiry with no clear extension strategy.
• A field operating under a PCA that nobody in the seller’s team appears able to locate in executed form.
• A working-interest schedule inconsistent with DGPC records.
• Historic assignments for which regulatory approval cannot be produced.
• A parent-company restructuring that occurred without considering effective-control consent.
• An operator different from the operator identified in the latest regulatory approval.
• Outstanding work commitments.
• Performance guarantees that remain unreleased.
• A development plan materially different from actual operations.
• Production from formations not clearly covered by the lease.
• Unresolved environmental or land-access disputes.
• Substantial flaring without clear approvals.
• Technical data supplied to bidders without analysis of Government ownership or confidentiality.
• Statements that the asset has “converted to Petroleum Policy 2012” without a supplemental agreement.
• Tight-gas economics modelled under the 2024 Policy without evidence of qualification, certification and required supplemental documentation.
• A mature lease approaching expiry whose continuing fiscal terms have not been modelled.
• A term sheet describing a “50% interest” without explaining local, GHPL or PHC participation.
• A foreign buyer assuming operatorship will transfer automatically because it has acquired control.
• None necessarily makes the transaction impossible.
• Each deserves investigation before value is committed.

How Josh and Mak International Assists Foreign E&P Companies and International Counsel

Josh and Mak International can assist foreign petroleum companies at every stage of the upstream regulatory lifecycle.

For new entrants, our work may include regulatory mapping, corporate-entry advice, bid review, qualification documentation, consortium structuring, review of model PCAs or PSAs and identification of federal and provincial compliance requirements.

For acquisitions and farm-ins, we can undertake petroleum-title due diligence, trace the legal history of the concession, review assignments and control changes, examine licence and lease validity, identify outstanding work obligations, review operatorship and JOA arrangements and prepare Pakistan-law conditions precedent and regulatory provisions for transaction documents.

For operating companies, we can advise on DGPC approvals, regulatory correspondence, licence extensions, development and production matters, farm-outs, restructuring, contractual interpretation, local-content obligations, Government-facing compliance and disputes.

For international law firms, we can operate as discrete Pakistan local counsel while lead transaction counsel retains control of the broader cross-border matter.

The objective is not to duplicate an international legal team.

It is to answer the Pakistan questions that cannot safely be answered from London, Dubai, Singapore, Houston or Beijing without understanding both the current regulatory framework and the legal history of the specific concession.

Frequently Asked Questions

What is the principal petroleum law of Pakistan?

The statutory foundation is the Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act, 1948. It operates together with the Constitution, petroleum rules, policies, petroleum rights and contractual arrangements.

What rules govern onshore petroleum exploration?

The principal current rules are the Pakistan Onshore Petroleum (Exploration and Production) Rules, 2013, in their amended form.

What rules govern offshore petroleum exploration?

The current offshore framework includes the Pakistan Offshore Petroleum (Exploration and Production) Rules, 2023.

What is Pakistan’s current principal E&P policy?

The Petroleum Division presently publishes the Petroleum Exploration and Production Policy 2012 in amended form. Significant amendments were made in 2024.

Does Pakistan use concession agreements or production-sharing agreements?

Both. The Policy provides for PCAs for onshore operations and PSAs for offshore operations.

Can foreign companies acquire petroleum rights?

Yes. The Policy expressly contemplates foreign applicants subject to financial, technical, legal and regulatory qualification requirements.

Can a foreign company operate directly from overseas?

The Policy contemplates that, following award, the qualified company must within the prescribed period either incorporate in Pakistan or obtain permission to operate through a registered foreign-company branch. The appropriate structure requires separate corporate and tax analysis.

Is an Exploration Licence the same as a Development and Production Lease?

No. An Exploration Licence grants exclusive exploration rights subject to the Rules. Commercial development and production require the applicable lease process and satisfaction of commerciality and development requirements.

How long does an onshore Exploration Licence last?

The initial term may be up to five years, divided into Phase I of three years and Phase II of two years, with two potential one-year renewals subject to the Rules and work obligations.

How long can a Development and Production Lease last?

The Rules provide for an initial period not exceeding 25 years, with further continuation mechanisms subject to the applicable conditions.

Can a petroleum interest be transferred without Government approval?

No. A petroleum right or working interest may not be assigned without prior written approval of the Authority.

Can a share acquisition trigger petroleum regulatory issues?

Yes. The Rules address changes in effective control resulting from dispositions of share capital of the petroleum-right holder or its parent.

Does the latest Petroleum Policy automatically replace old concession terms?

Not necessarily. Existing rights under earlier licences and petroleum agreements may remain protected, and specific conversion or supplemental arrangements must be reviewed.

Does the Tight Gas Policy 2024 apply to older fields?

It can apply to qualifying existing and future discoveries within the scope defined by the Policy. The Policy also provides specific rules regarding its interaction with existing PCAs and leases.

Who owns petroleum data generated by an operator?

Under the Onshore Rules, specified geological, geophysical, well, core and related petroleum data obtained by a petroleum-right holder is property of the Federal Government, subject to the detailed regulatory regime.

Who is the upstream regulator?

The Directorate General of Petroleum Concessions is Pakistan’s principal upstream E&P regulator.

About Barrister Aemen Maluka and This Oil & Gas Law Series

This series has an unusual foundation.

Barrister Aemen Maluka was involved in advising foreign companies on and developing an extensive practitioner treatment of Pakistan’s upstream petroleum laws long before online legal commentary on the sector became commonplace. The original research did not simply reproduce petroleum legislation. It followed the evolution of Pakistan’s concession system, the history of individual operators and petroleum fields, joint-venture structures, model agreements, fiscal obligations, foreign-exchange issues, operational regulation, land access, environmental requirements, arbitration and the practical mechanics of entering and leaving Pakistan’s upstream industry.

Her extensive experience now provides the historical backbone for this completely revised series. Barrister Aemen’s particular strength in this field is therefore the ability to approach Pakistani oil and gas law as a continuum rather than a collection of isolated regulations: to understand where a petroleum right came from, what legal generation governs it, what has changed around it, and what that means for the foreign company trying to invest in, finance, operate, acquire or exit it today.

For foreign companies and international law firms, that historical depth has a very practical purpose. Petroleum transactions are expensive places in which to discover that the governing agreement was misunderstood.

Instructing Josh and Mak International as Pakistan Petroleum Counsel

A foreign company considering Pakistani acreage does not necessarily require a large local legal team from day one.

It does, however, benefit from obtaining the correct Pakistan-law analysis before committing itself commercially.

Josh and Mak International can be instructed for a discrete preliminary regulatory review, comprehensive petroleum-right due diligence, bid or consortium advice, farm-in or acquisition support, a Pakistan-law transaction workstream, continuing regulatory counsel or a formal legal opinion.

Foreign law firms may retain the firm specifically to address Pakistan petroleum, corporate, regulatory, foreign-exchange and compliance questions while maintaining the international client relationship and transaction lead.

Where a proposed instruction concerns a specific block, field, licence, lease or petroleum company, an initial review is considerably more useful if accompanied by the available licence, PCA or PSA, JOA, working-interest schedule and material DGPC correspondence.

That permits the advice to move from general Pakistani petroleum law to the considerably more valuable question:

What law governs this particular petroleum asset, what approvals does the contemplated transaction require, and what risks should be addressed before the client commits capital?

Legal and Regulatory Update Note

This article reflects publicly available Pakistani petroleum legislation, rules, policies and official regulatory material reviewed up to 18 September 2026.

Petroleum rights are highly document-specific. Historic concessions, policy conversions, amendments, supplemental agreements, Government approvals, individual licence terms and transaction-specific facts may materially alter the position described in this general guide.

Foreign companies should therefore obtain advice based upon the actual petroleum-right documents before relying upon a general description of Pakistan’s current regime.

Josh and Mak International advises foreign E&P companies, investors, service companies and international law firms requiring Pakistan local counsel in upstream petroleum, energy regulation, petroleum transactions and associated compliance matters.

© Josh and Mak International. All rights reserved.

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