'OGDCL eyeing more than 100 percent addition of reserves in the long run,' Managing Director, OGDCL

Muhammad Rafi was appointed as Managing Director and CEO on June 13, 2014. He has 38 years of experience in senior management positions in Finance, Accounts, Banking, Corporate Affairs and Internal Audit. Rafi joined the Company in October 1988 and has served in various senior positions including Acting Executive Director (HR/Admin), Chief Financial Officer, General Manager (Finance) and General Manager (Internal Audit) prior to the assumption of his current position. Mr Rafi was also nominated by the Company to serve as a director of MCPL, an associated company: a role which he has performed since 2012.
BR Research recently sat down with the MD and discussed the future prospects of Pakistan's largest E&P company. Following are the edited excerpts.
BR Research: How has OGDC's operational and financial performance been recently?
Muhammad Rafi: OGDCL is the largest E&P Company in Pakistan, in terms of market capitalisation, production, exploration acreage and profitability. We have been operating for more than 50 years in Pakistan, currently having 62 blocks, of which 29 were awarded just last year.
Our gas production is around 1.2 billion cubic feet per day and oil production is 44,000 barrels per day. We are the largest producers of both oil and gas in the country. Last year, we earned Rs 124 billion in after tax profits, whereas the contribution to the exchequer was Rs 132 billion, approximately. We are also the largest taxpayer in the country, having paid around Rs 55 billion in taxes to the government.
BRR: Pakistan's gas production has remained stagnant for quite some time. What is OGDCL's state and how much work has been done towards increasing gas production flows?
MR: I will first touch upon the seismic data acquisition. We have chalked out a very comprehensive plan for seismic data acquisition - both 2D and 3D. In terms of 2D seismic survey, the acquisition would be close to 2,800 line kilometres, whereas in 3D, the seismic acquisition would be around 2,000 square kilometres.
As a result of seismic data acquisition and data interpretation, new prospects would be identified; on basis of which new exploratory wells will be drilled.
As far as the company's current endeavours towards gas production are concerned, we have ongoing projects at Kunar Pasaki Deep, which will contribute another 120 million cubic feet of gas per day in the system. Uch II is another project, from which we are likely to witness production increase from 120 million cubic feet per day to 160 cubic feet per day by December this year.
We recently had a new discovery at Sogri field inaugurated by the Prime Minister. We are trying to develop the discovery on a fast track basis. Hopefully this gas will also be injected into the system sooner than later.
BRR: What are your views on the current petroleum policy and why has it not translated into substantial results despite being appreciated from most corners?
MR: The recent petroleum policy announced by the government will act as a major breakthrough in gas exploration and will enhance production in the country. Compared with OGDCL's current average price of gas of $3/mmbtu, the new policy offers a minimum of $6/mmbtu to $6.6/mmbtu for new discoveries. This is a 100 percent increase over current rates, which should act as a major incentive for E&P companies.
At OGDCL, we plan to drill 35 more wells in the coming year, out of which 19 will be exploratory wells. Similarly, as a result of new blocks which have been awarded to us, there will be more seismic data acquisition. Resultantly, there will be more wells in the next two to three years.
Historically, OGDCL has a success rate of 1:2.8 over the past may years, which is one of the highest in the region. Hopefully, if the similar success rate continues, one can assume that there will be new discoveries and addition to company's reserves.
BRR: Do you think wellhead prices on offer serve as the single largest incentive or there are other variables too that need to be looked at?
MR: I firmly believe that higher gas price will be a major incentive. The gas price of $6/mmbtu to $6.6/mmbtu should be attractive to the foreign investors also as it is to us.
BRR: What is the development on shale gas front? The policy is out there but the groundwork seems to be missing.
MR: OGDCL has already initiated a study on shale gas. The Company has also identified 3 wells for the purpose of collection of shale data during drilling phase. We hope that with the completion of study and availability of data, we will be in a position to move further to find the shale gas prospects.
BRR: Do you think shale gas is a realistic proposition in Pakistan?
MR: The incentives are very good, rather even better. But it is a capital intensive process therefore necessary research work and due diligence is required to be done, before investing capital into shale gas.
BRR: What are the future prospects of OGDCL?
MR: The future prospects of the company are bright. Our plans include more exploratory efforts in the shape of seismic data acquisition and exploratory wells. During the current year, we have planned 35 wells and have so far spudded five. We have already marked 22 wells on the ground are well on the track. We are in the process of hiring contractors' rigs as well.
OGDCL is also looking ahead at two very busy years from now to 2016-17. We have a lot of area in hand and we are working on most of the 62 blocks available. We see ourselves heavily engaged in the next two years in carrying out seismic data acquisition, and the number of wells may further increase. All these efforts are likely to result in further reserve additions.
Our capex target for the year is close to $900 million, as we have more wells to work with. We want to complete our ongoing projects, so that new discoveries under development stage are put into pipeline. Our core priority is to keep fulfilling the country's demand for oil and gas. Our next priority is to achieve our targets simultaneously, and we are all geared up for that. Our strategy for the next few years is to go for more than 100 percent reserve additions so that the country's future requirements are met.