Pakistan: Oil and Gas Reserves Update

According to a report by IMS Securities, as per the latest hydrocarbon reserves data released by PPIS, as of June 2024, Pakistan’s total Oil reserves increased by 26% to 243 million barrels whereas Gas reserves were up slightly by 2% to 18.5tcf as compared to the reserves as of December 2023.

The substantial increase in oil reserves is primarily attributed to the improvement in oil reserves of OGDC, up 64%, while MARI’s oil reserves have doubled since December 2023, reaching 13.4 million barrels (similar to Tal block’s current reserves of 16.7 million barrels).

Despite the much-awaited addition of reserves of Bannu West (Shewa) and reserves upgrade of Mari Ghazij, overall gas reserves saw only a modest 2% increase, largely because of decline in other major fields.

Overall, a significant improvement in oil reserves was observed, largely due to the reserve upgrades of listed E&P companies, driven by the addition of Shewa and the reserve upgrades of Bolan East, Kunar, and Pasakhi/ Pasakhi North. This development is more favorable for OGDC and MARI as compared to PPL and POL.

 

Pakistan: OGDC profit down 22%QoQ

Pakistan’s largest exploration and production company, Oil & Gas Development Company (OGDC) has reported its 2QFY23 financial results, posting profit after tax of PKR 41.7 billion (EPS: PKR9.70), lower by 22%QoQ, higher by 18%YoY.

Net sales were PKR97.2 billion for the period, down 8.3%QoQ but up 22%YoY basis, mainly on the back of declining oil prices (down 15%QoQ) during the period. Overall, total hydrocarbon production declined by 1.7% during the quarter.

Exploration expenses were reported at PKR5.1 billion on account of two dry wells: Shahpurabad-1 (OGDCL stake: 50%) and Sundha Thal-1 (OGDCL stake: 50%).

Furthermore, operating expenses increased to PKR21.4 billion (up 15%QoQ) from PKR18.63 billion in the previous quarter.

Finance & other income for the quarter were reported at PKR9.2 billion, likely due to higher income on lease holdings and bank deposits.

Along with the result, company also announced an interim cash dividend of PKR2.25/share, taking total 1HFY23 dividend payout to PKR4.0/share.

 

Pakistan: E&P companies post windfall profit

According to a report by Pakistan’s leading brokerage house, AKD Securities, the Exploration & Production (E&P) sector has reported phenomenal earnings for 1QFY23. The sector’s profit after tax was reported at PKR100.8 billion—the highest in its history. 

The sector’s earnings grew 55%YoY, with favorable macros driving earnings growth this quarter.  Net sales were reported at PKR226.6 billion for the quarter, higher by 13%QoQ and 54%YoY. This despite a drop in Oil/Gas production, but a weak PKR fueled topline growth. 

Exploration expenses in the final quarter of last year were at PKR26.6 billion, with the giant’s share dropping in PPL’s lap, with the Company reporting PKR11 billion in dry well costs. In 1QFY23, the exploration expenses of the sector were stated at PKR9.2 billion, lower by 65%QoQ, due to the absence of any substantial dry wells. 

On a company wise basis, the greatest sequential growth in profitability was posted by PPL, with net profit growing rising to PKR26.3 billion for the quarter. Trade Debts of OGDC and PPL were reported at PKR491 billion and PKR401 billion at the end of the quarter, respectively, increasing by PKR34 billion and PKR35 billion from the earlier quarter. 

The E&P sector provides investors with an exchange rate hedge, with the prospects of the sector having been muddied by mounting trade debts for the larger companies. Hence, within the sector, analysts like MARI and POL due to the relatively low exposure to the circular debt menace.

Why Pakistan fails in boosting local production of crude oil and gas?

The report filed by Kazim Alam in Dawn should be an eye opener the policymakers and law enforcing agencies of Pakistan. The first and most important point is that production of oil and gas is constantly on the decline and E&P companies have not been able to increase production.

The second point is the real cause of concern, despite the fact that the country has a drilling success rate that’s notably higher than the international average (Every third drilling is successful in Pakistan as against one in five internationally; the average wells drilled in the country remains low.

Kazim has raised a pertinent point, whom to blame for the poor state of E&P in Pakistan: nature or bad governance? In my opinion the Government of Pakistan has to accept its inadequacy. It has failed in attracting foreign companies as well as providing security cover to the staff of E&P companies working in remote areas.

Since shifting blame to others is common the quote of an executive burst me into laughter. Citing the example of Kekra, a field located near Iran, he said the prospects seemed so good that E&P companies went all in, committing as much as US$140 million, or more than Rs28 billion at the current exchange rate. But they found nothing there. The supposedly huge reserves accumulated over hundreds of thousands of years had already slipped away in the intervening period.

The conclusion is that discoveries are small the efforts have to be accelerated by allocating more funds for drilling more wells. One of the most painful observations is that most of the E&P companies operating in public sector are made to pay huge dividend rather than spending money on drilling of new wells.

Some analysts say that in Pakistan people with vested interest often prevail over, they make big money in the purchase of crude oil as well as finished products. In case indigenous production of crude and POL increases, they will go bankrupt.

If any one does not agree with me should peep into the history. Excluding the output of OGDC, the share of all other companies is disappointingly low.
No ‘green’ refinery has been established after PARCO. Byco may be a good addition, but it is based on outdated technology. Other refineries have also failed major revamping and continue to produce low value added products.

To conclude it is sufficient to say only the Government of Pakistan can play a lead role by: 1) bringing in foreign E&Ps into the country, 2) offering new leases throughout Pakistan and 3) Encouraging OGDC to form new joint ventures.

OGDC discovers hydrocarbon in District Hyderababd

Pakistan’s largest exploration and production (E&P) enterprise, Oil and Gas Development Company (OGDC) has discovered a new oil and gas reserve in Hyderabad District. The OGDC is the operator of joint venture of Nim Block having 95% share along with 5% shareholding of the Federal Government through Government Holdings.

The discovery at exploratory well Chhutto-1 is the first hydrocarbon reserve in Bulri Shah Karim, Tando Muhammad Khan in District Hyderabad. Initial results encouraged the company to drill two more wells in this licensed areas, of which one well has already been marked for immediate drilling.

The structure of Chhutto-1 was delineated, drilled and tested using OGDCL’s in-house expertise. The well was drilled down to the depth of 3,820 meters. The well has tested 8.66 million standard cubic feet per day (mmscfd) of gas and 285 barrels per day (bpd) of condensate through 32/64-inch choke at wellhead flowing pressure of 2,100 per square inch.

As declared by the Company, the discovery is the result of aggressive exploration strategy adopted by the OGDC. It has opened a new avenue and would add to the hydrocarbon reserves base of the country in general and OGDC in particular.

The OGDC has the largest acreage, production and hydrocarbon reserves in the country. It is listed at Pakistan and London Stock Exchanges with a debt-free robust balance sheet and cash reserves, although its huge financials are stuck up in the country’s chronic energy sector circular debt.

Pakistan meets around 12% of its oil requirement from indigenous resources. Historically, the OGDCL’s production has hovered between 35,000 and 45,000 bpd. The company has embarked upon an aggressive exploration and development program in the last few years to take advantage of a slowdown in drilling activities in the Middle East and around the world.

Only recently, the company launched four fresh seismic crews started operations in Kharan, Pasni, Gwadar, Zhob and Musakhel in Balochistan which remained inaccessible due to security situation for a long time. It was for the first time that its nine seismic crews were simultaneously working in various parts of the country. The number of such crews never went beyond five in the past, he claimed.

OGDC achieves record crude oil production per day

It is not a secret that Pakistan is highly deficient in indigenous energy products. Import of crude oil and POL products eats up billions of dollars every year. On top of that extensive gas and electricity load shedding keeps capacity utilization of industrial units below optimum capacity utilization. The prevailing situation demands accelerating activities of exploration and production (E&P) companies. Pakistan meets around 12 percent of its oil requirement from indigenous resources.

The state owned largest E&P, Oil & Gas Development Company (OGDC) claims it is making extra efforts and one tends to agree with the statement partially. Its latest announcement says that the Company has achieved a record production of 50,172 barrels per day (bpd) of crude oil. By international standard the number may look dismal but for Pakistan it looks enormous, 57 percent of the country’s total crude oil production estimated around 88,000 bpd.

The information disseminated indicates that the Company is all set to inject about 4,000 barrels of additional oil per day, 100 million cubic feet per day (mmcfd) of gas and 400 tons of liquefied petroleum gas, starting with fewer quantities in the first week of December and then gradually going up. This addition would come from Kunar Pasakhi Deep field in Sindh which had been held up due to disputes and court cases.

OGDC discovers hydrocarbons reserves in Sindh

 Pakistan’s largest oil and gas exploration company, Oil and Gas Development Company (OGDC) has discovered hydrocarbons reserves in Sindh’s Ghotki and Khairpur districts. This has been stated in a communique sent to Pakistan Stock Exchange on Thursday.

According to the details the three discoveries – at Gundanwari-01, Mithri-01 and Khamiso-01 wells – would cumulatively add up to 29mmcfd gas and 15 barrels per day (bpd) of oil. It would increase OGDC’s earning by Rs0.40/share.

At Khamiso-01 in Ghotki, a joint venture of Guddu Block – comprising of stakes as OGDC as operator (70%, SEPL (13.5%), IPRTOC (11.5%) and GHPL (5%).

The structure of Khamiso-01 was drilled and tested by OGDC’s in-house expertise. The well was drilled down to the depth of 753 meters, which tested 2.95mmcfd of gas through 32/64-inch choke at wellhead flowing pressure of 505 PSI from Pirkoh Limestone formations.

At Gundanwari-01 in Khairpur district, where OGDC is an operator with 95% stake and Government Holdings (Pvt) Limited has remaining 5%, the well structure was delineated, drilled and tested. The well was drilled down to the depth of 3750 meters. It tested 19.40mmcfd of gas and 15bpd of Condensate through 32.64-inch choke at wellhead flowing pressure 3300 PSI from Lower Goru (Massive Sand) Formation.

OGDC assigned Triple AAA rating

Pakistan’s largest exploration and production entity, Oil and Gas Development Company Limited (OGDC) has been assigned a long-term entity rating of 'AAA' (Triple AAA) and short-term rating of 'A1+' (A One Plus) by Pakistan Credit Rating Agency (PACRA)

These are the highest ratings on respective entity ratings scale and denote the lowest expectation of credit risk emanating from an exceptionally strong capacity for timely payment of financial commitments.

The ratings reflect OGDC's strategic importance to the government of Pakistan for being the largest upstream oil and gas company having predominant share of recoverable hydrocarbons reserves and exploration acreage.

Moreover, the company is the leading contributor in the country's major hydrocarbon mix production and its oil and gas production continues to help the country in saving huge foreign exchange.

ODGC profit declines by 28.5 percent

Pakistan’s largest exploration and production enterprise, Oil & Gas Development Company (OGDC) has released its half yearly financial results for the period ended 31st December 2015. OGDC profit eroded by 28.5 per cent but the Board of Directors was generous enough in approving payment of second interim dividend of 12 percent, taking payment during first half to 27 percent.

OGDC has posted profit after tax of Rs34.206 billion (EPS: Rs7.95) during the period under review as compared to net profit of Rs47.828 billion (EPS: Rs11.12) for the corresponding period a year ago, down by 28.5 percent.

Net sales of OGDC plunged to Rs86.186 billion during July-December 2015 from Rs118.64 billion during the same period 2014, a decline of 27.35 percent.

OGDC has presence in the four provinces, largest portfolio of hydrocarbon reserves – 59 percent of oil and 36 percent of gas as at 30th June 2015.

OGDC’s average daily production is 40,028 barrel oil, 1,116mmcf gas, 312tons LPG and 28 tons Sulphur. It contributed 28 percent to total gas and 48 percent to crude oil production

OGDC to add LPG plant at Naspha field

Nashpa field of Oil and Gas Development Company (OGDC) is located at District Karak of Khyber Pakhtunkhwa. It is rich in hydrocarbons and capable of producing daily 1,032 barrel oil, around 125 mmcfd (million cubic feet gas per day) gas and liquefied petroleum gas (LPG).

A 380 metric ton LPG plant  would also be installed in March this year. The LPG project will be completed in two years and local manpower will be hired for running the plan at the field located at District Karak of Khyber Pakhtunkhwa. The field has been discovered recently having oil and gas.

Pakistan discovers a tiny gas field

Oil and Gas Development Company (OGDC) has made another gas discovery with initial production of 23.50mmcfd from its exploratory well in Sukkur in Sindh province of Pakistan.

According to the information provided to Pakistan Stock Exchange (PSX) by OGDC the Thal East well #01 was drilled down to the depth of 4,468 meters whereby reserves of hydrocarbon have been found in Basal Sand of Lower Goru Formation.

The details further says one more zone in Lower Goru Formation Sand is available which is yet to be tested and hopefully will add more reserves.

Russia enters Pakistan in search of oil and gas

Russia is expected to soon return to Pakistan’s petroleum sector after five decades with fresh investment commitments in new exploration and development techniques and construction of cross-country pipelines.

While the two countries are at an advanced stage of talks on a government-to-government contract of a 1,100-kilometre gas pipeline from Karachi to Lahore with an estimated cost of US$2.5 billion, some Russian companies are preparing to enter Pakistan’s exploration and development sector.

Reportedly a leading Russian petroleum company, JGC Rosgeologia (Rosgeo) has recently signed non-binding agreements with two public sector exploration and development companies for investment cooperation. The MoU was signed by KPOGCL’s CEO Raziuddin Razi and Rosgeo’s CEO Roman S. Panov. The two firms would promote the establishment and development of mutually beneficial cooperation in the above areas.

According to the MoU signed with Khyber Pakhtunkhwa Oil and Gas Company Ltd (KPOGCL), Rosgeo from Moscow will extend long-term cooperation in KP’s exploration and production (E&P) sector. The two firms would jointly bid for fresh exploration and concession blocks in upcoming transactions and acquire shareholding from existing companies.

The KPOGCL was created after the 18th Constitutional Amendment to share with federal government ownership of oil and gas rights. In 1961, Pakistan set up its largest E&P firm, the Oil and Gas Development Company Ltd (OGDCL), with the financial and technical support of the then USSR technical experts. The cooperation remained almost non-existent for decades due to diplomatic reasons.

The agreement envisages long-term cooperation between the two companies to perform various E&P activities, including geological and geophysical field works, 2D and 3D seismic data acquisition, drilling and related services, warehousing and jointly acquiring concession blocks in various parts of Pakistan.

Specific cooperation will be in the key priority areas of increasing the economic potential of Pakistan through the identification of new hydrocarbon fields and efficient use of the natural resources by ensuring environmental protection and sustainability.

The joint venture would also carry out geological surveys within Pakistan, using the modern technologies and methods. The Russian company will be responsible for the technical planning and execution, arrangement of rigs and recorders, while KPOGCL will be responsible for security, logistics and transportation, gensets, earth moving equipment, cranes, tractors, camp facilities, local support manning, communication, local clearances, permits, licences, business development, etc.

The cooperation of the two companies will be implemented in phases. A permanent working group comprising the two companies has been constituted to identify, study and evaluate specific projects of mutual interest.

For every specific project of mutual interest, the two companies would establish the appropriate scheme of cooperation and establish a joint company that will undertake the execution of the various projects.

Rosgeo also signed a similar MoU with the OGDCL for E&P cooperation on broader terms within their blocks for mutual benefit and overall reciprocity in accordance with the relevant laws, rules and regulations.

The cooperation under the MoU would include examining the possibility of “farm-in” and “farm-out” opportunities in existing exploration licences and look into opportunities in development and production fields including opportunities related to the application of enhanced oil recovery (EOR) techniques.

The two sides would look into mutually beneficial activities in acquisition, processing and interpretation of 2D and 3D seismic data and formulate strategies for sharing the expertise and training the personnel of both the companies.