Oil, gas explorer awaits attractive shale gas policy

OGDCL has already pumped $30m, seeks incentives to accelerate development work

ISLAMABAD:

Pakistan’s largest hydrocarbon explorer Oil and Gas Development Company Limited (OGDCL) is looking for an attractive, incentives-laden policy for tapping shale gas deposits as such ventures require high investments in field development.

OGDCL has already invested $30 million to exploit the shale gas reserves and is now awaiting a lucrative policy to expedite the development work.

The development of shale oil and gas fields has brought a revolution in the United States and Pakistan also sees a lot of potential in this respect.

OGDCL is currently injecting significant oil and gas into the system to contribute to the government’s efforts to boost indigenous resources and overcome energy crisis in the country.

Sources in the Petroleum Division told The Express Tribune that OGDCL was aggressively working on plans to explore shale gas. In this respect, it has dedicated teams and resources. The company has invested about $30 million and set three horizons in the first unconventional shale gas well named KUC-1 in Hyderabad district, Sindh.

“Drilling of the first horizontal well will start in 2026 followed by exploration of 10 horizontal wells dedicated for shale gas till 2029. OGDCL is expecting the government of Pakistan to announce a lucrative shale gas policy considering the high investment involved in developing such fields,” an official said.

Regarding the deployment of shale gas technology, sources elaborated that the process required the extraction of natural gas trapped within shale formations deep under the ground.

Shale is a type of sedimentary rock that contains significant amounts of organic material. Shale gas extraction involves a combination of horizontal drilling and hydraulic fracturing, commonly known as fracking.

In order to work on shale gas, geologists study rock formations to identify areas where shale gas may be present. This involves seismic imaging and other techniques to map underground structures.

Once a promising area is identified, drilling operations commence. Horizontal drilling allows access to a larger shale area compared to vertical drilling. A well is drilled vertically to a certain depth and then turned horizontally to follow the shale layer.

After drilling, hydraulic fracturing is performed. This process involves injecting a mixture of water, sand and chemicals at high pressure into the shale formation. This creates fractures in the rock, allowing gas to flow more freely to the wellbore.

Once the fractures are created, the trapped natural gas flows into the wellbore and is brought to the surface. Gas is then processed and transported for distribution.

The origins of shale gas technology can be traced back several decades ago, but it has gained significant attention in the early 21st century, particularly in the US.

About OGDCL’s plans for tight gas drilling in light of a new tight gas policy, sources said the company was aggressively working on its development. It plans to develop three wells in financial year 2024-25 followed by five and seven wells in subsequent years.

Regarding incentives for production optimisation initiatives, officials of the Petroleum Division said that price incentives coupled with tax relaxation would surely confirm economic viability of the brownfields facing a significant natural decline and ultimately expedite the application of optimisation techniques, which require considerable capital and operational expenditures.

They said that existing policies of the Ministry of Energy suited OGDCL to some extent but it needed to offer more such as waiving the additional 15% wellhead value (ie, extra royalty other than 12.5%) imposed on the ageing fields, which has passed 30 years of life.

Additionally, there is a need to waive the windfall levy on gas and condensate. Ageing fields should be given 15% depletion allowance rather than imposing an additional 15% wellhead value.

Published in The Express Tribune, June 2^nd, 2024.

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