PPL may forgo oil exploration expeditions abroad

PPL may forgo oil exploration expeditions abroad

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KARACHI: Pakistan Petroleum Limited (PPL) might forgo its plan of searching oil and gas reserves internationally following acquisition of new exploration licences at home, its Managing Director Khalid Rahman says. Stiff competition from foreign firms, low margins and financial constraints are some other reasons which have made Pakistan s second largest gas producer rethink any immediate need of going abroad to bolster profit, he said in an interview with The News. We would like to go international but there is a lot to do in Pakistan now, he said citing PPL s acquisition of 14 domestic blocks in a recent round of bidding. We have to be pragmatic. Dynamics of going international are tough. PPL is already a 50 per cent partner in Block-29 in Yemen along with Austrian operator OMV. After an unprecedented rise in profits on back of rising international oil price, the company had set eyes on Iran, Iraq, Senegal and other countries. Developing a field in Iraq requires $1.2 billion. We can not even dream of that, he said, adding: As much as I want to go in with even a small shareholding of lets say 5 per cent, someone has to accept me. But big consortiums are already tide up. Domestically, PPL has working interest in 22 exploration licenses. Last month, it went most aggressively to auction of prospective blocks under 2009 Petroleum Policy and gained highest number of 14 blocks. The company will seek to further increase exploration portfolio in Pakistan through partnerships with other firms, Rahman said, insisting the endeavour is risky with no guarantee that new reserves will be found.

Despite a boom in profits, PPL and other exploration companies have not had any major discovery of hydrocarbon reserves in last few years. Production of gas, once considered to be available in plenty, is on the decline. Pakistan stands on verge of becoming an importer. The year-on-year profit of PPL in fiscal 2008-09 soared 47 percent to Rs27.7bn following increase in price of gas, which is benchmarked with international crude oil rates and steep depreciation of rupee (Gas price is denominated in dollars). But PPL s actual production has come down especially from its flagship Sui Field, which brings 48 per cent of total sales revenue. Net recoverable gas reserves have depleted to 3.3 trillion cubic feet (TCF) by June 2009 from 3.7 TCF a year earlier. Rahman acknowledges PPL has lagged behind in replacement of reserves in last few years while production has remained between 950 million cubic feet per day (MMCFD) to 1BCFd. You must appreciate that we have been able to maintain a certain level of production even when Sui was declining, he said. And decline in Sui is far greater than what we have been able to discover. However, it is not easy for government-owned PPL to find new reserves. Besides security issues and infrastructural bottlenecks, unpredictability hovers on every mission. Everyone was hopeful about finding something in Dadhar, he said, referring to a block in Balochistan, which was abandoned earlier this year. We were expecting a seal of 150 meters, which traps gas. It was only 10 meters. Notwithstanding the assumptions, he said no one can say for sure if exploration will bring new discoveries. Extensive research including seismic surveys and test drilling is required to ascertain that, he added. No one can tell by looking at the land how much gas is in there, he said. World Bank once said there was 230 TCF in Pakistan. Where is that? I want to know. They said there are many billions of barrels of oil. Where is that? I want to know. As petroleum reserves deplete around the world, he said conventional ways of production have given way to advanced technology, which can extract gas from deep corners of a well. Known as tight gas reserves, PPL also expects to find them in newly acquired blocks in Sindh. In next ten years the company plans to replace one third of its existing reserves with new finds, an uphill task considering its performance.

There is no guarantee of our success but how wrong can we go, said Khalid Rahman who took top office of the company last year. We can make at least two discoveries out of 14 blocks. Besides searching for new reserves, PPL is also trying to increase production from existing fields, he said, explaining that main increase is expected from Kandhkot and Adhi fields, located in upper parts of Sindh and Punjab respectively. The operation is expensive and extensive. New wells are being dug in Sui after a gap of five years to stop rate of depletion. With an investment of $100 million, compression plant and other facilities are being set up at Kandhkot field to increase production to 200-215mmcfd from current 150mmcfd. Reassessment of reserves is underway at Adhi to see if production can be increased from current 45-50mmcfd to 100mmcfd. Similar activities are being carried out at Mazrani and Chachar gas fields. Small proportions of additions are also expected from partner-operated fields of Sawan, Miano, Tal, Block 22, Qadirpur, Latif, Nashpa and Gambat.


Courtesy: The News