Supply of tight gas from Pakistan’s Kirthar Block in Dadu, Sindh, is expected to start in July-August this year instead of an earlier schedule of May due to a delay in construction of a pipeline to move the gas, an official at the country’s ministry of petroleum and natural gas said on Monday.
The Kirthar Block is jointly owned by Poland’s PGNiG (70%) and Pakistan Petroleum Ltd. (30%). Pakistan’s state-run gas utility Sui Southern Gas Company (SSGC) signed the country’s first-ever tight gas sales and purchase agreement with PGNiG and PPL in November last year for supply of 30,000 million cubic feet per day, Platts reported.
SSGC is still in the process of laying a 52 km (32.24 mile) pipeline at an estimated cost of Rs 325 million ($3.31 million) to move the gas from the Kirthar Block, the official said.
The gas will be sold at $6.50/MMBtu, around 47% lower compared with imported gas price of $12.30/MMBtu but 40% higher than the current price of conventional gas produced in Pakistan. The higher price for tight gas is keeping with the government’s tight gas exploration policy that was approved in February 2011 and renamed as the petroleum policy in 2012. Under the policy, exploration companies have been offered 40-50% higher prices for tight gas, compared with the $4.26/MMBtu price for conventional gas announced in Pakistan’s Exploration and Production Policy of 2009.
Companies that succeed in recovering gas from tight fields within two years will get a 50% premium over the 2009 price, but if extraction takes more time they will get only a 40% increase. Leases for tight gas fields will run for 40 years, instead of the 30 years for conventional gas assets.
Tight gas is typically found in hard rock underground formations that are impermeable and non-porous. As such, exploration and extraction of tight gas is more costly and difficult due to which the exploration companies need to be given the additional incentives, Platts reported.
Pakistan’s tight gas reserves are pegged at 40 trillion cubic feet and most of this is believed to be in Sindh, which produces 70% of the 4.2 billion cubic feet per day of the country’s total natural gas output. Pakistan’s current natural gas supply falls short of demand by around 1.2 to 1.4 billion cubic feet per day.
The government is also working to import 3.5 million metric tonnes per year of liquefied natural gas (LNG) to meet the energy crisis.