Drilling activity slows down in nine months

Circular debt, security concerns force slow down.

KARACHI:

The circular debt, along with heightened security concerns, has forced oil and gas exploration companies in the country to curtail exploration and development activities.

In the first nine months (July-March) of the current fiscal year, activity depicted a significant decline of 40 per cent as only 30 wells were spud during the period, against 50 wells in the corresponding period last year.

According to a research note by Topline Securities, activity has been skewed towards development rather than exploration. Only seven exploratory wells were drilled, compared with 18 wells last year, with most of the activity conducted by MOL in its two blocks.

As per Pakistan Petroleum Information Services, only 30 exploration and development wells were drilled in the period under review, achieving 37 per cent of the full-year target of 80 wells. During the same period last year, 50 per cent of the target was achieved by drilling of 50 wells, added the note.

The underperformance is attributed to the unending circular debt, which has strained cash flows for the capital-intensive sector, and heightened security concerns in rich hydrocarbon basins of Balochistan and Khyber-Pakhtunkhwa (K-P).

In the nine months, no exploratory wells were drilled in Balochistan, while only two wells were drilled in a single block in K-P.

Out of seven exploratory wells drilled, two discoveries have been made so far. However, the residual was either dry or is currently suspended, resulting in a success ratio of 28 per cent – well below the historical average of 33 per cent.

Published in The Express Tribune, April 21^st, 2011.