PAKISTAN PETROLEUM LIMITED

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
June 11 - 17, 2012

Pakistan Petroleum Limited (PPL) has been a frontline player in the energy sector since the mid-1950s. As a major supplier of natural gas, PPL contributes some 25 per cent of Pakistan's total natural gas supplies besides producing crude oil, natural gas liquid and liquefied petroleum gas (LPG). The company's history can be traced back to the establishment of a public limited company in June 1950, with major shareholding by Burmah Oil Company (BOC) of the United Kingdom for exploration, prospecting, development, and production of oil and natural gas resources.

FINAL ENERGY SUPPLIES BY PETROLEUM PRODUCTS

FY (MILLION TONS) CHANGE IN %
2001-02 18.1 1.6
2002-03 17.5 -2.9
2003-04 14.9 -14.9
2004-05 16.2 8.3
2005-06 16.5 2.2
2006-07 18.6 12.9
2007-08 19.8 6.1
2008-09 19.8 0.1
2009-10 20.2 1.9
July-Mar
2010-11(e) 16.0 -
2011-12 (e) 14.8 -7.8

During September 1997, BOC disinvested from the exploration and production (E&P) sector worldwide and sold its equity in PPL to the government of Pakistan. Subsequently, the government reduced its holding through an initial public offer in June 2004, which was further decreased with the initiation of the Benazir employees stock option scheme (BESOS) in August 2009 when PPL employees were allotted 12 per cent shares from the government's equity. Today, the company's shareholding is divided between the government, which owns about 71 per cent, PPL Employees Empowerment Trust that has approximately seven per cent in form of shares transferred to employees under BESOS, and private investors who hold nearly 22 per cent.

PPL has been moving towards ISO 9001 quality management system (QMS) certification of all its field locations and departments.

The company established the monitoring and inspection (M&I) department in 2005 for quality assurance and control of technical and administrative operations, works performance and procurement. The department is mandated to ensure compliance with ISO 9001 standards for all fields and departments. Moreover, M&I initiatives also ensure continuity and functionality of the company's key assets and equipment through baseline surveys and periodic testing. Besides, inspection of annual turnaround processes and new and operational projects together with a review of daily production and plant shutdown reports are also carried out under QMS. Recently, PPL has achieved another milestone by clinching the prestigious management association of Pakistan's (MAP) 28th corporate excellence award in the oil and gas and utilities sector for the fourth consecutive year. This award affirms the company's adherence to best corporate governance practices.

PPL has an aggressive exploration programme geared towards optimizing production and replenishing reserves. The company has invested in acquiring state-of-the-art integrated technology and enhancing human resource competencies to achieve desired outputs and minimize risks through well-coordinated teamwork and strategic partnerships with local and international exploration and production companies.

PPL has 34 exploration blocks in Pakistan of which the company operates 19 while joint venture partners operate the remaining 15. This includes Offshore Indus-G, participation interest of which is expected to be granted soon. The company also has an international block in Yemen in partnership with OMV and is evaluating opportunities in the Middle East, Central Asia, and Africa.

PPL operates six producing fields in Sui, Kandhkot, Adhi, Mazarani, Chachar and Hala - the first two wholly owned by PPL - and has working interest in 12 partner-operated producing assets. Daily gas production from PPL-operated and partner-operated fields stands at one billion cubic feet (bcf) of gas per day, which translates into approximately 25 per cent of the country's total gas production.

During March 2012, PPL's proven recoverable reserves were 2.646 trillion cubic feet (Tcf) of natural gas, 39.280 million barrels (bbl) of oil/ NGL and 297,975 tonnes (tons) of LPG.

PETROLEUM PRICES IN PAKISTAN

PRODUCT RETAIL PRICE (RS/LTR) (JUNE 2012)
HOBC 127.07
Premium 100.02
High Speed Diesel 106.00
Light Speed Diesel 91.59

As such, the company's exploration strategy is focused on evaluating prospective areas for direct participation and pursuing farm-in opportunities. It is expected that PPL would acquire assets of MND Exploration and Production Ltd in Pakistan and Yemen through share purchase. However, MND Exploration and Production Limited (MND), a wholly-owned London-based subsidiary of KKCG SE, one of the largest privately owned groups in the Czech Republic, recently announced to divest its entire interest in oil and gas assets in Pakistan and Yemen.

MND's assets in Pakistan include (i) Sawan Development and Production lease (7.89 per cent share and exploration licences, (ii) Harnai (40 per cent), (iii) Ziarat (40 per cent), and (iv) Barkhan (50 per cent) in Pakistan together with exploration licence block-3 (20 per cent) in Yemen.

All assets under the deal are non-operating interests. Sawan Gas field is located in Sindh province. PPL already holds 26.2 per cent working interest in the Sawan gas field, which is currently producing 220 mmcfd gas and is one of the largest gas fields in Pakistan with further development potential through unconventional resources of hydrocarbons.

The company's major clients include Sui Southern Gas Company Limited (SSGCL), Sui Northern Gas Pipelines Limited (SNGPL), and Water and Power Development Authority (Wapda).