This has reference to news item in the daily Business Recorder, of November 1, 2010 regarding OGDCL. E&P industry is not a manufacturing industry thus normal cutoff date activity reporting for any other industry are not applicable to E&P industry.
If one look at the reported activity by OGDCL since its inception it will be abundantly clear that OGDCL has been consistent in presenting its drilling activities to its Board of Directors and to all other officers by reporting number of wells spudded.
Any first time reviewer looking at OGDCL in naivety without having any background knowledge of the activity pattern and the efforts which go into generating a prospect and then initiating the drilling, ie spud of a drillable prospect can never appreciate these facts. OGDCL is dismayed at the news report which has certainly disturbed our professionals whose commitment to OGDCL and the national cause is matchless.
"Being a responsible public sector company OGDCL always sets tough and stretched targets for its technical teams. The prime objective of such goal setting is to accelerate oil and gas exploration to added to the company's oil and gas reserves and increase oil and gas production and development of new discoveries. "The company performance for the last five years with rig availability and the wells which were spudded in June of every reporting year is given below:
-- Due to rig availability which normally improves during last quarter with completion of various on going wells.
"As shown in the table above, 7 wells were drilled in June 2008-09 and 7 wells in June 2009-10. As such we wish to reiterate that the drilling of wells drilled in June of each financial year is carried over into the new financial year. Hence the 7 wells drilled in June 2010, will now be carried over into the next FY ie 2010-11, which amply proves that there are no 'ghost wells' as referred to in the news item.
"All the targeted well activity is dependent upon certain assumptions such as acquisition of new exploration areas, discovery and appraisal dependent wells etc. During the year 2009-10, company was able to finalise 40 well locations, out of which 28 wells locations were in clear areas, 11 in Uch gas field area, and 1 well location in security dependent area (Zin) . In clear areas, OGDCL spudded 22 wells, 4 wells were spudded in Uch which makes total number of 26 wells spudded/drilled by the Company. The drilling operations could not commence on other marked well locations primarily due to security concerns.
"It is important to note that in addition to 26 wells drilled by OGDCL as operator, OGDCL participated in drilling of additional 17 wells as a major joint venture partner with other operators such as BP, MOL, ENI and POL. Moreover, 15 ongoing wells from previous years also remained under drilling during this period. During the four months of the current FY ie 2010-11, OGDCL has already spudded 5 wells.
"As a result of these ongoing efforts OGDCL made 6 discoveries during 2009-10,. Which also includes a major discovery at Nashpa, in Khyber Pakhtunkhwa, with significant upside potential. Drilling on first appraisal well Nashpa-2 on the Nashpa discovery is already in progress.
Two significant discoveries were made at Reti-1 and Maru-1 in Sindh, in the Central Indus Basin in Pirkoh Limestone of Eocene age. These discoveries have opened up new vistas in the Indus Basin for future exploration. In addition to this, OGDCL has made two discoveries during the four months of the current FY ie 2010-11. One discovery, ie of Sheikhan, is a major gas discovery.
"If we compare this effort level with the rest of the industry, the achievements of OGDCL undoubtedly would stand out. During the FY 2009-10 a total of 68 wells were drilling in the country. OGDCL as an operator drilled 26 wells in addition to 17 wells participated by the Company as a joint venture partner with other operators, indicating that OGDCL's technical efforts and financial resources were deployed for the drilling of 43 wells out of a total of 68 wells drilled by the entire E&P industry in the country.
"The success of an upstream oil company can be measured by its ability to renew its existing resource base, ie its reserves. OGDCL replaced its reserves by 95% during 2009-10. Overall, it has replaced 102% [?] of its reserves during the last five years. This performance can be considered as extraordinary in the present day scenario where easy to find prospects are dwindling world wide especially on onshore areas, whereas in case of Pakistan, the area of activity is also shrinking due to increasing security concerns.
"With reference to the last paragraph with respect to the production in the news item in the daily Business Recorder, the reporter has erred without understanding the dynamics of the E&P business. Production increases are not linear rather can never be linear, these increases come in steps whenever a new discovery after due process of appraisal and development is hooked up and brought to production.
Discoveries in Sindh where OGDCL has capacity due to declining production from existing fields, any new find within a certain radius can and in actual be hooked up and put to production quickly. Another example is Nashpa discovery in Khyber Pakhtunkhwa which in spite of being mixed flow, ie both oil and gas in the same stream, was brought online by laying a 15 km pipeline in very tough terrain and field started production within 9 months of discovery due to its proximity to our Chanda field. Had it not been the case it would have taken around 30 months to bring it to production.
"A more meaningful way of looking at an E&P company is to look at its production profile over a time horizon of 10-15 years primarily due to the fact that yearly dips and highs can be smoothened out and if a company shows a trend going south it is definitely worrisome. However, if a company shows a production trend going north it is a healthy sign importantly so since it is over an expanded horizon and thats what one should look at from business consistency basis, and on top of that if a company shows healthy reserves replacement it is phenomenal which exactly is the case with OGDCL.
"OGDCL, in addition to reserves replacement, has shown remarkable growth in its oil and gas production over the last decade to maintain its role as the leading hydrocarbon producer in the country. With average oil & gas production at 21,364 barrels per day and 554 million cubic feet per day respectively in 2000, the current production of the company has increased to 38,000 barrels of oil and 900 million cubic feet per day of gas with peak average production during 2009-10 being 39,797 barrels of oil and 969 million cubic feet per day of gas . OGDCL is also getting an additional 6,790 barrels of oil and 288 million cubic feet of gas per day currently from its participation as a joint venture partner in non operated fields, whereas in year 2000, OGDCL was getting a mere 4,980 barrels per day of oil and 86 MMcfd of gas from joint-venture operations.
"It is a known fact world-wide that all fields with age start showing a declining trend. Most of the OGDCL fields are again fields, OGDCL has been quite successful thus far in arresting the decline and extending the production life of its fields again due to competence of our professionals and our technology partners in extending the fields life and enhancing overall recovery from these fields. In case of Pakistan, most of our oil condensate fields give good production and reach their peak in the first 3-5 years of life and then start declining; there are few fields with even shorter life cycle. In case of gas fields, most fields reach their peak during the initial 5-7 years and then start declining. Of course, exceptions are there on either side of the average mentioned above; it all depends on the size and pressure of the reservoir.
"It is pertinent to mention here that any E&P company, whether operating in Pakistan or internationally, cannot ensure a sustained level of production due to natural depletion of reserves without following aggressive exploration programme in order to replace such declining reserves. OGDCL is honed on reserve addition to its reserves base and enhancing its production for the long term.
"Moreover, OGDCL has recently discovered many new fields in the Kohat region to maintain its momentum of growth. Major reserves in the southern part of the country which were discovered 7 years ago and could not be brought on production due to litigation, are now being put under active development phase. With production commencing from these fields, OGDCL will add substantial oil and gas to the existing level of production, to the extent of approximately, and additional 8,120 barrels per day of oil and 496 MMcf per day of gas."
Year Wells spudded Wells spudded in June* Discoveries Made
2005-06 30 09 06
2006-07 41 16 10
2007-08 31 9 5
2008-09 30 7 2
2009-10 26 7 6