Legal and regulatory position reviewed to 20 September 2026

Pakistan’s Petroleum Policy Is Where Geology Meets Contract

A petroleum prospect may begin with geology, but a petroleum investment begins with legal terms.

For a foreign exploration and production company considering Pakistan, the commercially significant question is not simply whether an unexplored block contains hydrocarbons. It is whether the legal and fiscal package permits the company to assume the geological risk on terms capable of producing an acceptable return if exploration succeeds.

That is the function Pakistan’s petroleum policies have progressively attempted to perform.

Pakistan’s policy framework determines, among other matters, how acreage is offered, the prospectivity zones into which onshore territory is classified, how bids are evaluated, what minimum work is expected, what participation by Pakistani entities is required, what fiscal and pricing regime applies, how the State and Provinces participate, and which model contractual instrument will govern the successful bidder.

The Petroleum Concession Agreement then takes much of that policy architecture and converts it into detailed contractual obligations.

For that reason, Petroleum Policy, bidding terms and the Model PCA should be read together before a foreign company submits a bid.

They should not be studied sequentially after an acreage award.

This is particularly important because Pakistan’s current Policy provides that the post-award PCA or PSA is to be concluded on the model agreement made available at the time of the invitation to bid, and that neither the model agreement nor the bid terms are to be modified during preparation of the execution copies.

The time for identifying an unacceptable contractual provision is therefore before the bid is submitted, not after the company wins.

The Historical Importance of Pakistan’s Petroleum Policies

Pakistan did not begin with the modern system of competitive acreage awards, Work Units and largely standardised model agreements.

The earlier concession regime was substantially more negotiated.

The original practitioner research underlying this series records that the Government issued its first Model Oil Concession Agreement in 1969, followed by Model Petroleum Concession Agreements in 1982 and 1987. Those models provided a starting point, but negotiations could remain lengthy because the documents were not yet functioning as the tightly standardised bid instruments seen today.

The same source records an important turning point in 1988, when the Government offered 43 exploration blocks in what it describes as Pakistan’s first bid round. Twenty-four bids were received for 12 blocks and nine PCAs ultimately followed.

The later development of formal petroleum policies gradually transformed this process.

The Petroleum Division’s own current policy materials confirm the succession of Government E&P policies beginning in 1991, followed by policies in 1993, 1994, 1997, 2001, 2007, 2009 and 2012. Importantly, official policy documents also confirm that superseding a policy did not, as a general rule, extinguish petroleum rights already granted under earlier licences, PCAs or PSAs.

That preservation of historic rights is one of the defining characteristics of Pakistani upstream legal due diligence.

The Evolution of Pakistan’s Petroleum Policy Regime

The progression can usefully be understood as follows.

The Government’s own 2009 and 2012 policy documents broadly confirm this historical progression, including the transition in 1997 toward offshore production sharing, the introduction in 2001 of new Rules together with model agreements, and subsequent policy revisions driven by changing market conditions.

The 1991 Policy: Pakistan Moves Towards an Express Investment Framework

The original text records the 1991 Petroleum Policy as Pakistan’s first formal petroleum-policy document, issued in connection with the Government’s International Petroleum Seminar held in Islamabad in November 1991. A revised Model PCA accompanied that policy and another bidding round followed.

The significance of this stage was institutional rather than merely textual.

Pakistan was moving away from a system in which the petroleum bargain was heavily dependent upon long-form bilateral negotiation and towards one in which Government would state in advance the principal investment package it was prepared to offer.

The 1991 Policy was subsequently revised in 1992.

That development laid the conceptual foundation for the much more structured licensing system foreign investors encounter today.

The 1993 and 1994 Policies: The Economic Package Becomes Central

A further policy was issued in 1993, followed by what the original practitioner work regarded as the more significant 1994 Petroleum Policy.

The 1994 framework introduced a zonal system based upon geological prospectivity and associated economic risk. The original research identifies three onshore zones and records that different economic terms were offered depending upon the perceived geological and cost profile of the acreage.

That basic concept survives today.

The detailed map and economic terms have evolved, but the central philosophy remains recognisable: acreage that is considered more difficult, frontier or commercially challenging may justify different economic treatment from acreage in a more mature producing basin.

For foreign companies, this demonstrates that a Pakistani petroleum block cannot sensibly be valued without first identifying its licensing zone.

Two blocks with similar gross acreage may operate under materially different economics.

The 1997 Policy: The Offshore PSA Concept Emerges

The 1997 Petroleum Policy represented another important transition.

The original book records that the Policy retained much of the earlier onshore zonal structure but introduced Zone 0 for offshore acreage, with a production-sharing package intended to stimulate offshore exploration.

The Government’s later Policy documents confirm the same broad history: the 1997 Policy preserved much of the 1994 onshore framework while introducing a new offshore package based upon production sharing and giving certain existing offshore licence holders the option of converting concession arrangements into PSAs.

The 1997 generation is significant because it marks the point at which Pakistan’s modern distinction between onshore concession arrangements and offshore production-sharing arrangements becomes clearly visible.

That distinction is now fundamental.

The 2001, 2007 and 2009 Policies

The 1997 regime was followed by Petroleum Policy 2001.

The Government’s current historical account records that the 2001 Policy came together with Petroleum (Exploration and Production) Rules 2001, a Model Offshore PSA and a Model Onshore PCA. A revised offshore PSA followed in 2003 together with the Offshore E&P Rules 2003.

The 2007 Policy represented another recalibration of investment terms.

It was followed by the 2009 Petroleum Policy, which expressly stated that changing international market conditions and the need to attract technology and investment required further revision of the fiscal framework. The 2009 document itself identifies the sequence of previous policies and emphasises preservation of rights arising under earlier agreements.

These policy generations remain highly relevant in 2026 because existing Pakistani fields and discoveries may derive from them.

A foreign buyer should never assume that “Petroleum Policy 2012” appears in the governing documents simply because the transaction occurs in 2026.

Petroleum Exploration & Production Policy 2012

The Petroleum Exploration and Production Policy 2012, in its amended form, remains Pakistan’s principal conventional upstream policy framework.

The Petroleum Division currently publishes the amended 2012 Policy alongside the earlier petroleum policies, the 2024 Tight Gas Policy and the current Model PCA.

The 2012 Policy explains that its purpose includes accelerating exploration and production, attracting foreign investment and technology, expanding indigenous resource development, promoting participation by Pakistani companies and creating a transparent licensing regime.

For foreign entrants, however, its most important feature is practical: it tells the investor how new petroleum rights are awarded and what economic package will ultimately be reflected in the petroleum agreement.

Onshore Licensing Zones

The amended Policy divides onshore Pakistan into licensing zones.

The current framework identifies:

The amended Policy provides enhanced gas-pricing treatment for Zone I(F), linked to the Offshore Zone O shallow-water pricing methodology while otherwise retaining the Zone I onshore package.

The 2024 amendment also expressly provides a supplemental-agreement mechanism for application of the Zone I(F) package to eligible blocks with effect from 29 January 2024.

For a foreign bidder, the zone affects much more than geographical description.

It can influence price assumptions, required local participation, project economics and investment modelling.

How Petroleum Rights Are Awarded Under the Current Policy

The Petroleum Policy contemplates three broad routes for granting upstream rights.

The principal route is competitive bidding for Petroleum Exploration Licences leading to a PCA in an onshore block or a PSA in an offshore block.

A second route permits grants without ordinary competitive bidding to qualifying strategic partner companies on a Government-to-Government basis.

A third permits direct negotiation of non-exclusive Reconnaissance Permits for studies and multi-client survey activity.

For ordinary international E&P investment in open acreage, competitive bidding remains the central mechanism.

DGPC Controls the Bid Process

The Directorate General of Petroleum Concessions administers the bid process.

The Policy gives DGPC power to issue Invitations to Bid and to call bidding rounds when required.

Recent practice confirms that this power is actively used.

The Petroleum Division’s tender record shows repeated invitations for petroleum exploration rights, including onshore rounds in recent years and the major Offshore Bid Round 2025.

In August 2025, for example, DGPC issued another invitation for petroleum exploration rights requiring interested E&P companies to obtain the formal Bid Documents and submit sealed applications to DGPC.

The lesson for foreign companies is that the newspaper or website advertisement is only the beginning.

The legal bid package is what matters.

The Bid Documents Should Be Treated Like Transaction Documents

A sophisticated bidder should conduct legal review of the bid package with substantially the same seriousness it would apply to an acquisition agreement.

The package may contain the acreage description, block coordinates, geological information, bidding criteria, qualification requirements, Work Unit assumptions, model licence, model PCA or PSA, bid security, prescribed forms and representations.

By submitting the bid, the company may be making firm commitments that become embedded in the petroleum contract.

The legal team should therefore understand what is being promised before the technical team inserts the final Work Unit figure.

Work Units: The Competitive Currency of the Bid

The current Policy makes Work Units central to bid evaluation.

A bid must state the Work Units offered as the firm Phase I commitment.

The bidder offering the highest number of firm Work Units is declared the winner.

If two or more bidders offer the same highest number, those bidders are required to re-bid the Work Unit commitment. The process may be repeated until a clear winner emerges.

This is a deceptively simple mechanism.

The legal significance is substantial.

The winning figure does not merely determine who receives the block.

It becomes a minimum contractual obligation.

A bidder can therefore win an acreage competition by promising itself into a commercially unattractive exploration programme.

Winning the Bid Can Be the Beginning of the Risk

Exploration bidding creates an unusual commercial tension.

A company wants to offer enough Work Units to beat competing bidders.

But every additional Work Unit may represent additional committed exploration activity and therefore additional capital at risk.

The correct question is not:

“What number wins?”

It is:

“What firm programme can we commercially and operationally discharge if we win?”

That question should be answered jointly by the geoscience, finance, legal and operational teams.

A bid that succeeds but produces an uneconomic minimum work programme is not a successful bid.

What Are Work Units?

The Model PCA translates the winning bid into the contractual Minimum Work Programme.

The current Model PCA provides for an initial Exploration Licence term of five years, divided into Phase I of three years and Phase II of two years.

Phase I incorporates a benchmark Work Unit obligation plus the additional Work Units offered in the bid. Entry into Phase II requires fulfilment of Phase I obligations and commitment of at least one firm exploration well or the Work Unit equivalent of a 3,000-metre well, subject to the applicable Rules.

Accordingly, Work Units are not merely a bid-ranking device.

They become part of the operational bargain.

A Foreign Bidder Should Cost the Work Programme Before Signing the Bid

A foreign investment committee should require an internal schedule translating the proposed Work Units into likely activities and expenditure.

That schedule should reconcile the petroleum bid with the company’s actual exploration budget.

The company should know what combination of seismic acquisition, processing, interpretation, geological studies and drilling may be required to discharge the commitment.

It should also understand what happens if the programme cannot be performed.

The current Model PCA contains mechanisms dealing with undischarged Work Units, guarantees and minimum work obligations.

Those provisions deserve examination before bid submission.

The Post-Award Rule Is Especially Important: No Renegotiation of the Model

This is perhaps the most important transactional rule for a new foreign entrant.

The Petroleum Policy provides that after a successful bid, the relevant PCA for onshore acreage or PSA for offshore acreage is concluded on the basis of the Model PCA/PSA made available when bids were invited.

It further states that modification of the model agreement or bid terms is not permitted during finalisation of the execution copies.

This changes the lawyer’s role.

Local counsel should not be engaged merely after award to “negotiate the PCA”.

By then, the ability to reopen core provisions may be extremely limited.

The legally productive work occurs before bidding.

What Should Foreign Counsel Review Before the Bid?

Before authorising submission, the foreign bidder should have a clear matrix addressing at least the following areas:

A company that understands those matters before bidding is in a materially stronger position than one that discovers them clause by clause after award.

The Model Petroleum Concession Agreement 2013, as Amended January 2024

Pakistan currently publishes the Model Petroleum Concession Agreement 2013, amended January 2024.

The Model PCA is far more than a licence form.

It establishes the detailed contractual relationship governing the onshore petroleum venture.

The document addresses working interests, the work programme, guarantees, commercial discovery, development, joint operations, production, fiscal payments, data, procurement, employment, accounting, insurance, indemnity, assignment, force majeure and dispute resolution.

For the foreign company, it effectively becomes one of the project’s principal constitutional documents.

The PCA and the Exploration Licence Perform Different Functions

The Exploration Licence and PCA are frequently discussed together, but they should not be confused.

The licence constitutes the petroleum right granted under the statutory regime.

The PCA governs the contractual relationship between the Government and the working-interest owners.

A Development and Production Lease subsequently provides the statutory right associated with commercial development and production.

Accordingly, title due diligence should ordinarily establish consistency between the:

licence;

PCA;

lease;

supplemental agreements;

and DGPC approvals.

One should not substitute for another.

Working Interests Under the Current Model PCA

The current Model PCA illustrates the modern participation structure.

It provides for minimum local participation according to the licensing zone.

The Required Minimum Local Working Interest is:

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

20% in Zone II; and

25% in Zone III.

The detailed model also illustrates an allocation in which local working-interest holders and the Provincial Holding Company collectively produce the applicable local threshold.

During exploration, the Provincial Holding Company’s 2.5% working interest is carried in the manner described by the Model PCA, with reimbursement mechanisms following commercial production.

The Model PCA also requires working-interest owners to offer 2.5% working interest to GHPL on a full participation basis, subject to the exercise mechanism contained in the agreement.

These provisions are commercially significant.

A foreign bidder should model its net economic interest, not merely the gross percentage initially appearing in a consortium proposal.

Local Working Interest Is Not the Same as Local Incorporation

This distinction can easily cause confusion.

The current Model PCA defines Local Working Interest Owners by reference to Pakistani incorporation and Pakistani share ownership, not simply the fact that a multinational has incorporated a wholly foreign-owned subsidiary in Pakistan.

A foreign-owned Pakistani subsidiary should therefore not automatically be assumed to satisfy required local-participation thresholds.

The shareholding and the specific Model PCA definition must be examined.

The Consortium Should Be Structured Before the Bid

Many petroleum bids are submitted by joint ventures rather than single companies.

The consortium may contain:

a proposed operator;

Pakistani E&P participants;

foreign investors;

state-owned companies;

GHPL involvement;

and eventually Provincial Holding Company participation.

The internal consortium documents should therefore address the consequences of winning before the bid is submitted.

The parties should know who bears the cost of the Work Units, who provides bid and performance security, who becomes operator, how joint decisions are made, what happens if one member fails qualification, and how working interests adjust for mandatory participation.

A vague “we will agree the JOA after award” understanding is unnecessarily dangerous.

Joint Bidding Agreements and Pre-Bid Risk Allocation

A well-constructed Joint Bidding Agreement can deal with the pre-award relationship.

It should align the members on the proposed Work Unit bid, participating interests, operator nomination, expenses, confidentiality, bid security, exclusivity, withdrawal, regulatory cooperation and the transition into the JOA and PCA if the consortium succeeds.

One issue deserves particular care.

A participant should not be able to encourage an aggressive Work Unit bid and then walk away immediately after award leaving its partners to discharge the commitment.

The JBA should allocate that risk expressly.

The Model JOA Matters Almost as Much as the PCA

The earlier 1997 Model PCA regime already treated the model Joint Operating Agreement and accounting procedure as integral to the concession structure. The original practitioner work specifically noted the close connection between the PCA, JOA and accounting procedure.

That remains conceptually important.

The PCA governs the relationship with Government.

The JOA governs how the working-interest owners conduct the joint venture amongst themselves.

For many day-to-day commercial disputes, the JOA may be the document that matters most.

Future pages in this series will examine operatorship and joint operating structures separately.

Pakistan’s 2024 Petroleum Policy Amendments

The 2012 Policy has not remained static.

A significant set of amendments was notified in 2024.

The Gazette amendment reflected in S.R.O. 147(I)/2024 amended, among other matters, the treatment of Zone I(F), arrangements relating to petroleum rights following expiry of producing leases and conversion provisions applicable to earlier concessions.

These amendments deserve particular attention in acquisitions involving mature fields or older concessions.

Zone I(F) and Frontier Economics

The 2024 amendment expressly linked qualifying Zone I(F) acreage to an enhanced gas-pricing treatment and contemplated a supplemental agreement for eligible blocks with effect from 29 January 2024.

This reflects a recurring principle in petroleum economics.

More difficult acreage often requires different incentives if capital is to move into higher-risk geology.

For foreign investors, however, eligibility should never be assumed from geography alone.

The actual contractual mechanism by which the improved treatment becomes applicable must be confirmed.

Mature Producing Fields After Lease Expiry

The 2024 amendments also changed the treatment of petroleum rights following expiry of a producing lease.

The amended Policy provides a mechanism under which DGPC may continue the right while the field remains commercially viable where the existing lease holder agrees to pay an amount equivalent to 15% of wellhead value, divided equally between the Federal and relevant Provincial Governments.

Where the existing holder does not accept that mechanism, DGPC may invite bids for the producing area, with evaluation based on a signature bonus devoted to social welfare in the producing area.

This has obvious consequences for mature-field M&A.

A buyer should never value remaining reserves without analysing the remaining legal term of the lease and the economics of continued production beyond it.

Conversion of Older Concessions to Petroleum Policy 2012

Another important area concerns conversion.

Pakistan has repeatedly offered mechanisms through which qualifying older petroleum arrangements can obtain aspects of later policy treatment, ordinarily through prescribed conditions and supplemental documentation.

The Petroleum Division currently publishes Model Supplemental Agreements for conversion and related Rule 35 / Zone I(F) arrangements.

The 2024 Model Supplemental Agreement confirms that conversion provisions can distinguish between different generations of exploratory effort and can preserve earlier pricing provisions while adding newer pricing treatment for qualifying new exploration.

This is a sophisticated point but commercially essential.

A concession does not necessarily have a single fiscal “birth date”.

Parts of its economics may arise from different policy generations depending upon conversion, new exploration effort and supplemental agreements.

A Petroleum Asset Can Have More Than One Economic Layer

Consider a hypothetical long-standing concession.

The original licence may have been awarded under a pre-2001 policy.

The field may contain an old producing horizon priced under that regime.

The concession may later have executed a supplemental agreement converting qualifying exploration effort to Petroleum Policy 2012.

A deeper discovery may receive newer pricing treatment.

A tight reservoir may separately qualify for Tight Gas Policy 2024.

The lease may eventually be renewed under the mature-field provisions introduced in 2024.

Calling that asset a “2012 Policy field” would conceal more than it reveals.

The legal analysis must be reservoir-, discovery-, agreement- and sometimes well-specific.

Bidding Is Not Limited to Pakistani Companies

Foreign E&P participation is expressly contemplated by the Policy and modern bid architecture.

Recent activity demonstrates this in practice.

In 2025 the Petroleum Division publicly identified Türkiye’s state-owned Turkish Petroleum as a participant in onshore blocks provisionally awarded in that year’s bidding process, including Ziarat North and Sukhpur-II.

On 26 February 2026, the Government executed PCAs and Exploration Licences for 11 onshore blocks—eight in Balochistan, two in Sindh and one in Punjab. The official announcement identified OGDCL, PPL, MariEnergies, Pakistan Oilfields Limited and Prime Global Energies among the successful joint-venture participants and described investment commitments of approximately Rs 8.66 billion, together with approximately Rs 276 million for social welfare.

This is useful evidence that Pakistan’s competitive onshore award process is not merely a dormant framework in an old policy document.

It remains operational.

The 2025 Offshore Bid Round: A Modern Case Study

The Offshore Bid Round 2025 provides an especially useful illustration of the contemporary system.

The Government offered 40 offshore blocks after what it described as an 18-year gap.

Before opening the round, the Petroleum Division developed a Model Production Sharing Agreement and operated alongside the modern Offshore Petroleum Rules framework.

When bids were opened on 31 October 2025, bids had been received for 23 blocks, covering approximately 53,510 square kilometres.

Successful participants included major Pakistani E&P companies and international/private-sector participants including Turkish Petroleum, United Energy, Orient Petroleum and Fatima Petroleum.

The successful bidders collectively committed 4,427 Work Units during Phase I, which the Government associated with approximately US$80 million of initial investment. It stated that exploration drilling could ultimately take investment to approximately US$750 million–US$1 billion.

On 20 May 2026, the Government announced execution of PSAs and Exploration Licences for the awarded offshore blocks; two blocks had already been executed in December 2025.

The lesson for foreign counsel is clear.

The same basic bidding philosophy—qualification, model documentation, Work Units, fixed contractual architecture and long-term operational commitments—remains central even where the offshore contractual form differs from the onshore PCA.

A Bid Is Also a Future M&A Asset

Foreign bidders should consider one further issue that is easy to overlook.

The company is not merely bidding for exploration rights.

It may also be creating an asset that will later be farmed down, financed, reorganised, merged, partially sold or transferred to another group company.

The original bid structure can therefore influence future transactional flexibility.

A consortium that is badly organised at award stage can become extremely difficult to restructure.

Questions concerning pre-emption, assignment approval, local participation, operatorship and guarantees should therefore be considered with eventual M&A in mind.

Farm-Ins After Award

A foreign company need not necessarily enter Pakistan through a primary DGPC bid.

It may acquire a participating interest in an existing block.

That can be commercially attractive because part of the geological risk may already have been reduced.

But the investor then inherits a different legal problem.

It must understand the bid commitments made by somebody else.

The farm-in due diligence should therefore establish:

what Work Units were originally bid;

how much of the programme has been discharged;

which obligations remain;

whether any shortfall exists;

which guarantees remain outstanding;

whether acreage has already been relinquished;

what future wells are committed;

and whether DGPC has issued any adverse correspondence.

The farminee buys into the block’s regulatory history, not simply its geology.

Why “Carry” Arrangements Need Careful Drafting

Farm-ins frequently involve the incoming party carrying some or all of another participant’s exploration expenditure.

Those arrangements require careful interaction with Pakistani working-interest requirements, Provincial participation, GHPL rights and the approved working-interest schedule.

The commercial “headline percentage” should therefore be reconciled against:

registered working interest;

cost-bearing interest;

carried interest;

voting interest;

production entitlement;

and post-commerciality reimbursement.

Otherwise parties can use the same percentage while describing quite different economics.

Bid Guarantees and Parent Company Support

Petroleum exploration commitments are not left entirely unsecured.

The Model PCA contemplates guarantees supporting performance of minimum work obligations.

Foreign investors should identify early whether the required security is to be provided through:

a bank guarantee;

parent-company guarantee;

corporate guarantee;

or another approved mechanism.

The issuing entity’s financial strength and jurisdiction may matter.

For an international corporate group, parent-company support should also be reviewed against internal treasury policy and cross-default implications.

The Role of the Province in the Post-Eighteenth Amendment Regime

Modern petroleum bidding cannot be understood entirely through the old Federal Government model.

Article 172(3) of the Constitution now provides for joint and equal federal-provincial ownership of mineral oil and natural gas within a Province and adjacent territorial waters, subject to existing commitments and obligations.

The Policy and Model PCA reflect this constitutional development through provincial representation and Provincial Holding Company participation.

This is not merely constitutional symbolism.

It has economic and governance consequences for the petroleum venture.

Foreign investors should therefore understand both the DGPC process and the relevant provincial interest.

Petroleum Pricing Belongs in the Bid Model

An exploration bid cannot be assessed rationally without assumptions concerning potential petroleum pricing.

The amended Petroleum Policy preserves zonal pricing distinctions, including specific treatment for Zone I(F).

Older concessions may have completely different pricing formulas.

Converted concessions may contain layered pricing.

Tight gas may attract specialist treatment.

Accordingly, valuation should not simply insert a generic “Pakistan gas price”.

The legal source of the pricing entitlement should be identified and tied to the reservoir or discovery to which it actually applies.

Royalty and Tax Are Only Part of Government Take

The amended Policy presently specifies royalty of 12.5% of petroleum value at the field gate for the general onshore package and refers to taxation under the petroleum fiscal regime.

Yet a bidder’s economic model should go substantially further.

The PCA can also involve rent, production bonuses, social-welfare obligations, training expenditure, local participation, carried interests, windfall mechanisms and other project-specific payments.

Government take must therefore be modelled from the complete policy and contract package.

Our dedicated fiscal-regime page will address those matters in detail.

Social Welfare Is a Contractual Cost, Not Merely CSR

Petroleum concession arrangements have long contained social-welfare expenditure obligations.

Recent awards continue to highlight them.

The February 2026 execution of 11 onshore PCAs and Exploration Licences was officially announced together with approximately Rs 276 million in social-welfare commitments.

This is another illustration of why a petroleum bid should not be modelled solely through drilling expenditure.

Non-drilling contractual obligations form part of project economics.

Petroleum Policies Do Not Simply Erase Their Predecessors

Perhaps the most enduring lesson from Pakistan’s policy history is continuity.

The original 1997 Policy expressly preserved accrued rights under superseded policies, as noted in the historic practitioner text.

Modern Government policy documents similarly confirm that replacement of previous Petroleum Policies did not generally disturb existing rights granted through licences, PCAs and PSAs.

That preservation explains why historic policy research remains necessary in 2026.

A twenty-five-year-old policy may be “obsolete” for new awards yet highly relevant to a producing asset.

What Does a Petroleum Policy Actually Do Legally?

This requires some precision.

A Petroleum Policy is not identical to an Act of Parliament or statutory rule.

It sets out the Government’s framework for upstream investment, including fiscal, pricing and licensing terms.

Those policy terms then gain operative significance through various legal mechanisms: statutory rules, bid documentation, petroleum licences, leases, PCAs, PSAs, supplemental agreements, notifications and Government approvals.

It is therefore too crude to say either:

“The Policy is law”

or:

“The Policy is merely non-binding guidance.”

The better analysis asks how the particular policy provision has been legally implemented in the specific petroleum arrangement.

That distinction is especially important when advising on legacy rights.

The Model PCA Is Not the Executed PCA

Similarly, a Model PCA should not be confused with the agreement actually governing an existing concession.

For new bidding, the model is critically important because the Policy constrains post-award modification.

For an acquisition of an old petroleum asset, however, the legal document is the executed PCA together with its amendments and supplemental agreements.

A current model cannot retrospectively be assumed to govern a field awarded decades ago.

This simple proposition prevents a remarkable number of potential due-diligence errors.

Twelve Questions an Investment Committee Should Ask Before Approving a Pakistan Bid

A board or investment committee considering a Pakistani block should require clear answers to the following matters before approving the bid:

If those questions cannot be answered, the bid is not ready for board approval.

Particular Issues for International Oil Companies

A large IOC entering Pakistan may have internal policies that exceed Pakistani regulatory requirements.

That does not eliminate the need to understand local rules.

Instead, the project must satisfy both.

Internal anti-bribery procedures, sanctions screening, HSE standards, procurement rules, human-rights policies, reserve booking requirements and investment-committee thresholds must coexist with Pakistani petroleum obligations.

The consortium agreement should therefore be designed so that the operator can satisfy both local and group-level compliance requirements.

Particular Issues for Smaller Foreign Independents

Smaller independent E&P companies face a different problem.

They may find the geological opportunity attractive but underestimate the institutional infrastructure required to hold and operate a petroleum right.

Financial qualification, bank or parent guarantees, Work Unit commitments, local participation, technical staffing, Pakistan establishment, reporting, security, taxation and ongoing DGPC engagement can impose significant corporate demands.

A smaller foreign company should therefore undertake a realistic cost-of-entry review before bidding.

The cost of a petroleum right begins before the first well is drilled.

Particular Issues for Foreign State-Owned Companies

Foreign NOCs may have access to both ordinary bidding routes and, in appropriate circumstances, strategic Government-to-Government arrangements contemplated by the Policy.

That does not mean every state-owned investor automatically receives non-competitive acreage.

The structure must fall within the applicable policy and governmental arrangements.

Foreign state companies should therefore distinguish diplomatic engagement from the formal legal grant of petroleum rights.

Due Diligence on a Block Before Bidding

A foreign company should not limit its pre-bid review to seismic interpretation.

Legal due diligence should examine the status of the block itself.

Questions may include whether acreage overlaps existing rights, whether old leases or retained discovery areas exist, whether land or security restrictions are material, whether environmental sensitivities affect operations, whether previous wells have produced data relevant to the bid and whether infrastructure access is realistic.

The petroleum bid is a geological commitment made inside a legal geography.

Both matter.

Security and Operability Are Part of the Commercial Bid

Certain frontier areas may present logistical and security issues.

A Work Unit bid that is technically possible on paper may become much more expensive where mobilisation, access or security materially increase cost.

The original petroleum-policy framework had already recognised the importance of security-clearance mapping decades ago.

Modern bidders should continue to treat practical access and security as part of bid economics.

Data Rooms and Confidentiality

Petroleum bidding invariably depends upon technical information.

Foreign investors should determine what data DGPC is making available, what confidentiality restrictions apply, whether data may be exported for overseas processing and what rights the bidder obtains to retain or use it if unsuccessful.

Consortium partners should also regulate exchange of proprietary interpretations.

The company’s geological model may belong to the company even where underlying Government seismic data does not.

That distinction should be documented.

Why Foreign Law Firms May Need Pakistani Co-Counsel Before Bid Submission

An international energy firm advising a client on entry into Pakistan may already understand petroleum concessions, PSAs and JOAs exceptionally well.

The value of Pakistani local counsel lies elsewhere.

Local counsel can identify:

which version of the Petroleum Policy is actually operative;

whether a block is subject to a specialist Pakistani regime;

how constitutional provincial participation affects the structure;

what the Model PCA means when read with the Onshore Rules;

which DGPC approvals will be required;

whether the proposed Pakistani participant satisfies the Model PCA definition of a local working-interest owner;

what corporate vehicle can hold the interest;

and how future transfer or control provisions may affect the client’s global transaction planning.

The purpose is not to teach an international petroleum lawyer how a PCA works.

It is to identify how this PCA works in Pakistan.

How Josh and Mak International Can Assist with a Pakistan Petroleum Bid

Josh and Mak International can assist a foreign E&P company before, during and after a DGPC bid round.

At pre-bid stage, the firm can review the Bid Documents, Petroleum Policy, applicable Rules and Model PCA or PSA; advise on corporate entry and qualification; assist with consortium and Joint Bidding Agreements; analyse local working-interest requirements; identify regulatory and provincial issues; and prepare a legal-risk matrix for management or investment committee approval.

At bid stage, we can assist with prescribed legal documentation, corporate authorities, qualification materials, consortium documentation and Pakistani regulatory compliance.

After award, we can advise on execution of the Exploration Licence, PCA or PSA, Pakistan corporate establishment, operatorship, guarantees, JOA implementation and the continuing regulatory relationship with DGPC.

For international law firms, this work can be performed as a defined Pakistan local-counsel workstream, leaving global transaction leadership with the referring firm.

Due Diligence Before Buying an Existing Petroleum Interest

Where the client is entering through a farm-in rather than a new bid, the exercise changes.

The principal question becomes:

What exactly did the original bidder promise the Government?

The due-diligence review should reconstruct the asset from award to present day.

That means examining the original bid, Exploration Licence, PCA, Work Units, guarantees, extensions, relinquishments, discoveries, commerciality, leases, conversions, assignments, JOA amendments, Government correspondence and performance status.

A farm-in agreement should never be signed merely because the seller can prove that it owns a stated percentage.

The investor must understand the obligations attached to that percentage.

Red Flags in Petroleum Bid and PCA Transactions

The following circumstances deserve heightened scrutiny:

• A bidder offering Work Units substantially beyond the technical programme approved internally.
• A consortium whose members have not agreed who funds the minimum work programme.
• An assumption that the Model PCA can be substantially renegotiated after award.
• A foreign-owned Pakistani subsidiary being treated automatically as a qualifying Local Working Interest Owner.
• A proposed operator that has not established its regulatory qualification.
• A farm-in agreement referring only to “all obligations from completion” without allocating historic work defaults.
• A seller unable to produce the original bid documents.
• A target company claiming 2012 Policy pricing without a clear conversion instrument.
• An older field relying upon an expired or nearly expired lease without analysis of the 2024 mature-field provisions.
• A board paper using an undifferentiated “Pakistan gas price” across multiple policy generations.
• A Work Unit obligation shown as geological expenditure but not reflected as a contractual liability.
• A consortium that has not considered how GHPL or PHC participation alters percentage economics.
• An international acquisition agreement whose Pakistan subsidiary is included in closing but whose petroleum change-of-control position has not been checked.
• These are not merely drafting issues.
• They can affect whether the investment thesis survives.

Frequently Asked Questions

What is Pakistan’s principal current Petroleum Policy?

The Petroleum Exploration and Production Policy 2012, in its amended form, remains the principal conventional upstream policy published by Pakistan’s Petroleum Division.

Were there Petroleum Policies before 2012?

Yes. Pakistan issued Petroleum Policies in 1991, 1993, 1994, 1997, 2001, 2007 and 2009 before the 2012 Policy.

Do old petroleum policies still matter?

Yes. Rights granted under older licences, PCAs and PSAs were generally preserved when later policies superseded earlier ones, subject to the governing documents and any subsequent conversion or supplemental arrangements.

How are new onshore petroleum blocks normally awarded?

The principal route is competitive bidding administered by DGPC under the Petroleum Policy and applicable Rules.

What determines the winner of a petroleum bid?

Under the current Policy, bids are principally evaluated by the firm Work Units offered for Phase I. The highest qualifying Work Unit offer wins, with a re-bidding procedure where the highest offers are tied.

Can the successful bidder renegotiate the Model PCA after winning?

The Policy provides that the PCA or PSA is finalised using the model made available with the invitation to bid and that the model terms and bid terms are not to be modified during preparation of the execution copies.

What is the current Model PCA?

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

Does Pakistan permit foreign E&P companies to bid?

Yes. Pakistan’s petroleum framework expressly contemplates foreign E&P participation subject to qualification and applicable local participation requirements.

What local participation is required?

The current Model PCA defines Required Minimum Local Working Interest at 15% for Zones I and I(F), 20% for Zone II and 25% for Zone III.

Is a foreign-owned Pakistani subsidiary automatically a Local Working Interest Owner?

Not necessarily. The current Model PCA definition looks to Pakistani incorporation together with the prescribed level of Pakistani share ownership.

What does GHPL receive?

The current Model PCA contains a mechanism under which working-interest owners offer GHPL a 2.5% interest on full participation terms, subject to the agreement.

What role does the Provincial Holding Company have?

The Model PCA contains a 2.5% PHC participation mechanism, including an exploration-phase carry and later reimbursement structure, subject to the agreement.

Can Pakistan award petroleum rights outside competitive bidding?

The Policy contemplates specified Government-to-Government strategic-partner awards and direct negotiation of non-exclusive Reconnaissance Permits in addition to ordinary competitive bidding.

Has Pakistan conducted recent petroleum bidding rounds?

Yes. Recent onshore rights were awarded and executed in 2025–26, and Pakistan conducted a major Offshore Bid Round in 2025 followed by PSA and licence execution in 2025 and 2026.

Can an existing concession convert to the 2012 Policy?

Certain qualifying historic arrangements may obtain later policy treatment through applicable conversion provisions and supplemental agreements. The Petroleum Division continues to publish model conversion documentation.

Why should a foreign company engage Pakistani counsel before bidding rather than after award?

Because the Work Unit commitment becomes part of the contractual minimum programme, local participation affects project economics, regulatory qualification must be established and the Policy restricts renegotiation of the model agreement after award.

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 Before a Petroleum Bid, Farm-In or Acquisition

Foreign investors often approach local counsel after a commercial opportunity has already been substantially negotiated.

In Pakistani upstream petroleum, earlier involvement can produce considerably greater value.

Where Josh and Mak International is instructed before bid submission or execution of a farm-in term sheet, we can examine the policy generation, block status, Model PCA/PSA, local participation, Work Unit exposure, operatorship, qualification, transfer restrictions and Pakistan corporate structure while the client still has freedom to change the commercial arrangement.

For an existing asset acquisition, we can reconstruct the regulatory history of the petroleum right and identify the distinction between original concessions, later policy conversions and current legal requirements.

For international law firms, we can deliver that analysis as a discrete Pakistan-law workstream.

The object is not to make a petroleum transaction more complicated.

It is to identify the complications before they become contractual liabilities.

A foreign company examining Pakistani acreage is welcome to provide the available block details, bid package, licence, PCA or PSA and proposed consortium structure for a preliminary regulatory assessment.

Legal and Regulatory Update Note

This guide has been reviewed against publicly available Pakistani petroleum-policy, regulatory and official bidding materials up to 20 September 2026.

Petroleum bidding terms are round-specific and concession rights remain document-specific. Earlier Petroleum Policies, historic PCAs, conversion agreements, supplemental arrangements, individual bid terms and later regulatory approvals may materially alter the general position described above.

No foreign company should therefore assume that the current Model PCA or amended 2012 Petroleum Policy alone determines the legal and economic position of an existing petroleum asset.

Josh and Mak International advises foreign E&P companies, investors and international law firms on Pakistani petroleum bidding, regulatory qualification, PCAs and PSAs, farm-ins, acquisition due diligence, corporate entry and continuing upstream compliance.

© Josh and Mak International. All rights reserved.

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