E&P firms to step up efforts to find new deposits

Hope to receive outstanding dues from gas utilities, which will improve cash flow

KARACHI:

Pakistan’s oil and gas exploration and production (E&P) firms are expected to ramp up efforts to find new hydrocarbon deposits on hopes of improvement in revenue collection from gas utilities, indicating that new discoveries will keep fuel reserves stable after persistent depletion for quite a long time.

In a commentary, Optimus Capital Management Research Analyst Fabeeha Ali said “looking ahead, in line with anticipation of enhanced exploratory activities with recent energy sector reforms, we expect positive reserve replacement in future, at least leading to sustained reserve profiles of E&P companies.”

Talking to The Express Tribune, the analyst elaborated that energy reforms included a significant increase in gas prices by the government twice in the past four months (in November 2023 and February 2024), aimed at overcoming the revenue shortfall faced by gas utilities ie, Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company (SSGC) and addressing the circular debt crisis.

The availability of improved liquidity to the gas marketing companies will allow them to clear current and pending dues of oil and gas exploration firms, resulting in an increase in their cash flow. The shortage of financing with E&P firms was one of the major hindrances in the way of drilling new wells, testing and finding hydrocarbon reserves.

The research analyst pointed out that the piling up of receivables of E&P companies was mainly owing to delay in payments by the gas marketing companies, which had to pay about 50% of the total dues. On the other hand, oil refineries used to clear all their dues payable to the exploration firms.

The latest update suggests that the circular debt in Pakistan’s energy sector soared to Rs5.725 trillion as of November 2023. It comprised power sector circular debt of Rs2.703 trillion and gas sector circular debt of Rs3.022 trillion.

Ali said total recoverable reserves of oil in Pakistan remained largely stable over six months, closing at 193 million barrels of oil equivalent (MMBOE) in December 2023, up 0.03% from June 2023. Total recoverable reserves of gas came in at 2,786 MMBOE in December 2023, down 1.25% from June 2023.

Oil and gas reserves, however, depleted by 14% and 5%, respectively, in the past one year from December 2022 to December 2023.

As per available data, the remaining life of oil and gas reserves in Pakistan is nine years and 16 years, respectively. Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL), Mari Petroleum Company Limited (MPCL) and Pakistan Oilfields Limited (POL) have oil reserves life of seven, six, 23 and seven years, respectively.

On the other hand, they have gas reserves life of 19, 10, 15 and seven years, respectively. Substantial fresh reserves of 12 million barrels of oil and 264.6 billion cubic feet of gas have been added from Al-Haj’s 92 Kot Palak field to Pakistan’s reserves portfolio.

Jhim East block of PPL has added another 0.4 million barrels of oil and 24.7 billion cubic feet of gas while OGDC’s Nim East added only 0.3 million barrels of oil and 1.8 billion cubic feet of gas.

MOL’s Tal block had remaining oil and gas reserves of 19.1 million barrels and 521.3 billion cubic feet as of December 2023 whereas original gas reserves of Tolanj West had increased by 41.4 billion cubic feet.

Gas supply timings

SSGC announced that it would ensure uninterrupted gas supply during Sehr and Iftaar timings during Ramazan.

However, it must be kept in mind that around 10% depletion in the country’s gas reserves annually had led to the widening of demand-supply gap.

“For this reason, in order to ensure improved gas pressure, SSGC would be carrying out gas pressure profiling (load-shedding) from 9am to 3pm and then during night from 10pm to 3am during Ramazan,” SSGC said.

Published in The Express Tribune, March 12^th, 2024.

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