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KPOGCL striving to bring E&P of oil and gas upfront to make Pakistan self-reliant

Kyber Pakhtunkwa has huge potential in E&P sector, govt must reform plans to lure investment

Interview with Raziuddin Razi — CEO, Khyber Pakhtunkhwa Oil & Gas Co Ltd

Profile

Raziuddin Razi, who is the Chief Executive Officer of Khyber Pakhtunkhwa Oil & Gas Company Limited (KPOGCL) for one and half years having a vast experience and worked in both international and domestic energy sectors. Raziuddin, who did his MSC and MBA from Michigan and New York Universities, served in Pakistan Planning Commission as Chief Energy. He also served in Saudi Royal Commission as Technical Advisor. He was also the CEO of Attock Refinery from 1997 to 2005. Raziuddin was also the Managing Director of OGDCL from 2005 to 2006. He has been member of the Board of Directors of various oil companies and refineries besides highly prestigious education institutions like LUMS. While expressing his view on the prevailing energy situation in the country as well as in the province of Khyber Pakhtunkhwa (KPK) he is confident that it is a matter of time only as the province sufficient energy reserves can cater to the growing need of the country while the province of KPK is in a unique position to serve the energy sector.

PAGE: What is the potential in exploration & production business in Pakistan?

Raziuddin Razi: Pakistan’s daily oil consumption is standing at approximately 400k bpd and total Pakistan’s production to-date stands at 94k bpd therefore robust investment needs to be done to explore further reservoir to minimize the balance of trade payments on account of crude import bill. Only Sindh is explored whereas Punjab, Balochistan and Khyber Pakhtunkhwa province especially is lying vacant for investment in E&P sector with huge potential in the untapped reservoir’s.

PAGE: Why are foreign investors not entering the market for exploration & production business in Pakistan?

Raziuddin Razi: With the recent drop in oil production prices and increase in production over the world has resulted in drop in investment over all on international level. Pakistan has had security issues which have now improved. Hopefully investors will look into the possibilities of investment in this sector. Government has also relaxed the rules to do E&P business with highest price being offered in Zone # 1 for natural gas.

PAGE: What challenges are being faced in Pakistan to do E&P business?

Raziuddin Razi: Awareness of exploration & production business has been a long grown problem which I feel is the biggest challenge. Investors in Pakistan want to invest in risk free business lines. Yes E&P is a risky business but considering the success ratio of Pakistan it’s a very lucrative business and it has a positive impact on the whole economy if in the right direction. Furthermore, I believe masses are concentrating on the energy – power sector side business. In trying and educating people on the raw material for any industry whether it is power or fertilizer etc is important and necessary. The raw material to run this business is oil & gas, which needs attention and needs to be produced locally.

PAGE: How the energy sector can get rid of the circular debt issue, is your company also a victim of circular debt?

Raziuddin Razi: The menace of circular debt can be eliminated through aggressive oil and gas exploration & production and refining strategy. Indigenous fuel will bring lower price and thus the government need not to subsidize. The government needs to call in oil and gas exploration & production companies to develop a new petroleum policy to address the issue and get on to works.

PAGE: What is being done to create awareness about the E&P sector at student level?

Raziuddin Razi: With the help of local universities and USAID Programs, awareness is being created and curriculum design programs are being implemented at university level to create industry specific professionals in the market for future achievements.

PAGE: How do you see the outlook of refining sector in Pakistan?

Raziuddin Razi: The government needs to intervene to add refining capacity in Pakistan. The public sector, especially PSO, PARCO the provincial holding companies and then the main stock refineries like ARL, NRL and PRL need to take leading role. The government needs to reduce borrowing rates for the refining sector to enable them to invest in these capital intensive mega-projects. PSO needs to synergies with refineries to develop deep cut 200,000 bpd refineries.

Company Profile

KPOGCL is a young organization formed two years ago. It is working as a catalyst for oil and gas Exploration & Production (E&P) in Khyber Pakhtunkhwa. Khyber Pakhtunkhwa (KP) is now the center of gravity for Pakistan’s energy future. KPOGCL is not only entrusted with the responsibility of carrying out Exploration and Production (E&P) activities, itself, but is as well, entrusted the responsibility to allure more E&P Companies to do so by ensuring them with the requisite security and the first hand sharing of technological data thus literally acting as a Fast Track implementation of E&P. KPOGCL, while being actually KP Government sponsored/patronized, thus can very conveniently act as an interface between the E&P Companies and all the other Government Related Agencies thereby actually performing the role of ‘One Window of Operations. It is also the Provincial Holding Company (PHC) under the Petroleum Policy – 2012. KPOGCL is in fact a facilitator to E&P companies. The Company promotes all E&P activities throughout KPK by investing in Producing and Exploration Blocks and procurement of heavy equipment (i.e. Rig and Seismic Data Acquisition Recorder) – all ultimately aimed at generating revenue and of course fulfilling the dire needed energy requirements of not only KPK Province but the whole country. The Company is also member of Production & Exploration Companies Association (PPEPCA). It is run by an independent Board of Directors, who mostly are Experts from the private Sector with Mr. Raziuddin (Razi) as its CEO. Though, being newly established, the Company is in its embryonic stage of development but owing to the strong support and patronization it has, from the KP Government, it has very rapidly developed it’s paraphernalia not only to engage itself, on war footing, in all E&P activities but also arrange with the KP Government to ensure a fool proof security to all the rest of the E&P Companies from abroad and within the country. Khyber Pakhtunkhwa government, being cognizant of Oil & Gas reserves established Khyber Pakhtunkhwa Oil and Gas Company Limited (KPOGCL) — a landmark achievement of the present government. It is an oil & gas exploration and production company fully owned by the Government of Khyber Pakhtunkhwa and designated as Provincial Holding Company. Our priority mandate is to co-ordinate the security and logistics of oil and gas companies moving in and out of KP. We address investor problems and also work as a conduit to other departments. Secondly, it provides services that facilitate investors in seismic & drilling operations. The third mandate is investment. KPOGCL has already invested in petroleum blocks, such as Baratai, Pezu, Peshawar East, Kulachi, Karak North, Baska North and Marwat lying in KP as JV in each. The KP government has injected equity of Rs. 500 million into KPOGCL, besides underwriting another Rs. 7.5 billion. KPOGCL will soon buy a seismic recorder and 2500 hp oil rig. It is hiring seismic crew, so that we bring our stakes into the system to assure national and foreign E&P and services companies. In order to remain attractive in highly competitive global exploration market, the Government of Khyber Pakhtunkhwa through KPOGCL making every possible effort to invite new players to the province, assist foreign and local E & P companies in their work, providing full proof security cover in order to ensure the development of oil & gas resources of Khyber Pakhtunkhwa. Khyber Pakhtunkhwa is the new geological frontier, the exploration success ratio is 1:2.8. The reservoirs are large with high calorific value. A number of international and national are working in Khyber Pakhtunkhwa, today Khyber Pakhtunkhwa is producing 50% of Crude Oil and about 10% of Natural gas. It provides great opportunities to the investors. As an incentive the Government of Pakistan has given very high well head price to the geological zone-1, in which Khyber Pakhtunkhwa is located. For example, at US$ 110/barrel Platts price the well head gas price would be US$ 6.6/MBTU. This gives high ROE to the investors. Due to this pricing mechanism a number of new entrants have started investing in Khyber Pakhtunkhwa, including some international oil companies. KPOGCL is the operator of a block in Southern districts of KP, namely LAKKI, which is an 1800 square kilometers block having a potential of 7/20 mmcfd of gas and 1980-6000 barrels of oil per day. It is inviting International and national oil companies (IOC/NOCs) to join us in E&P operations.’ KP has a number of other prolific petroleum concession blocks. If an investor intends to apply as an operator i.e. wants to plan and execute the Exploration & Production activities on its own than that option is also available. Apart from this other prospective blocks are available for investment as non-operator, in case, the investor to have more (or less) JV it can be tailored accordingly. KPOGCL can share preliminary information on geology, success expected and economics of Exploration& Production blocks in KP. Investment in services also provide great opportunities to the investors. The services include preliminary Geological and Geophysical (G&G) Survey/Study, Magnetic and Gravity Survey, 2D/3D Seismic Data Acquisition, Drilling, Security services, Land permitting, camp supply/management, logistics, diesel engine supply/operation/maintenance, catering, human resource supply and other support services. Policy Framework, Incentives, Pricing and Legal/Contractual Information, coordinate access to Data Rooms and LMKR Data Repository, set up office and Manning in Pakistan, coordinate and Execute JV (Working and Non-Working) Agreements, Concession Agreements.

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