Fall in oil, gas reserves

The country's oil and gas reserves fell by 7.6 percent and 8 percent on year-on-year basis respectively in FY08 as the original recoverable reserves of some key fields were slightly revised down by their respective operators.
Amongst the oil fields were the Zamzama, Sakhi, Bobi, Jabo, South Mazari, Zaur and Chak-66 NE fields (representing a cumulative 8.6 percent of the total oil reserves of the country), which witnessed downward revisions in their original recoverable reserves.
However, the downward revision in these fields was partly offset by an upward revision in the Mela field by an approximately 50 percent on yearly basis, which increased its original recoverable reserves to 23.86 million bbl in FY08 from 15.87 million bbl a year earlier, especially since the Mela field represents approximately 6.7 percent of the country's total oil reserves.
On a company wise basis, BP's oil reserves fell by 4.3 percent on yearly basis in FY-08 which represent approximately 10.4 percent of the total oil reserves of Pakistan. However, this downward revision was moderately countered by an upward revision of 1.4 percent in OGDC's original recoverable reserves, which represent the lion's share of 45 percent of the country's total oil reserves.
Amongst the gas fields which saw downward revisions were the Bahu (-20 percent), Miano (-40 percent), Rehmat (-42 percent), Chachar (-8 percent) and Sawan (-35 percent), which cumulatively represent approximately 4.5 percent of the total recoverable gas reserves of the country. An upward revision of 2.0 percent in the Uch field from 4.99tcf to 5.01tcf slightly offset the fall in reserve numbers from other fields. The Uch field represents approximately 15 percent of the country's total recoverable gas reserves.
Of the 11 discoveries made in FY08, the reserves of a meagre 03 have been included in the latest figures released by the PPIS, namely Adam (operator - PPL), Missri (BP) and Moolan North (OGDC). Of the previously discovered fields, reserves of 03 fields were added, namely Zaur West (operator - BP), Ahmed (OPII) and Tando Allah Yar North (gas - OGDC).
Reserve addition of the 8 other discoveries should provide a welcome boost to the country's total oil and gas reserves. PPL's oil and gas reserve lives remain comfortably positioned at 24 and 16 years respectively. Although the addition of Adam field helped in increasing the company's reserves, its high production seems to be having an eroding effect on the company's total gas reserves as no major addition was made to the reserves.
The gas reserve replacement ratio (RRR) of the company was at -67 percent in FY08. However, reserves addition from the promising Mami Khel field is expected to improve the company's gas RRR. On the other hand, an upward revision in the oil reserves of Mela field propelled the oil RRR of PPL to 144 percent in FY08.
No oil and gas reserve additions were made by POL because of which the company's RRR was recorded at zero percent while its oil and gas reserve lives stand safely at 20 and 41 years respectively. However, POL's high reserve lives stem largely from a low production base, thus undermining its significance.
OGDC remained nestled in its position with respective oil and gas reserve lives of 11 and 31 years. Mela's upward revision also boosted OGDC's oil RRR to 14 percent as the company has a 56 percent stake in the field. Gas reserve replacement ratio in FY08 was at one percent. Due to the recent market slide, significant upward potential has been created in all the three major E&P scrips, Saad Arshad, an analyst at Invest Capital & Securities said.
Although the weak PKR-USD scenario is problematic for the economy, it is beneficial for the three E&P companies as their revenues are majorly marked in USD. "Moreover, considerable room to meet a relatively inelastic demand exists as we merely produce approximately 25 percent of our total oil consumption", he said and added that OGDC, PPL and POL are currently trading at attractive FY09E PEs of 5.4x, 4.9x and 4.6x respectively.