PPL looks to shore up depleting reserves

Changes organisational structure by diluting more responsibility

KARACHI: Faced with a daunting challenge of finding new hydrocarbon reserves, Pakistan Petroleum Limited (PPL) has changed its organisational structure by diluting more responsibility and narrowing the scope of general managers to key areas, CEO Syed Wamiq Bokhari said on Wednesday.

Unlike the previous structure, which did not distinguish between existing and potential fields, the new arrangement has distributed exploration and management responsibilities among various assets, he said. “The world has changed and we would have to change too, if we need to move forward,” he told the annual general meeting of shareholders. “I don’t know of any organisation that still uses the functional structure.”

His remarks came in response to concerns that separate business units were being established to pave the way for PPL’s privatisation. “That is completely baseless. No one has asked me to move in that direction,” he said, alluding to the federal government, which holds a majority stake in the company.

Bokhari, who was appointed earlier this year, is the first outsider to head PPL. Most of his professional career was spent with multinational petroleum explorers.

Reorganisation is based on nine areas like PPL’s producing assets of Sui, Adhi and Kandkot and exploration activities in frontier, north and south regions.

“This won’t impact our cost since assets will still be sharing services of different departments like finance, human resource and drilling,” he said.

Since Bokhari’s appointment, PPL has also been hiring people from other companies, industry officials say. PPL’s profit in fiscal 2014-15 plunged 33% to Rs34 billion over the previous year mainly due to a slide in global crude oil price.

But the company, which is primarily responsible for Pakistan’s heavy reliance on gas as a source of fuel, has seen continuous decline in its own reserves and it no longer plays a dominant role in the country’s gas production.

Gas production was down 3.3% to 301,302 million cubic feet despite efforts to increase output from existing fields. The company derives 66% of its revenue from sale of gas.

PPL has been facing difficulties in hitting large finds. Around 51% of the gas it produces comes from Sui field that was discovered in the 1950s.

Three of the only four new finds during the year came from Gambat South Block in Sindh that was identified as potential source couple of years back.

Bokhari acknowledges the challenge. “We need to aggressively increase exploration activity and this means going to difficult areas like parts of Balochistan and frontier region,” he said. Lower crude price that has also led to a decline in the cost of petroleum service industry like rig providers might also benefit PPL as the company’s low operating costs allow it work at “low oil price”, he said.

“PPL is not leveraged either and that works to our advantage.” The company is aiming to drill 22 wells this year.

PPL has not abandoned hopes of finding oil and gas in offshore fields as it plans to drill a well with a partner company in December 2016.

Published in The Express Tribune, October 1^st, 2015.

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