Any chance of foreign investment in the country is a blessing when the external sector woes continue to mount – and that too in a sector that once was the key in attracting FDI. The oil and gas exploration and production sector might be in for a pleasant surprise if the offshore drilling that has just commenced is successful in finding the huge oil and gas deposits as proclaimed.
Yes, offshore drilling at distance of 230 kilometers from Karachi has been started by a group of multinational and local E&P giants where some are claiming of reserves higher than those at Sui. This comes as quite an update after ExxonMobil – the US energy giant took up 25 percent stake in the Indus-G block with ENI as the operator and OGDCL and PPL also part of the block, especially when offshore drilling has not resulted in any successful finds in the country previously.
According to Topline Securities, though offshore drilling has not produced any results in the past - more than a dozen offshore wells drilled in over 5 decades - the lower Indus G block is considered resource rich. It highlights that the drilling of Kekra well-1 in this block is expected to take 100 days, with an update likely by April 2019. One estimate for a discovery is 1bcfd, which is 25 percent of the country’s existing gas production. The brokerage house points towards the need for a pipe network to connect the well to the system in case of a successful discovery, which may take up to 4 years; the initial cost is estimated at around $70-80 million, equally divided among the four players: ENI, ExxonMobil, Oil and Gas Development Company (OGDC), and Pakistan Petroleum Limited (PPL).
This offshore development in Pakistan is among the three key offshore activities anticipated in 2019 globally. According to Bloomberg, “Some of the world’s biggest explorers are drilling wildcat wells in places like Pakistan, Indonesia and Papua New Guinea this year, hoping to discover the massive deep-water find…” It quotes Wood Mackenzie, a global energy consultant that is expecting a pickup in offshore exploration this year across Southeast Asia.
On the policy side, the local government has exempted the custom duty on the import of oil drilling ships, vessels and other machinery at the right time when ENI, ExxonMobil and the local giants were to begin drilling offshore. This is some development from the last time this space talked about venturing into deep waters (Read, “Moving into deep waters”, published on June 1, 2018). Besides, the offshore block is in Zone 0 as per Petroleum Policy 2012, which offers the highest gas price for ultra-deep exploration with an extra $1 per mmbtu incentive for the first 3 discoveries in the offshore area. Also, the policy offers a royalty waiver to companies for the first 4 years if commercial production begins.
While a wave of optimism has swept through the domestic E&P sector that had started feeling the heat from the furnace oil saga (Read, “FO saga: the beginning of the domino effect?”, published on December 14, 2018) a success in the offshore domain will certainly open floodgates to investment in the country’s E&P sector that has been facing dwindling reserves.
Comments
Comments are closed.