OGDCL stuck in the wrong kind of limelight

Most companies, like most people, like to remain in the limelight, always trying to get their press releases published and catching media attention. So if Oil & Gas Distribution Company is making headlines for the past two weeks or so, its managers must be wallowing in glory, right? Well, not actually, because the firm is making headlines for all the wrong reasons, partly due to its own fault and partly due to others.
The goddess of good fortune seems to be in cold relations with OGDCL of late, as the list of bad news includes the Qadirpur gas field pricing issue, litigation going around four vital fields of the company, ministrys order of probe into the delay in installation of compression facilities at Qadirpur. And the latest being, the governments move to seek clarification from companys management regarding the delay in Kohlu exploration block.
Realising the seriousness of the issue, the government has called for an emergency plan to avoid the embarrassment of a complete closure of the gas field. There is a strong likelihood - albeit not widely shared by industry watchers- that the temporary arrangement might backfire as the process lacks technical and professional handling.
If this fear materialises, it is going to have catastrophic consequences for the company in particular and the energy sector as a whole. The fact that Qadirpur gas field accounts for approximately 15 percent of the countrys total gas production, according to Pakistan Energy Yearbook, a complete collapse of the field could give pangs to the industry as it would create acute gas shortage in the system.
The company, however, is confident that the interim installation of compression facility would be adequate enough to sustain production levels of 650 mmcfd from the field - an affirmation echoed and well received by the industry analysts at large.
However, this is in stark contrast to a note sent earlier to the petroleum ministry, by none other than the company itself, citing the unlikelihood of gas being injected to the system beyond FY10, which could possibly lead to a collapse of the all important Qadirpur field.
This leaves the company and the government to expedite the litigation process of four other fields that accounts for 17 and 30 percent of the companys total oil and gas production, respectively. Even if the company succeeds in its desire to reach an out-of-court settlement, there is a very little chance of any incremental production from these four fields prior to FY12, leaving the company with either flat or declining production levels in the years to come.
This entire saga can also, most likely, lead to a cut in governments dividend expectation from OGDC, as the company still finds itself caught in the circular debt chain. The largest exploratory firm is expected to continue with its past practices of withholding governments share in the dividends in case of such constraints, which could also hurt governments budgeted revenue estimates.