Experts and policy-makers are convinced that the GDRs is the best of all available options for the gas company in the prevailing situation

From KHALID BUTT, Lahore
Nov 21 - 27, 2005

The Cabinet Committee on Privatization (CCOP) has opted for Global Depository Receipts (GDRs) to off load shares of the state-owned oil giant, Oil and Gas Development Company Limited (OGDCL), in the international stock market, which will be announced in its upcoming meeting, officials confirmed.

The official sources told PAGE that the OGDCL consultants strongly opposing the strategic privatization of the company have already suggested for using the option of GDRs for shares off load.

Pakistan had used GDRs option for the NBP and the PTCL, but in both cases, it received poor response and now they want to make the OGDCL a test case for Islamabad's long-time entry into the world stock market.

Talking to The PAGE the Privatization Commission's officials said that the consultants have recommended GDRs option for the ODGCL, which was one of the various options being considered for this profit-making state-owned oil exploration and production company.

"GDRs are one of the many options and the final decision on the OGDCL privatization would be taken at the appropriate level in due course of time," the officials said.

Experts and policy-makers are convinced that the GDRs is the best of all available options for the gas company in the prevailing situation and it could bring Pakistan good return instead of its strategic sale.

They are convinced that since oil exploration and production was a great attraction for investors, the OGDCL can bring desired results for Pakistan.

The OGDCL's IPO, which had received overwhelming response from domestic shareholders in the past, is reported to be a source of inspiration for the policy-makers to opt for GDRs for it.

Experts say prior to go for the GDRs option for the OGDCL, Pakistan would have to take a number of steps to ensure that the time and schedule finalized for such an initiative work to the expectation of the policy-makers.

The government has to take major steps to ensure that the schedule finalized for the OGDCL's GDRs was ripe and would bring good results from the international stock markets.

At the same time, Islamabad would be required to restructure the OGDCL house in such a manner that it responds to queries received from any of the clients or companies listed in any of the international market within a reasonable shortest time.

Experts on GDRs say that two factors play pivotal role in making GDRs for any company a success: economic and political situation of a country and its ranking in the world stock market.

OGDCL has registered sale of 30,085 barrels of oil per day, 717 million cubic feet per day of gas, 281 metric tons per day of LPG and 53 metric tons per day of sulphur during fiscal 2004, with 34 and 21 percent respective shares during 2003-04 in oil and gas production.

Officials said that OGDCL held 48 per cent of oil and 35 per cent of gas share of oil and gas reserves in the country, which was higher than any other exploration company. Rs. 139.7 million barrels of oil and 9.8 trillion cubic feet of gas have been explored during fiscal 2004.

The OGDCL sources said that the company had implemented a number of projects for the development of its oil and gas fields including Dhodak gas/condensate field in district D.G. Khan, Punjab, Qadirpur gas field in district Sukkur, Sindh, Pirkoh and Uch gas fields in Dera Bugti Agency, Balochistan, and Nandpur and Panjpir gas fields in Khanewal and Jhang districts, Punjab.

The officials said that OGDCL carried out exploration and development activities on its own besides joint ventures with other oil companies. OGDCL presently holds the largest acreage position in Pakistan and was operating in 16 concessions covering an area of 25,656 Km2 of which OGDCL owns 100% interest in 7 concessions. In addition, OGDCL holds non-operating working interest in another 7 concessions operated by other companies covering an area of 32,499 Km2 including 15,000 Km2 for offshore blocks.

OGDCL's equipment base includes nine drilling rigs, two workover rigs, six seismic data acquisition crews, civil works and gas pipeline laying crews, a seismic data processing centre, geological analysis laboratory and logging units. It has an Oil and Gas Training Institute with fully equipped laboratories which have also provided training to professionals from foreign oil companies operating in Pakistan.

The officials said that OGDCL had drilled 187 exploratory wells and 239 development wells besides making 60 discoveries with a success ratio of 1:3. OGDCL had been successful in making 10 discoveries - two oil discoveries and eight gas/condense discoveries for the last 3 years.

OGDCL's profitability depicts an upsurge on the dual impact of higher energy prices and enhanced oil and gas output. Moreover, it is expected that the OGDCL would declare an interim cash dividend at Rs2/share as against Rs1.5/share during 1Q/FY05.

The higher energy prices, new discoveries and development activities at existing fields are expected to fuel the growth momentum of OGDCL's revenues and earnings.

It may be recalled that during last financial year the earnings of OGDCL were up 47% ensuing from 44% surge in sales revenue.

The company's sold quantity of crude oil, gas and LPG were higher at 31%, 19% and 18%, respectively. OGDCL realized net price of crude oil during FY05 at US$36.5/bbl, 36% higher as against US$26.8/bbl in the preceding year. Developments in Chanda and Qadirpur were major contributors to the company's enhanced oil and gas output during the year. The Chanda Field commenced production in July 2004 and is presently producing 2,700 bpd of oil and 9.5 MMcf per day of gas. The Qadirpur plant started operating at full capacity from November 2004 and the field is supplying 500 MMcf per day of gas to SNGPL.