Latest venture to explore oil and gas into offshore territory of the country is expected to meet with a 'big success' following unsuccessful attempts on this front in the past, experts said. Some experts anticipated offshore discovery to be even bigger than the Sui field as the block is estimated to be rich in gas reserves. The Sui field is currently second biggest gas field after Mari with current production at around 400mcfd or 10 percent of total gas production.
The discovery is anticipated to yield gas flows which can be as big as Sui field, with estimated reserves of 3-8 trillion cubic feet (TCF), or 25-40 percent of Pakistan's total gas reserves. Pakistan Exploration & Production (E&Ps) companies along with international partners have ventured into offshore territory of underexplored but promising Indus G-Block for a deep-sea drilling endeavour.
The operator of the block, ENI (an Italian company working in Pakistan's upstream sector since 2000) has chartered Saipem 12000 rig/ship to drill the exploration well, located 230 kilometres southwest of Karachi in the water depth of more than 1,300 meters.
The endeavour is a Joint Venture (JV) formed by ENI, ExxonMobil (American company that has come back to Pakistan after nearly 3 decades), Oil and Gas Development Company (OGDC), and Pakistan Petroleum (PPL) to spud the Kekra-1 exploration well in Indus G block (rigs reached Karachi's coastal lines and drilling may have already begun). The exploration cost is estimated at $70-80 million, to be contributed equally by the JV partners.
"All eyes are fixated on the said exploration endeavour with companies and government officials calling it a possible 'Game Changer' for Pakistan (the Country which meets up to 49 percent of its oil & gas need, in barrels of oil equivalent, through local production)", Nabeel Khurshid, an analyst at Topline Securities said.
Any substantial discovery can be a good catalyst for Pakistan E&Ps (especially OGDC & PPL) as well as for attracting foreign investment into the sector. Further, it will also provide some respite to Pakistan's depleting oil and gas reserve life which are estimated at 11 years and 14 years, respectively.
By or before April 2019, the companies will be in a position to assess the potential hydrocarbon flows from this offshore drilling along with their economic viability. Setting up the necessary infrastructure to make hydrocarbon flows commercially available can take 3-5 years as per channel checks, Nabeel Khurshid said.
Offshore success can be a real game changer for Pakistan E&Ps as offshore Indus Block G falls under 'Ultradeep' Zone-0 price mechanism. "We estimate that at Arab Light Crude $60/bbl, the gas from Indus-G will be priced at $7.2/mmbtu with additional $1/mmbtu as an incentive for first three discoveries in offshore area, as per Petroleum Policy 2012 (PP12)", he said.
The said zone is competitively priced, offering premium of 80 percent, in comparison to the average applicable pricing on onshore blocks under older policies. Further, the PP12 exempts E&P companies from paying any royalty for the first 4 years after commencement of commercial production from offshore field, which otherwise, would have been 12.5 percent of the value of petroleum produced.
With incentives (premium pricing and royalty exemption) that are being offered on offshore blocks (ultradeep) endeavours, E&Ps can fetch 50-60 percent of net margin vs. 35-40 percent on existing blocks, he estimated. "However, if history is to tell us anything, there could be another dry hole in waiting as Pakistan has drilled 17 offshore wells to date and most failed to reach the target reservoirs", he said.
The last offshore well Shark-1, a JV of PPL and ENI was spud in 2010 at exploration cost of $40-45 million and was found to be commercially unfeasible after three months of drilling.
If drilling in Indus-G turns out to be unsuccessful, it could be another blow to Pakistan and its exploration companies that are in dire need of some major discoveries given fast depleting hydrocarbon reserves, he said. "In case of non-feasibility, we estimate per share impact of dry well cost on OGDC and PPL at Rs 0.6 and 1.1, respectively, to be booked in the second half of FY19, as per the accounting treatment", he added.
The discovery, if commercially viable (success rate for the region is around 10-20 percent), is anticipated to yield gas flows which can be as big as Sui field, with estimated reserves of 3-8 Trillion Cubic Feet (TCF), or 25-40 percent of Pakistan's total gas reserves.
Comments
Comments are closed.