KARACHI – The lingering circular debt issue, coupled with heightened security concerns, has forced local oil and gas exploration companies to curtail exploration and development (E & D) activities. Industry analysts observed that E & D activities depicted a significant decline of 40 percent in the nine months of FY11, as a meager 30 wells were spudded in contrast with 50 wells in the same period last year. They further underlined that bifurcation of the number reflects the gravity of the prevalent situation, as only seven exploratory wells were drilled compared to last year’s 18.
“This dampened activity bodes negatively for the country’s hydrocarbon reserve replacement and, thus, increases the country’s reliance on exogenous resources,” viewed Nauman Khan of Topline Securities.
The analyst said that, as per the Pakistan Petroleum Information Services (PPIS), only 37 percent of the full year target of 80 wells was achieved. “Last year, during the same period, 50 percent of the target was achieved as 50 wells had been drilled versus a target of 100 wells,” Khan recalled.
The analyst opined that the activity had been skewed towards developmental rather than exploration of new reserves, which was even more alarming. During the period under-review, only seven exploratory wells (against a target of 29) had been drilled with major activity concerted in two blocks namely Tal and Margalla.
The analyst cited circular debt and security issues as reasons behind the below par performance of exploration firms. The never-ending circular debt has strained cash position of the capital intensive E & P sector, while security concerns, particularly in rich hydrocarbon basins of Balochistan and Khyber Pakhtoonkhwa, have multiplied issues, he said. “No exploratory wells were drilled in Balochistan, while only two wells even that in single block were drilled in Pakhtoonkhwa in the period under-review,” Khan said. He maintained that, amongst the listed companies, Oil and Gas Development Company (OGDC) had drilled only one exploratory well against a target of 10 wells.
In addition, the energy giant had drilled 10 developmental wells against the targeted 16, indicating the company’s focus of maximising returns from its existing fields. “PPL and POL did not drill any new well of their own during the year, but are expected to benefit from exploration activity of their JV partners,” he stated. The success ratio, according to Khan, stood at 28 percent in the nine months of FY11. Out of the seven exploratory wells drilled, two discoveries had been made so far. “While work on one well is being carried out, the residual were either found dry or are currently suspended. The said translate into a success ratio of 28 percent, which is below the historical average of 33 percent,” the analyst said.
The lingering circular debt issue, coupled with heightened security concerns, has forced local oil and gas exploration companies to curtail exploration and development (E & D) activities. Industry analysts observed that E & D activities depicted a significant decline of 40 percent in the nine months of FY11, as a meager 30 wells were spudded in contrast with 50 wells in the same period last year. They further underlined that bifurcation of the number reflects the gravity of the prevalent situation, as only seven exploratory wells were drilled compared to last year’s 18. “This dampened activity bodes negatively for the country’s hydrocarbon reserve replacement and, thus, increases the country’s reliance on exogenous resources,” viewed Nauman Khan of Topline Securities.
The analyst said that, as per the Pakistan Petroleum Information Services (PPIS), only 37 percent of the full year target of 80 wells was achieved. “Last year, during the same period, 50 percent of the target was achieved as 50 wells had been drilled versus a target of 100 wells,” Khan recalled.
The analyst opined that the activity had been skewed towards developmental rather than exploration of new reserves, which was even more alarming. During the period under-review, only seven exploratory wells (against a target of 29) had been drilled with major activity concerted in two blocks namely Tal and Margalla.
The analyst cited circular debt and security issues as reasons behind the below par performance of exploration firms. The never-ending circular debt has strained cash position of the capital intensive E & P sector, while security concerns, particularly in rich hydrocarbon basins of Balochistan and Khyber Pakhtoonkhwa, have multiplied issues, he said. “No exploratory wells were drilled in Balochistan, while only two wells even that in single block were drilled in Pakhtoonkhwa in the period under-review,” Khan said. He maintained that, amongst the listed companies, Oil and Gas Development Company (OGDC) had drilled only one exploratory well against a target of 10 wells.
In addition, the energy giant had drilled 10 developmental wells against the targeted 16, indicating the company’s focus of maximising returns from its existing fields. “PPL and POL did not drill any new well of their own during the year, but are expected to benefit from exploration activity of their JV partners,” he stated. The success ratio, according to Khan, stood at 28 percent in the nine months of FY11. Out of the seven exploratory wells drilled, two discoveries had been made so far. “While work on one well is being carried out, the residual were either found dry or are currently suspended. The said translate into a success ratio of 28 percent, which is below the historical average of 33 percent,” the analyst said.
