E&P sector's drilling target likely to be missed

The challenging security environment and infamous circular debt has adversely affected the E&P sector's drilling activity, as only 42 wells have been spudded in FY11 (till 17 July-11) against full year target of 80 wells. With only 13-days left, FY11 target is likely to be missed and is expected to show a decline of approximately 38 percent on year-on-year basis as against 68-wells drilled last year, analysts said.
"Despite an obvious need for an accelerated drilling programme for oil and gas reserves, the programme remained largely muted in FY11", Nauman Khan, an analyst at Topline Securities said. He said a total of 4 (predominantly oil) discoveries were struck in the year, translating into success ratio 33 percent inline with historical success ratio of 30 percent. On the positive note, average discovery size stood approximately at 1,040bpd as against 450bpd last year.
"These discovery size propelling volumetric growth going forward along with firm pricing scenario", he said. As per Pakistan Petroleum Information Services (PPIS), only 42 E&D wells were drilled in FY11(till 17 Jun-11) achieving only 52 percent of the full year target of 80 wells. This is 38 percent lower than last year 68 drilled wells versus target of 100 wells.
In addition to reduce activity, further caution was exercise by the sector with focus skewed towards developmental activity rather than exploration of new reserves. In FY11, only 12 exploratory wells (against a target of 29) while 30 appraisal/development wells have been spudded against the target of 51 wells.
On a positive note, he said, exploration activity in Balochistan finally resumed after a lapse of 2 years. OGDC, Pakistan's largest E&P company, finally started working on the highly anticipated Zin Block. However, it is premature to estimate the actual outcome of the drilling process.
Amongst the listed companies, OGDC had drilled only 3 exploratory wells against target of 10 wells, while showing its inclination towards maximising returns from existing fields. The company had drilled 13 developmental wells against a target of 16 wells for the year. PPL and POL drilled only 1-exploratory well each but both are expected to benefit from its exploration activity of their JV (Joint Venture) partners. Out of 12 exploratory wells drilled during FY11(year to date), 4 discoveries have been made so far translating into success ratio 33 percent which is inline with the historical trend. However, the good thing was discoveries were predominantly of oil with average discovery size higher than last year. From these few wells discovery size was almost double at 1,040bpd as compared to 450bpd.