Pakistan Petroleum expands oil search to record areas

KARACHI: Pakistan Petroleum Ltd, the nation’s second-biggest fuels explorer, has expanded oil and natural gas exploration to a record number of areas to help meet energy demand as daily power disruptions hurt economic growth.

“We simply have to be more aggressive,” Khalid Rahman, chief executive officer, said in an interview in his Karachi office today. The company is working on 36 blocks, of which it is the main operator in 20, he said. That compares with an average of 20 blocks in which the explorer was the main operator in 5 or 6.

Improved domestic energy supplies may help Pakistan increase economic growth, which fell to the slowest pace in 8 years in the 12 months ended June 30. Demand for energy, which is 3 times supply, and outages that last several hours a day have forced textile and engineering factories to close down and caused riots across the country.

“Unless we find sizeable energy reserves and reduce reliance on expensive imported fuels, we cannot have sustainable growth,” said Tariq Iqbal Khan, chief executive officer at National Investment Trust, which manages Rs85b ($1b) in stocks and bonds in Karachi.

“So far, companies haven’t worked at the level required.” Pakistan Petroleum shares fell 1.1 per cent to Rs 200.87 at the 3:30 p.m. local time close on the Karachi Stock Exchange. The stock has risen 6 per cent this year, compared with an 11 per cent increase in the benchmark index.

Gas Discovery

"The explorer plans to drill as many as 70 wells and another 80 development wells in the next 5 years," said Rahman. Pakistan Petroleum discovered gas in the Latif North well in the southern province of Sindh a month ago, said Rahman, 53, who was appointed chief executive in August 2008.

The company has a 30% interest in the well. “The reservoir is bigger than we thought,” he said. “Within 6 months at the most, we should be able to add this discovery to our production line.” He declined to give details of production estimates.

"Pakistan Petroleum plans to buy a 25% interest in the Indus G offshore block from Oil & Gas Development Co., Pakistan’s biggest energy explorer, for which government approvals are awaited," said Rahman. "The explorer may bid for more offshore blocks in June, he said. Exploration at the Shark-1 offshore well in the Indus Basin failed and will cost the company an estimated Rs 1b," he added.

Baluchistan Survey

The company is carrying out seismic work in 3 parts of the south-western province of Baluchistan, home to half of Pakistan’s estimated gas reserves, where an insurgency impedes exploration and raises the cost of production.

"A crew of about 500 people is working in a radius of 50 kilometers (31 miles) amid 4 levels of security cordons," he said. The seismic work at Khuzdar, Kalat and Bahawal Khan will be completed by December. “These are very rugged areas and heavy security is needed,” Rahman said. “But as a national company, if we don’t do it, who will? So we have become bolder.”

Pakistan Petroleum plans to resume seismic surveys in Baluchistan’s Sui gas field, the country’s biggest, to evaluate deeper prospects, he said. Surveys that started in 2001 were aborted after a crew was attacked.

The explorer’s gas production remains at 1 b cubic feet a day after the decline in output from Sui and may stay at the same level for the next three years as other fields compensate, Rahman said.

Power Plant

Output from the Sui field, which started in 1955 and accounts for 25 per cent of Pakistan’s total, is declining by as much as 5 per cent a year.

"The company is installing compression facilities at the Miano, Kandkot and Chachar wells in Sindh province to stabilize production, he said. Pakistan Petroleum plans to build a power plant at Kandkot with a capacity of 250 megawatts in partnership with an international company," he said, without providing details.