The government plans to utilise all viable options to enhance upstream oil and gas production through expansion of operations in restricted security zones, meeting drilling targets, tapping tight gas and reviving dormant and non-performing fields by giving higher well-head pricing for difficult gas in order to achieve sustainable gas production of five billion cubic feet per day (BCFD) and 90,000 barrels of oil per day (BPD) over the next five years.
According to the Energy Annual Plan for the next fiscal year, the planned reforms and physical activities in the upstream oil and gas sector include finalising the regulatory framework for enhanced oil and gas recovery. The government will award 15 new exploration licenses to meet the 100 wells drilling target. These measures would increase the well-head gas production to 4.7 BCFD against the target of 3.8 BCFD for the next fiscal year. The crude oil production is expected to increase marginally to 69,000 BPD against the target of 86,889 BPD in the next fiscal year.
The government is bound to take these initiatives, as upstream activities for oil and gas are not providing desired results with declining production, particularly for gas, which threatens the energy security. The exploration and production targets will be integrated with fuel demands of the power and petroleum sectors to minimise reliance on imported fuel. It also recommends undertaking a natural gas pricing study in the next fiscal year to take into consideration the availability and prices of substitute fuel from local and import sources to avoid the unnecessary use of gas. The study will review options for full cost recovery and minimisation of cross subsidies.
Options for institutional reforms envisage the transfer of the function of gas distribution to a number of entities, similar to the concept of NTDC and DISCOs in the power sector to make the management efficient. It noted that as delays in LNG import projects had increased gas shortages and hurt industrial production, efforts would be made to revive the stalled marshal project for implementation of a Floating Storage Re-gasification Unit (FSRU) for the import of 500 MCFD of LNG.
It is also envisages that the Pakistan Gas Port Limited and Engro Vopak Terminal Limited will proceed with the construction of the terminals. It is expected that during the fiscal year 2011-12, about five licenses will be granted for LPG marketing and a number of licenses may also be granted for setting up auto refuelling stations at various locations across the country. The planned physical activities for mid and downstream next fiscal year aim at Byco Petroleum Pakistan Limited (BPPL) commissioning its 115,000 BPD refining capacity during 2011.
BPPL, in collaboration with Coastal Refinery Limited (CRL), is expected to set up an off-shore Single Buoy Mooring (SBM) near Hub for loading and unloading of oil using large vessels. Hascol Petroleum Ltd is in the process of setting up an oil storage facility of 6,500 tonnes at Shikarpur. A study will be undertaken to rationalise fuel prices at par with international practices recommendations for ex-refinery and retail pricing for oil products will be implemented with future direction for oil price deregulation.
Support will be provided to PSO to for the development of expertise in international oil trading, vessel chartering and oil hedging to avail market opportunities and minimise the import cost. A specific timetable will be announced to implement the refinery projects to improve product quality and meet Euro II/III specifications. Under the five-year plan, the proposed 52-km-white oil pipeline linking Karachi Port Trust and Pak Arab Pipelines Company (PAPCO) terminal at Port Qasim will be initiated.
The proposed Machike-Morgah-Taru Jabba (MMTJ) cross-country pipeline will be initiated as a joint venture between Pakistan State Oil (PSO), Attock Refinery Limited (ARL) and other oil marketing companies for efficient transportation of petroleum products from mid-country to the north. Spur lines to Sialkot, Mirpur, Kohat and other cities will further decrease supply costs. Restructuring and commercialisation of inefficient public sector energy companies is alos planned.
The plan noted that the role and performance of the energy regulators was ineffective. It recommends strengthening OGRA and NEPRA based on a review of their functions, staffing, expertise and authority. In the Energy Efficiency Programme for 2011-12, it was proposed that there was a vast potential for improvement in energy efficiency. According to assessments by various international agencies, efficiency measures could save energy of 11.16 MTOE or 17 percent of the primary energy supply.
This would be sufficient to provide over 7,000MWs of thermal power. During 2010-11, the expected local crude oil production of 65,940 BPD will fall short of the projected 88,726 BPD. However, domestic gas production is expected to be in line with the projection of 4 BCFD. A total of only 50 wells, 20 exploratory and 30 appraisal and development wells, are expected to be drilled against the target of 100 wells.
The Council of Common Interest (CCI) approved the Tight Gas Policy, 2011. The new policy will offer 40-50 percent higher prices, compared to the 2009 policy, to attract exploration companies to invest in tight gas fields. The tight gas reserves of Pakistan are over 50TCF, compared to the current recoverable gas reserves of 29TCF.
