Govt awards 15 new blocks to local firms

The government has provisionally awarded 15 new blocks to four local oil and gas exploration companies to find new hydrocarbon deposits nationwide and reduce Pakistan’s heavy reliance on import of energy.

The state-owned Oil and Gas Development Company Limited (OGDC) won 10 blocks out of the 15 awarded through competitive bidding by the government, Mari Petroleum Company Limited (MPCL) and OKTL E&P acquired two blocks each while Pakistan Oilfield Limited (POL) secured one block, an official of the Ministry of Energy (Petroleum Division) told The Express Tribune on Wednesday.

“We are pleased to inform that the Directorate-General of Petroleum Concessions (DGPC)…has communicated provisional award of new exploration blocks to MPCL; two blocks as an operator and two as a joint venture partner with other exploration and production companies,” said Mari Petroleum Company Secretary Assad Rabbani in a notification issued to the Pakistan Stock Exchange (PSX).

“Formal award of these blocks is subject to approval of the acquisition by MPCL board of directors; execution of petroleum exploration licenses/petroleum concession agreements with the government; execution of joint operating agreements among the respective joint venture partners; and completion of related legal/procedural formalities,” he said.

Earlier, nine exploration and production companies made bids for the 15 blocks. The government had invited bids for a total of 20 blocks.

“Pakistan has improved its law and order situation in recent years. This should prompt oil and gas exploration companies to expedite their efforts to find new hydrocarbon deposits in the country,” BMA Capital Executive Director Saad Hashmi said.

Poor law and order situation was a major reason behind slowdown in new exploration activities in the country. Earlier, the Ministry of Defence did not grant security clearance to initiate new exploration activities sometime in 2018 and 2019.

For such reasons, the governments kept delaying auctioning new oil and gas exploration blocks since the last few years. In March 2019, Prime Minister Imran Khan approved the establishment of oil and gas exploration dedicated force to expedite the drive to find new hydrocarbon deposits and attract higher investment in the energy sector.

“The probability of finding new hydrocarbon deposits has reduced to one in 10 attempts compared to one out of three in the past (during Musharraf’s era),” Hashmi added.

To recall, the exploration firms have failed to find significant deposits of oil and gas for over a decade now. On the other hand, the demand for hydrocarbons is on a rise with gradual expansion in economic activities and increase in population.

As per details, Mari won two blocks in the capacity of their operators in Balochistan namely Nareli and Sharan blocks. Besides, it has also been offered to form joint venture partnership with OGDCL and Pakistan Oilfields (POL) to work in a block (Killa Saifullah) in Balochistan and North Dhurnal block in Punjab, respectively. Besides, OGDC won 10 blocks, there are five operators in the province of Punjab, two each in Sindh and Balochistan and one in Khyber-Pakhtunkhwa (K-P), according to the Ministry of Energy.

OKTA E&P won one in K-P and another one in Balochistan. POL acquired only block in Punjab.

The minimum investment to be made by the exploration and production companies in these blocks will be over $71 million in three years, DGPC reported the other day.

Apart from the exploration and production activities, the successful companies will also spend over $1.3 million in social welfare in the areas of their respective blocks, it said.

For blocks that have discoveries, several hundred million dollars will be invested by these companies in development work, it added.

The oil and gas reserves have continued to deplete steady fast in the absence of new significant deposits, as small discoveries have failed to meet the growing demand. Accordingly, the share of energy in total imports has gradually surged to 20-25%.

Pakistan meets 70-80% local demand for energy through imports, it was learnt. Recently, Topline Research said Pakistan’s oil production during the second quarter (October-December) of the current fiscal year fell by 6% on a year-on-year basis to 76,331 barrels of oil per day (bopd) due to decline in production of Tal block fields like Mardankhel and Makori Deep by 27% and 31%, respectively.

Pakistan gas production declined by 4% year-on-year to 3,409 mmcfd (million cubic feet per day) as flows from KPD, Kandhkot and Qadirpur fell in the range of 6-18%.

The drop in the production was seen despite the addition of five new oil fields and four gas fields during the quarter, it said.

Published in The Express Tribune, January 28^th, 2021.

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