Arif Kemal, chairman of the Pakistan Petroleum Exploration and Production Companies Association, said that producers would meet the secretary of the Ministry of Petroleum and Natural Resources on Thursday to discuss the issue. "The biggest demand of the industry would be to implement the policies in letter and spirit," Kemal said.

"If the rules and regulations are not changed then there would be no problem. Same was in the case of the IPPs", he said, referring to a punishing 30-month showdown over pricing with foreign-backed Independent Power Producers (IPPs).

Pakistan and foreign-backed gas producers are locked in a dispute over what the government is willing to pay for new gas finds, estimated at up to 9 trillion cubic feet.

The companies involved include some of the leading industry giants like Austria's OMV, Australia's BHP, Union Texas from the United States, and Britain's Premier Oil Plc and LASMO Plc.

IPPs revisited?
Analysts said if the row continued it could end in the same manner as Pakistan's fight with the IPPs over cutting the tariffs they charge the state utility WAPDA for power.

The government in July offered to buy discoveries using a sliding gas price regime based on oil price bands, which went against the spirit of the 1994 petroleum policy which linked gas prices to international oil prices. Kemal said the announcement by the chief executive general Pervez Musharraf that he would speed up the search for oil was "positive" but the gas pricing issues would need to be solved.

"Last year large gas fields were discovered in Pakistan. But as there was a delay in the agreements, it had slowed foreign investment into new exploration," he said. He said the policy did provide the companies the option to sell the gas to a "third party" but at present the government and state entities were the main buyers.

According to official figures 16 discoveries, 4 of oil and 12 of natural gas, were made in 1997/98 fiscal year that ended in June 1998 of which six gas finds were large. Industry sources said Pakistan has potential reserves of at least 26 billion barrels of oil and 100 trillion cubic feet of natural gas, which have remained largely unexplored.