TGR policy could double gas reserves and production
KARACHI:
The government’s move to get the local and international industry excavate and explore difficult-to-reach pockets of gas is like to bring in waves of investment and reserve additions in unconventional and highly promising areas, according to analysts.
Tight gas reserve (TGR) studies estimate total gas resource potential to be 120 per cent of Pakistan’s existing reserves.
Tight gas is natural gas which is difficult to access and companies require a large financial incentive to go after it.
The government is reviewing a draft policy floated to dig out hidden gas in unusual pockets and difficult formations. The idea was floated by exploration and production companies with the support of the directorate general.
Analysts at KASB Securities believe that the terms of the fiscal incentives and pricing that the government is settling on are reasonable even though they are not in line with the ones that the industry wanted. According to them, gas prices will be calculated at $3.4 to $6.2 per million British thermal unit (mmbtu), with royalties at 12.5 per cent of the sales. They believe that taxes will be around 40 per cent.
They add that the definition of TGR is generous relative to standards elsewhere and should encourage development.
Several global oil and gas companies control significant tight gas reserves, including BP, which has also sunk substantial resources into learning more about extracting tight gas. Analysts believe that OGDC and PPL will benefit the most from this new policy.
TGR policy may break new ground for E&P companies
TGR studies estimate the total gas resource potential to be 33 trillion cubic feet; 120 per cent of Pakistan’s existing reserves. This is located in the upper-middle Indus and Kirthar. The TGR potential of lower Indus, Potwar, Kohat and offshore areas is yet to be established.
If current gas production is any guide, companies with gas production concentrated in Sindh should benefit the most. On this count, the analysts find OGDC and PPL ideally placed. Miano and Sawan reportedly carry a total of 400mmcfd gas production potential. Both PPL and OGDC both have significant stakes in the fields.
Reasonable gas prices and favourable terms
Analysts at KASB Securities believe that the government will need to ensure fast decision making on TGR and avoid misuse of policy. The thrust of the policy seems to be on early production from known TGR fields. They believe that companies are very likely to initially focus on existing fields for TGR potential.
The policy provides a 40 per cent premium over 2009 policy prices, which translates into $3.4-6.2 per mmbtu, significantly below industry demand of 80 per cent of imported gas cost of $4.6-11.6 per barrel.
Published in The Express Tribune, July 7th, 2010.
The government’s move to get the local and international industry excavate and explore difficult-to-reach pockets of gas is like to bring in waves of investment and reserve additions in unconventional and highly promising areas, according to analysts.
Tight gas reserve (TGR) studies estimate total gas resource potential to be 120 per cent of Pakistan’s existing reserves.
Tight gas is natural gas which is difficult to access and companies require a large financial incentive to go after it.
The government is reviewing a draft policy floated to dig out hidden gas in unusual pockets and difficult formations. The idea was floated by exploration and production companies with the support of the directorate general.
Analysts at KASB Securities believe that the terms of the fiscal incentives and pricing that the government is settling on are reasonable even though they are not in line with the ones that the industry wanted. According to them, gas prices will be calculated at $3.4 to $6.2 per million British thermal unit (mmbtu), with royalties at 12.5 per cent of the sales. They believe that taxes will be around 40 per cent.
They add that the definition of TGR is generous relative to standards elsewhere and should encourage development.
Several global oil and gas companies control significant tight gas reserves, including BP, which has also sunk substantial resources into learning more about extracting tight gas. Analysts believe that OGDC and PPL will benefit the most from this new policy.
TGR policy may break new ground for E&P companies
TGR studies estimate the total gas resource potential to be 33 trillion cubic feet; 120 per cent of Pakistan’s existing reserves. This is located in the upper-middle Indus and Kirthar. The TGR potential of lower Indus, Potwar, Kohat and offshore areas is yet to be established.
If current gas production is any guide, companies with gas production concentrated in Sindh should benefit the most. On this count, the analysts find OGDC and PPL ideally placed. Miano and Sawan reportedly carry a total of 400mmcfd gas production potential. Both PPL and OGDC both have significant stakes in the fields.
Reasonable gas prices and favourable terms
Analysts at KASB Securities believe that the government will need to ensure fast decision making on TGR and avoid misuse of policy. The thrust of the policy seems to be on early production from known TGR fields. They believe that companies are very likely to initially focus on existing fields for TGR potential.
The policy provides a 40 per cent premium over 2009 policy prices, which translates into $3.4-6.2 per mmbtu, significantly below industry demand of 80 per cent of imported gas cost of $4.6-11.6 per barrel.
Published in The Express Tribune, July 7th, 2010.