GAS PRODUCTION IN PAKISTAN

Security reason causes decline in Balochistan's share

By SHABBIR H. KAZMI
Oct 16 - 22, 2006

Natural gas has contributed a lot towards Pakistan's economic development, be it industry or agriculture. On one hand gas keeps industrial units and power plants running and on the other hand fertilizer plants provide much needed nutrients to area under cultivation. Gas as a primary source of energy is not only cleaner fuel but also low cost. Lately, it has also become a dependable and cost efficient substitute for motor gasoline.

Pakistan, like many other countries, was considered devoid of fossil oil. Indigenous production of crude oil has been too little to meet the energy requirement of the country. The discovery of Sui gas field turned a new page in the history of Pakistan. For decades it remained the sole source of gas and it still contributes significant share in total production of gas in the country. However, lately Sindh has emerged as the largest producer of gas among the four provinces.

Till late sixties the general perception was that Pakistan does not have enough oil and gas reserves. This also kept exploration activities at low level. It was only in mid seventies that Pakistan made any significant progress. Creation of Oil & Gas Development Corporation (OGDC) in the public sector, allocation of larger amounts for exploration and formation of joint ventures subsequently encouraged globally known exploration companies to enter Pakistan. One of the reasons was exceptionally high success rate as compared to the global average. The other reason was virtual discovery of oil or gas at most of the fields. This could be one of the factors that oil production may have not grown significantly but gas output has increased manifold. It is in fact a blessing in disguise because gas purification, transmission and distribution are much easy compared to refining of crude oil and distribution of refined products. Presence of condensate also allows extraction of LPG, yet another fuel commonly used by domestic consumers.

Most of the globally known exploration and production (E&P) companies are operating in Pakistan. One of the reasons for their presence is the well-head price formula. The GoP had realized that OGDC and other local companies cannot help in overcoming the huge crude oil deficit and the petroleum policy has to offer extra incentives. Presence of global operators has also encouraged competition. These companies are investing heavily in the development of the areas where they are operating.

OGDC remains the largest producer of oil and gas in the country. Its fields are also spread across the country, virtually located in all the four provinces. Lately, OGDC has chalked out an ambitious exploration program. Another reason for OGDC's colossal success is its strategy of engaging global companies as 'operators'. This strategy has helped in deployment of latest drilling equipment and technology as well as implementing its exploration plan. On top of everything the strategy also helps in hedging risk of OGDC as well as the operators. Foreign companies also feel more comfortable with a credible local partner.

A closer look at the province-wise data of oil and gas production shows that share of Balochistan has been going down. Two questions arises: 1) has Balochistan gone dry? and 2) Cost of production gone economically unviable. The fact is Balochistan is still rich in oil and gas but E&Ps do not feel 'secure' in working there. Therefore, the focus has shifted from Balochistan to other provinces. The success rate in these provinces, particularly in Sindh, has encouraged the E&Ps to concentrate on these areas. That is the reason most of the new discoveries are in Sindh, Punjab and NWFP.

On January 2006 the balance recoverable gas reserves were estimated at 32.928 trillion cubic feet. The average production of gas during July-March 2005-06 was 3.826 million cubic feet per day (mmcfd) as against 3.663 mmcfd during the same period a year earlier. During July-March 2005-06 a total of 41 wells were drilled (18 in the public sector and 23 in the private sector) as against 34 during the same period a year ago.

PRODUCTION OF NATURAL GAS
(July-March 2005-06)

COMPANY

OUTPUT (MMMCFD)

BHP

264

ENI

369

MGCL

467

OGDCL

649

OMV

545

OPI

83

POL

55

PPL

846

Tullow

5

PEL

21

BP Pak

241

Petronas

32

MOL

48

Total

3,825

Source: Economic Survey 2005-06

Shares of listed E&P companies often witness speculative trend. This is most visible once any announcement regarding any discovery is made. One such example is Tal block. Prices of the companies having interest in this block went up with the news, much before the announcement of proven reserves. Therefore, it is necessary to understand that people should learn to think rationally rather than being carried away by the vaguest information.