Shale gas: Government to initiate pilot projects to fill energy gap

Likely to offer $12 per mmbtu to exploration companies.

ISLAMABAD:

Encouraged by estimates given by the US Energy Information Administration (EIA), Pakistan has planned to launch pilot projects for tapping the country’s huge shale gas reserves in an effort to gradually bridge the yawning gap between demand and supply of energy, sources say.

According to an EIA assessment, Pakistan has massive shale gas reserves estimated at 51 trillion cubic feet (tcf) compared to conventional gas reserves of 58 tcf.

At present, shale gas is not being produced in the country and significant initial work is required to be undertaken to tap this potential energy resource.

Shale gas is extracted directly from shale formations and since it has low permeability compared to conventional reserves, it does not come out easily and specific investment and pricing are required for its exploitation.

With the discovery of huge shale gas reserves, the US has become a gas-exporting country. According to reports, Washington in future will experience a boom in shale oil production as well and will become the largest oil producer.

According to sources, Pakistan will offer $12 per million British thermal units (mmbtu) to gas exploration and production companies under the pilot programme, a price that is close to the price of gas to be imported from Iran under the Iran-Pakistan pipeline project.

“The government will offer this price for first three discoveries of shale gas,” an official told The Express Tribune. “A policy framework is being prepared and its approval will be sought from the Economic Coordination Committee (ECC) of the cabinet.”

According to the official, exploration companies have already found some traces of shale gas during search for conventional gas as 10% to 12% shale gas appears on upper faces of conventional gas.

The United States Agency for International Development (USAID) has signed an agreement with Pakistan for providing technical assistance in conducting a study on shale gas reserves, which will endorse the EIA’s estimates. It will take five years to complete the study.

Experts point out Pakistan has consumed around 40% of conventional gas reserves and shale gas is the most viable option to meet growing needs.

According to a study conducted by a group of exploration and production companies, the cost of shale gas production will become economical at about 80% of Brent crude price, but this will have to be brought down to 70%.

New wells

Apart from shale gas, the government is also planning to drill 400 wells in the next four years aimed at enhancing the country’s oil and gas production, officials say.

Though in the past one year new gas deposits had been found, total production of the country stands at the same level at four billion cubic feet per day because of depletion of reserves in existing fields.

However, oil output has risen to near 100,000 barrels per day compared to 74,000 barrels per day earlier.

Published in The Express Tribune, July 18^th, 2014.

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