Oil and gas extraction: Attack sets off alarm for exploration firm

Foreign firm halts operation after staff targeted by ‘militants’.

ISLAMABAD/ KARACHI:

A day after a deadly attack on its staffers, a multinational oil and gas exploration company has shut down its operations at the Maramzai gas field in Tal block, situated in Kohat district of Khyber-Pakhtunkhwa.

Gunmen on Thursday intercepted a convoy of the employees of the Hungarian firm MOL somewhere between the Lachi area and Hangu district and abducted two engineers.

The gunmen opened fire when paramilitary troops escorting the convoy challenged them. In the ensuing firefight six employees, including an engineer, were killed.

An official of the company said operations at the site have been halted. “The company staffers have been evacuated from the site and production of both oil and gas from the well has been halted,” the official told The Express Tribune.

But the top administrative official of Kohat sought to play down the incident. “Though operation at the site has been stopped, the main production facility at Karak is operational,” Khalid Umerzai  told The Express Tribune.

Nonetheless, the stoppage will mean a reduction of 30 million metric cubic feet (mmcf) per day of natural gas to the SNGPL, as well as a fall in domestic production of crude oil of 1,600 barrels per day (bpd).

MOL officials contend that the “strike will continue indefinitely until adequate security is provided to the company’s installations and its personnel”.

“Though no group has claimed responsibility, circumstantial evidence shows it was the handiwork of the Taliban,” an official told The Express Tribune on condition of anonymity.

MOL operates the field under a joint venture agreement that grants it a 10 per cent stake in the production. The remaining stake is jointly owned by Pakistan Oilfields Limited (POL), Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL) and Pakistan Holding Private Limited.

If the closure continues for a month, the likely impact on the earnings per share of POL, OGDC and PPL is expected to be 30 paisa, 2 paisa and 7 paisa, respectively. In case the shut down were to be extended to the entire Tal block, that could mean much bigger hits for the companies.

KASB analyst Fawad Khan estimated that earnings per share for POL, PPL and OGDC would be reduced by Rs1.7, Rs0.45 and Rs0.12, respectively.

“Production from Tal block contributes significantly to earnings of both POL and PPL,” said Khan adding that, “POL, PPL and OGDC derive 43 per cent, 18 per cent and 9 per cent, of their respective sales from here”.

Experts contend that even these calculations belie the gravity of the current crisis. “Tal block provides 330 mmcfd of natural gas and 9,000 bpd of oil,” said BMA head of research Hammad Aslam. “But even more importantly it is the only block that has turned in double digit growth in recent years while other major fields are declining in production”.

At least eight foreign oil and gas companies are engaged in exploration work in different areas of the province, mostly in Kohat district. And officials say Thursday’s incident would have a negative impact on oil and gas exploration in the province. “For multinational firms, it is going to be another Balochistan where oil and gas facilities are being targeted every day,” he added.

Sources said the MOL has been receiving threats from local tribesmen for quite some time. Khattak Ettehad, an organisation of local tribesmen, has been demanding jobs in the Hungarian company.

The provincial government is least bothered about the protection of foreign oil firms as it believes that it is the responsibility of Islamabad to look after them.

The provincial government says the federal government and foreign oil companies have not recognised its ownership right on the oil and gas fields as envisaged in the 18th constitutional amendment.

“Oil companies consider the provincial government as an irrelevant party to their projects,” an unnamed official toldThe Express Tribune. “They always deal with the federal government on all issues.”

“The MOL has been working in our province since 2002 but it never accepted our recommendations to provide jobs to the local people,” he said. “The firm prefers to hire people from Punjab, depriving the local population of benefits from the natural resources in their area,” he added.

He also blamed the government entities for the situation. “The OGDC and SNGPL are also responsible for ignoring interests of the local people,” the official added. “They are also making money from our area.”

The provincial government is getting only 12 per cent as royalty from the federal government out of billions of rupees it earns every year from this project. The 18th amendment guarantees a 50 per cent share in the oil and gas being produced by the province.

Published in The Express Tribune, January 22nd, 2011.