OGDCL strengthening country's energy base

Dec 12 - 18, 2005

Sui, the largest gas reservoir in Pakistan initially having a size of over 9 trillion cubic feet of gas, is depleting fast and may be sufficient only for the next three to four years.

The depletion of this largest gas resource was however not a cause of serious concern as there are strong possibilities of exploring more gas fields in the same block, but the nature is kind to have bestowed with plenty of gas resources in other parts of the country. In this respect Mari Gas is providing a strong base to the supply side on the natural gas front.

Apart from the exploration activities outside Mari Field, Mari Gas is enhancing its reserves bank of Mari D&P lease and has made a considerable progress in this regard by adding 1.2TCF recoverable reserves as concluded by reservoir consultant through discovery in a deeper horizon.

The installation of compressors on shallow Habib Rahi Reservoir wells is also expected to be finalized by March. Meanwhile, Mari Gas also entered into first ever operations outside Mari D&P lease area with spud in of Ziarat Exploratory well No 1 as an operator in September 2005. In FY05 the company made a gas discovery in its Mari D&P lease area in Sui and Pirkoh Limestone formations.

In the current financial year, the sales of the company stood at Rs4,510million, 19% higher compared to Rs3,784million during the corresponding period of last year. This increase in sales is attributable to higher production from the company owned fields and increase in average selling price. Operating expenses of the company also remained intact at Rs236m, while exploration expenditure depicted a mammoth increase of Rs214m to Rs235m compared to Rs21m in the corresponding period last year. Consequently, the operating income of the company declined by 19% to Rs185m as against Rs229m previously. However, an exceptional increment of 318% in other operating income and 10% decline in taxation expense lent great support to the bottom line. The effective tax rate of Mari also depicted a decline of 6.3pps.

The gas production during the period stood at 42,589 MMSCF with an average rate of 463 MMSCF/day as against 41,484 MMSCF and 451 MMSCF/day previously. The shareholders are entitled to a guaranteed rate of return at 30% per annum and this return is escapable if the company's gas production increases beyond the level of 425 MMSCFD at the rate of 1% for each additional 20 MMSCFD of gas or equivalent oil produced with subject to a maximum of 45% per annum.


OGDC in fact is a strong contributor of energy supply in the public sector. Steady growth in Gas and LPG production has increased at 7% and 20% respectively due to the higher contribution from Qadirpur and Bobi fields of the company.

In the days to come, a considerable enhancement in production of oil, gas and LPG is expected in near future as OGDCL is pursuing various development projects including Dhakni and Dhodak expansion projects, Chanda, Tando Allah Yar, Sinjhoro development projects and Qadirpur Gas Compression project.

According to the quarterly report, during the period four petroleum exploration licences were granted to OGDCL - in Zone-I, Block No.2564-1 (Smander) and 3371-11 (Dhok Sultan) while Block No. 2467-8 (Thatta) of Zone-II and Block No 2870-2 (Bagho-o-Bahar) in Zone-III. Weakening trend of crude oil prices have recently gone below the US$60/bbl level ensuing from the combined effect of lower demand growth estimates, build-up in US inventories and warmer winter temperatures in the northern hemisphere. Unseasonably warm temperatures have allowed refiners in the US to pile up crude and oil products. It seems unlikely that international crude oil prices would significantly firm-up in the medium-term ensuing from adequate global inventories and the comfortable demand-supply situation.

The financial health of OGDCL is reflected in its earnings during first quarter of the current financial year, which depicted 21% upsurge. Profitability of OGDC also strengthened on the back of a 31% rise in sales to Rs20billion as against Rs15billion previously, mainly attributable to high international oil prices and increase in sales volume of crude oil, gas and LPG from the company's own and operated joint venture fields.

The average net realized price of OGDCL for crude oil improved by approximately 47% to US$49/bbl compared to US$33.40/bbl during the same period previously.

Crude oil sales for the period stood at Rs10.3bn, 16% higher than the same period last year. Operating expenses of the company soared by 36% to Rs3.2billion, while exploration and prospecting expenditure also increased by 81%. On the other hand, other income of the company also depicted an extraordinary increment of 152% to Rs839million compared to Rs332m during the corresponding period last year.