Despite winning highest price offer, company fails to produce gas

Could not develop Sindh’s Kandra field, seeks revision in rules to avoid lease cancellation

ISLAMABAD: Despite getting the highest price offer from the previous government of Pakistan Peoples Party (PPP), Pakistan Exploration Limited, along with its joint venture partners, has failed to produce gas from Sindh’s Kandra field and is seeking further relaxation in rules to avoid cancellation of its lease, says an official.

The current Pakistan Muslim League-Nawaz (PML-N) administration has revoked lease agreements of several oil and gas exploration companies, prompting them to file cases in courts to challenge the move.

However, Pakistan Exploration is hoping for relaxation in rules in an attempt to avert the same fate as other inactive companies have met.

Heating value of raw gas in Kandra field is estimated at 150 British thermal units (btu), which is considered low in quality, and recoverable reserves are calculated at 2.86 trillion cubic feet.

According to the official, Pakistan Exploration’s lease contract had expired in February 2016 and it along with joint venture partners was not only seeking an extension in the contract, but was also pressing for regularisation of the lease since February 2016.

Earlier, Pakistan Exploration and its partners were seeking the allocation of 5 million cubic feet of gas per day (mmcfd) from Sui Southern Gas Company (SSGC), but later it was revised during tenure of the PPP government and the volume was increased to 10 mmcfd.

The PPP administration had offered a price of $9 per million British thermal units (mmbtu) for low btu gas in a bid to encourage Pakistan Exploration to explore tight gas reserves. However, the company pressed SSGC to allocate a quantity of 10 mmcfd, which the latter refused, saying it would allocate gas at a lower price. Owing to the dispute, a gas sale and purchase agreement could not be implemented over the past few years.

Meanwhile, the lease for Kandra field expired on June 4, 2011 and rules were relaxed on October 18, 2012 to allow the company to undertake development activities over the next three years and four months in order to start commercial production.

However, the field could not be developed by the end of the extended period on February 17, 2016 because of failure to resolve technical and commercial issues with SSGC.

Again, the joint venture approached the Petroleum Division, requesting a four-year extension for field development work from the date of approval of such extension and regularisation of the period since February 17, 2016.

Now, the joint venture is looking for the government’s nod for consuming the low btu gas in the production of 120 megawatts of electricity.

Published in The Express Tribune, April 1^st, 2018.

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