PAKISTAN OIL, GAS REFORMS TIED TO BID FOR ENERGY SELF-SUFFICIENCY BY 2000

Dec. 9, 1991
Oil and gas exploration and development is accelerating in Pakistan as it seeks to achieve energy self-sufficiency by 2000. In addition to backing out some domestic oil use with burgeoning natural gas supplies and cutting refined products imports by boosting refining capacity, Pakistan is targeting a sharp increase in oil production. Ultimately, industry officials in Pakistan would like to see it become a significant net exporter of oil, perhaps qualifying it for eventual membership in the

Oil and gas exploration and development is accelerating in Pakistan as it seeks to achieve energy self-sufficiency by 2000.

In addition to backing out some domestic oil use with burgeoning natural gas supplies and cutting refined products imports by boosting refining capacity, Pakistan is targeting a sharp increase in oil production.

Ultimately, industry officials in Pakistan would like to see it become a significant net exporter of oil, perhaps qualifying it for eventual membership in the Organization of Petroleum Exporting Countries.

And foreign investment will pay a key role in that effort as the government takes steps to sweeten incentives for foreign oil and gas companies (OGJ, Apr. 22, p. 37). Consequently, drilling activity and the number of foreign operated concessions are at record levels in Pakistan.

Meantime, state owned Oil & Gas Development Corp. has embarked on an ambitious program of exploration in underexplored basins while seeking foreign assistance in hiking oil recovery rates in existing fields.

AHEAD OF TARGET

A recent surge in exploration and development in recent years has enabled Pakistan to achieve its crude production target set in the seventh 5 year plan 2 years ahead of its schedule.

Federal Minister for Petroleum and Natural Resources Chowdhry Nisar Ali Khan disclosed that fact at a recent meeting with a delegation of Premier Consolidated Oil fields, London, led by Premier Chairman Roland C. Shaw.

The seventh 5 year plan called for a target of producing 76,000 b/d of oil by 1993. Currently Pakistan is producing about 75,000 b/d of oil and 1.5 bcfd of natural gas, which combined meet about three-fourths of its energy needs.

With start-up of early production from recent significant discoveries by Occidental Petroleum Corp. and OGDC expected soon, the current target for 1993 soon will be exceeded. OGDC estimates production of 6,000 b/d of oil from Oxy's Pindori discovery near Islamabad, which yielded Pakistan's biggest single well flow rate. It also projects output of 2,950 b/d from an OGDC discovery well at Missa Kiswal. Subsequent drilling at Missa Kiswal suggests a field productive capacity of about 10,000 b/d, according to company estimates.

OGDC now expects those and other recent discoveries to boost Pakistan's oil output to as much as 100,000 b/d by 1993.

An earlier plan had called for oil production to rise to 72,000 b/d in 1991 from 43,000 b/d in 1986 (OGJ, Dec. 22/29, 1986, p. 23).

Much of the better than expected results stem from an enviable wildcat success ratio in Pakistan, 1:3 compared with the widely accepted international industry average of 1:10.

Pakistan is following a two pronged upstream strategy in pursuing energy self-sufficiency this decade: expanding its national gas infrastructure to substitute gas for oil where feasible and boosting domestic production of oil. That strategy calls for cutting oil's share of Pakistan's energy mix to 30% from 41% and boosting the gas share to 45% from 35%.

GOVERNMENT REFORMS

In a report in September to the Pakistani senate standing committee on petroleum and natural resources, Nisar noted a strong response from private oil companies to efforts of Prime Minister Nawaz Sharif to remove government controls on upstream oil and gas operations and cut red tape in permitting.

During the preceding 8 months, he told the committee, as many as 24 oil and gas concessions had been signed with international companies and additional contracts were being processed.

More incentives are likely to be forthcoming in the months to come as the government cobbles together the nation's first comprehensive petroleum policy, expected to be unveiled soon.

Nisar said the final version of the new petroleum policy is complete and awaiting cabinet approval. A draft of the policy was circulated among certain companies for comment. Nisar followed that up with meetings with oil and gas companies to hear their views, much of which were incorporated into the final policy document.

Part of that effort will include measures to review and streamline OGDC's role in Pakistan's petroleum sector, the minister said.

In the future, OGDC would compete with other companies on a commercial basis and without any official support under the new petroleum law, he added.

He cited the importance of the role foreign oil companies play in Pakistani exploration and continuing efforts by the current government to improve relationships with them.

In a meeting with Oxy International Oil & Gas Co. Pres. David R. Martin, Nisar also noted the Pakistani government is considering cutting customs duties and giving duty rebates on imports of drilling equipment in order to encourage use of advanced technology in the country's oil and gas sector.

Nisar told Martin foreign oil companies should focus more on offshore drilling, new exploration plays, workovers, and enhanced oil recovery.

Referring to exploration in the country, he noted that only 253 wells have been drilled in the country since independence, while in Canada alone 3,000 wells/year are drilled.

Nisar also told the senate committee he "hoped the day was not far off when Pakistan would enter into the group of OPEC nations."

OGDC'S ROLE

Although government support for OGDC might be diminished under the new petroleum law, Nisar told an OGDC meeting the state owned company has the potential to remain Pakistan's top oil company even while competing with foreign oil companies on a commercial basis.

He cited OGDC's recent impressive record of success in exploration, which has in turn spurred the government's plans to sharply boost exploration activity.

OGDC drilled six oil and/or gas discoveries in 1991, including the Missa Kiswal strike, which may prove to be the company's biggest oil discovery.

Nisar also stressed OGDC should undertake well workover and enhanced recovery programs to help Pakistan maximize oil production.

The minister urged OGDC's senior management to integrate efforts to make OGDC a dynamic and competitive oil company, lauding the company for progress on its program to become self-financing.

OGDC STRATEGIES

OGDC has implemented a new strategy to accelerate its search for oil and gas, according to Chairman Gulfaraz Ahmed.

Gulfaraz gave a comprehensive presentation to Niser covering OGDC's corporate mission, strategy, objectives, exploration and development programs, and results.

OGDC plans to drill 12 exploratory wells in the current fiscal year.

He noted OGDC's three part strategy includes a focus on exploration innovations, chiefly targeting bigger oil and gas reservoirs in new and nonconventional areas.

Gulfaraz said, "While maintaining a balanced economic direction, OGDC would achieve short term cash flow by concentrating in the southern district, maintain medium term production stability by exploring in the northern district, and undertake innovative searching in new areas for larger reservoirs of oil and gas."

OGDC made the switch to self-financing operation in July 1989, after which it needed to boost short term cash flow. Gulfaraz said the company could meet short term cash flow needs through rapid development of fields in the southern Indus basin.

Sustaining production in the medium term was needed to proceed with strategic decisions and maintain viability of OGDC as an oil and gas company. That could best be achieved by concentrating on exploration and development in the northern Indus basin and the region around Potohar plateau, Gulfaraz said.

OGDC's chairman said, given the weight of data accumulated thus far, more oil and gas discoveries in the southern and northern Indus basins can be expected, but there is less hope of finding larger oil and gas deposits in these conventionally explored areas.

For the third part of OGDC's strategy, exploration in virgin basins ordinarily could take as much as 8-18 years, given the lack of available geological and geophysical data.

However, given the current strong foreign interest in Pakistan E&D and the new government incentives, significant results of the potential for world class discoveries in the most remote virgin basins could be forthcoming in about 5 years, Gulfaraz said. In a few new areas, where some seismic surveys have begun, results are expected in about 2 years, he added.

"We will use new developments in technology for seismic data acquisition and processing and interpretation to improve chances of success of the innovative search," Gulfaraz said.

EXPLORATION STRATEGY

OGDC's exploration strategy currently focuses on a number of new areas, including the Peshawar basin, Makran district, Kakal Khurasan region bordering Afghanistan, Yazman area near the border with India, and offshore Indus basin.

OGDC's exploration in offshore and onshore areas of Makran, notably the Rajanpur area, has reached an advanced stage with wildcats likely to spud there within 2 years, Gulfaraz said.

The state company also plans to test for the first time stratigraphic plays in the Mianwali and Darbukach areas of Kohat district. If successful, that effort would open a new exploration frontier in Pakistan.

OGDC is earmarking considerable capital outlays for such innovative exploration methods and has obtained reconnaissance permits for some of the targeted areas. At the same time, Gulfaraz said, OGDC would welcome and encourage participation of private oil companies in joint ventures.

RECORD WILDCATTING

OGDC expects to continue its record pace of exploratory drilling in Pakistan. It essentially has achieved its goal of drilling 28 exploration and development wells in Pakistan in the current fiscal year.

That includes an OGDC record of 11 exploratory wells in 1 year.

For 1992, OGDC plans to drill 12 exploratory wells in Pakistan, with much of the focus in lower Sindh province.

OGDC DISCOVERY

OGDC plans one or two appraisal wells to its sixth hydrocarbon strike this year, which involved a sizable oil flow rate at Meyun Ismail, about 40 km southeast of Hyderabad in Sindh province (OGJ, Sept. 16, p. 50).

Its 1 Meyun Ismail discovery well flowed 1,320 b/d of 44 gravity crude and 78 Mcfd of gas with 450 psi flowing wellhead pressure from Cretaceous lower Goru sands at 7,144-7,281 ft. About 15 km southeast of OGDC's Tando Alam oil field, the discovery well is expected to be put on production soon. The high quality crude will be sent to a Pakistani refinery, and the low gas:oil ratio promises to expedite early development.

OGDC identified the Meyun Ismail structure with extensive seismic surveys. It is a tilted fault block trending north-south with its crest transacted by a fault on the west. The structure has an areal extent at the top of the reservoir of about 4 sq km with a vertical closure of 40 m.

OGDC spudded 1 Meyun Ismail June 2 and drilled it to target depth of 7,774 ft July 17.

OGDC DEVELOPMENT PLANS

OGDC plans to develop four oil and gas fields and two gas/condensate fields in lower Sindh province by yearend 1993 at a total cost of $88 million.

A loan from the Asian Development Bank will cover $52 million of that investment total. The loan will have a 15 year term, including a 3 year grace period. ADB has also arranged $5 million equivalent in commercial cofinancing from Fuji Bank Ltd., Singapore.

OGDC will be responsible for arranging in local currency an amount equivalent to the remainder.

Development of Thora, Sono, Lashari, and Kunnar oil fields and Bobi and Daru gas/condensate fields, all about 150 km east of Karachi, is expected to yield 48 million bbl of liquids and 57 bcf of gas.

The development will save Pakistan $47 million/year in imported oil costs.

Discovered by OGDC, the fields are near Tando Alam field, also underdevelopment with ADB funds. The multiple field project calls for drilling 11 development wells as well as procurement and installation of equipment and materials related to drilling, field gathering facilities, gas lift system, central gathering facilities at Tando Alam, and a gas processing plant.

In addition, the project will provide for transfer of foreign technology to improve drilling efficiencies and implement enhanced oil and condensate recovery with a gas lift system and gas recycling. OGDC plans to apply the technologies to other fields with similar geological conditions.

PIRKOH DEVELOPMENT

OGDC is proceeding with third phase development of gas fields in the Pirkoh area of Pakistan.

Revised plans call for 25 additional wells to be drilled by March 1992 to meet supply contract and related construction deadlines.

Current Pirkoh gas production is 160-175 MMcfd, flowing under wellhead pressure. Under an agreement OGDC signed with Sui Southern Gas Co., the initial average production of gas from Pirkoh was to be 80-130 MMcfd during fiscal 1991-92 and thereafter at a constant rate of 130 MMcfd. Accordingly, the throughput of Sui Northern Gas Pipeline has been agreed at an average 120 MMcfd.

To meet contractual obligations, initial plans called for drilling 35 Pirkoh wells and tying them into the pipeline by March 1992.

However, wellhead flowing pressures are declining along with reservoir pressures. So OGDC has begun to implement in phases a $174 million project to install additional compression on the pipeline to sustain throughput.

PUNJAB PROSPECTS

Prospects for E&D in Punjab are brightening with the Pindori and Missa Kiswal strikes and local government promises for bureaucratic reforms.

Ghulam Hyder Wyne, chief minister of Punjab province, said his government will approve drilling permits by all oil companies seeking to drill in Punjab within 1 month of application in an effort to boost production there.

He told Nisar he had made the commitment to management of Union Texas Petroleum Holdings Inc. during a recent visit to the company's headquarters in Houston. Union Texas is one of the key operators in Pakistan, having discovered more than two dozen oil and/or gas fields in the country during the 1980s alone.

Nisar told Wyne drilling action in Punjab probably will double in 1992 from current levels, citing increased exploratory activity at Dina Jhelum and adjoining areas of Azad Jammu and Kashmir that the Punjabi government approved earlier.

OXY PLANS

Oxy's Martin said Pakistan is one of the key countries where Oxy plans to expand E&D operations.

Citing new government incentives, Martin said Oxy plans to accelerate EOR operations in Bal Kasar, Joyamir, and Chak Naurang fields.

In addition, Oxy plans to drill a delineation well on the Soan block in the Potwar basin where it drilled the 1 Pindori oil and gas discovery.

That well flowed 5,906 b/d of 41 gravity crude and 18.5 MMcfd of gas from two zones at 13,304-13,746 ft. It flowed 2,994 b/d of 40.6 gravity oil and 9.6 MMcfd of gas through a 41/64 in. choke from 160 ft of Eocene Sakesar pay at 13,304-13,500 ft and 2,912 b/d of 42.8 gravity oil and 8.9 MMcfd of gas through a 1/2 in. choke from 80 ft of Paleocene Patala and Lockhart at 13,662-13,746 ft.

The discovery well, drilled last summer, has been suspended.

Oxy experienced a high pressure gas leak in the discovery well but quickly brought it under control.

Pindori is Oxy's second strike on the block. The first, at Bhangali, where production started in 1989, tested 3,110 b/d of 32 gravity oil and 7.2 MMcfd of gas from Eocene Sakasar.

Pindori is 17 miles east of Oxy's 50 million bbl Dhurnal field. Dhurnal and Bhangali together produce about 15,000 b/d of oil and 35 MMcfd of gas. Oxy is operator of Soan block with 40% interest and other interests held by OGDC 50%, Pakistan Oil Fields Ltd. 7% and Attock Oil Co. 3%.

UNION TEXAS

J.E. Knight, Union Texas vice-president of international exploration, said Pakistan's new oil policy will give an added thrust to his company's oil and gas exploration there.

Citing the increased confidence spurred by government reforms, Knight said Union Texas plans outlays of $30 million for exploration during the next 18 months in Sindh province.

The company long has seen Pakistan as one of its international linchpins. Union Texas has boosted its productive capacity in Pakistan to 18,000 b/d of oil and 151 MMcfd of natural gas.

CALLAN CONCESSION

Karak Petroleum (Pakistan) Ltd., a unit of Edward Callan Interests, Houston, plans to reprocess existing seismic data and drill one wildcat on the Karak block of Kohat-Potwar basin at a cost of $5 million.

Karak's joint venture with OGDC calls for exploration in Karak and Attock districts covering more than 774 sq km near Islamabad under the first phase of the joint venture agreement.

The Callan unit's license concession was the twenty-third such agreement signed under the current licensing round, 17 of which were with foreign companies and the remainder solely with OGDC.

BLOCK 25

Work has been outlined for Block 25, a 4,600 sq km parcel in Sindh and Baluchistan provinces awarded to a joint venture of Pakistan Petroleum Ltd. (PPL), Austria's state oil company OMV AG, and the U.K.'s Hardy Oil (U.K.) and Oil & Gas Development Corp.

The venture also was awarded Blocks 22 and 26 last year (OGJ, Nov. 12, 1990, p. 43), with OMV operating Blocks 22 and 26 and PPL operating Block 25.

The venture plans to conduct 1,200 line km of seismic survey and drill two exploratory wells on the block during 1991-94.

About 461 line km of seismic survey have been completed on the block, and additional seismic is planned in 1992.

About 95% of the block lies in the Dadu, Larkana, Nawabshah, and Jacobabad districts of Sindh and the rest in Kachhi district of Baluchistan.

The block lies west of the city of Larkana in Sindh and north of the city of Dadu in Sindh with the Indus River flowing through the southeastern portion.

Just west of the block is the Mazarani gas discovery drilled by a PPL group. Seismic surveys in PPL operated Block 35 continue, although civil strife in the region has led the government to provide troops to accompany the seismic crews.

OGDC's vibroseis crew had completed about 387 line km of survey as of July 9.

IRANIAN, SOVIET OVERTURES

Iran and the Soviet Union have offered Karachi proposals for joint oil exploration in Pakistan.

The proposal by the Iranians came from the Iranian Oil Minister during the sixth joint ministerial conference of the two countries in Tehran recently.

Nisar said a delegation from National Iranian Oil Development Corp. would visit Pakistan before yearend to exchange information and data about exploration to be carried out in two areas of Baluchistan.

Iran and Pakistan are proceeding with cooperative ventures in other petroleum sectors.

Pakistan and Iran recently agreed to conduct feasibility studies of constructing pipelines to deliver Iranian gas and oil to Pakistan (OGJ, Mar. 18 Newsletter). And the two countries recently marked progress on a joint venture refinery in Pakistan fed by Iranian crude (OGJ, Nov. 18, Newsletter).

Nisar, recalling a pioneer role the Soviets played in early oil exploration in Pakistan, said the government will seriously consider the Soviets' proposal for joint oil exploration in certain parts of Punjab.

Copyright 1991 Oil & Gas Journal. All Rights Reserved.