PPL announces country’s biggest gas discovery in 10 years

Find occurs in Matiari, Sindh; company says 56mmcfd of gas found


Saad Hasan December 15, 2015
Find occurs in Matiari, Sindh; company says 56mmcfd of gas found PHOTO: FILE

KARACHI:


Pakistan Petroleum Limited (PPL) on Tuesday announced that it had struck the country’s biggest gas discovery from any well in the past 10 years, raising hopes of acceleration in drilling activity.


The state-owned company hit a find of 56 million cubic feet per day (mmcfd) of gas in Matiari, Sindh.

This volume might not appear big in the overall context of gas consumption in Pakistan - 4,000 mmcfd - but it is still significant since many petroleum exploration companies have struggled to replace depleting gas fields with new finds.

New gas field discovered in Sindh

The Hatim X-1 well was spud in the Gambat South Block in October 8 and was drilled to the depth 3,800 meters on November 26 where tests were run to determine its potential.

Company officials say further drilling is expected to increase the gas output to 80 mmcfd. “We will drill the appraisal well in the next three months. We won’t be announcing that because it won’t be a discovery. But this is major find,” said an official.

This makes the discovery large enough to meet the need of Engro’s new fertilizer plant - the largest in the country - that has continuously faced shutdowns due to gas shortages.

Investors reacted to the news straightaway as PPL’s share price jumped from Rs106.71 to Rs110.95 by end of business even though the benchmark-100 index remained visibly under pressure. A total of 3.67 million shares changed hands on Tuesday.

PPL has drilled 11 wells so far in Gambat Block, which straddles across three districts of Sindh including Sanghar and Matiari. It has found hydrocarbons reserves in nine wells so far. In August last year PPL disclosed that Sharf X-1, another well in Gambat South, will produce 42 mmcfd with a potential to go up to 60 MMCFD.

Favouring local investors: PPL likely to be sold in bits and pieces

The Gambat South Block is operated by PPL with a working interest of 65%. Joint venture partners Government Holdings Private Limited and Asia Resources Oil Limited have 25% and 10% stake, respectively.  PPL ventured into Gambat with a bated breath since two other companies including Oil and Gas Development Company Limited (OGDCL) had already tried their luck and found nothing.

“We learned from their mistakes. They were just drilling in the wrong place,” said a senior PPL official.

But he also attributed the high successful ratio of advancement in seismic 3D technology, which is allowing petroleum geologists to analyse data much more efficiently.

PPL badly needs to replenish its gas reserves. The company has seen continuous decline in gas output in last four years. Gas production came down to 825.48 mmcfd in 2014-15 from 1,000 mmcfd in 2011-12.

Declining price and volumetric sales of oil has also impacted PPL’s profitability. The Karachi-based company reported a 57% decrease in profit for July-September quarter of 2015 over same period of last year.

PPL, which has a portfolio of 47 exploration blocks, has been aggressively searching for new hydrocarbon reserves for the last two years to compensate for the decrease in production from its established fields like Sui. The company has been trying to reduce the depletion rate of its fields by installing compressor plants and drilling more wells.

It has six producing fields including Sui, Kandhkot, Adhi, Mazrani, Chachar and Hala and has working interest in eight partner-operated fields.

Published in The Express Tribune, December 16th, 2015.

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COMMENTS (12)

Haris K. | 6 years ago | Reply The effect in the stock market can already be seen. The share price of PPL from 110 reached 122 today with two consecutive upper locks and expected to rise more. Earlier, PPL wasn't making much progress and their earning per share was rather suffering but this discovery has certainly changed the game.
S.R.H. Hashmi | 6 years ago | Reply It is good to hear that Pakistan Petroleum Limited has just made a discovery of gas in Matiari in Sindh which, with 56 million cubic feet per day flow, happens to be the biggest discovery in Pakistan in the past ten years. Though forming a very small part of the overall Pakistani gas consumption of 4,000mmcfd, it may nevertheless lead to much bigger discoveries in future. And in the month of December, Pakistan also made history by signing a 15-year LNG import with Qatar which would amount to $ 16 billion at present price determined as a direct percentage of Brent crude oil price. Under the contract, Pakistan will receive 1.5 million tons of LNG in the first year, which will be increased to 3 million tons from the second year. The contract has some peculiarities. like: 1) Our government disclosed the pricing formula a good nine months after the first consignment of LNG was received, as again the normal commercial practice of settling price before the supply. Perhaps it is only now that the government felt confident to disclose the pricing formula. 2) The price will remain fixed for the first ten years, with a revision clause only applicable after ten years, when the parties will also be free to terminate the contract. 3) During the first ten years, Pakistan will perrhaps be bound to import the stipulated quantities of LNG at prices determined in accordance with the pricing formula. The contract seems unfair to Pakistan because tied to the prevailing crude oil prices, which are perhaps at their lowest presently from which level, they can only rise in future, raising the LNG prices as well.. As a result, being obliged to take fixed quantities of LNG from Qatar at predetermined prices, Pakistan will perhaps be unable to take full advantage of lower gas prices in the open market, caused by fresh gas reserves being discovered all the time within and outside the country as well as availability of additional gas through Turkmenistan, Afghanistan, Pakistan, India pipeline as also from proposed Iran-Pakistan pipeline. And what all this means is that the contract favours the seller (Qatar) at the cost of buyer (Pakistan). In these circumstances, the seller will only be too pleased to return some of the excess favour deliberately built into the system, back to those behind the deal from the buyer’s side.
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