ISLAMABAD: The ministry of petroleum and natural resources has reportedly proposed an enhancement in the exploration expenditure limit of the Mari Gas Company Limited (MGCL) by 100 per cent, increasing it to $40 million from $20 million per annum, official sources told Business Recorder.
MGCL is a public limited company incorporated in Pakistan under the Companies Ordinance of 1984. The government of Pakistan is holding 18.2% share in the company besides a 20% indirect holding through OGDCL. The company is principally engaged in drilling, exploration, production and sale of oil and gas. The wellhead gas price given to the Company is on cost plus basis as defined in the Mari Gas wellhead price agreement dated December 22, 1984.
Since its inception, Mari Gas has been involved in production of gas from the Mari Gas Field located at Daharki, district Ghotki. The company has also made two additional discoveries in the same area, namely the Mari Deep and SML/Pirkoh.
In 2001, the company was allowed by government to undertake exploration, appraisal and development activities outside the Mari Field, costing up to $20 million per annum or 30% of annual gross sales revenue, whichever was less with the condition that all revenues from new oil/gas fields will be credited to GPA.
The current production from the Habib Rahi (shallow) reservoir of Mari Field is around 500 MMCFD, which is dedicated to the fertiliser sector while the Mari Deep is earmarked for the power sector. However, at present around 60 MMCFD is being supplied to the power sector by curtailing proportionate volumes from the fertiliser unit, as decided in the Energy Summit. Additionally, 109 MMCFD has been allocated to IPPs (65 MMCFD for the Fauji Power and 44 MMCFD for the Guddu Power Plant) from the Mari Deep reservoir. The Fauji Power is already in operation while another 44 MMCFD gas is being offered to power or fertiliser sectors. Currently, the notified wellhead price of MGCL is Rs48.30 per million BTU (equivalent to $0.53) against $2.6I MMBTU and $4.1/MMBTU offered under 2001 and 2009 petroleum policies, respectively. Due to lower wellhead price, the company is a major gas development surcharge contributor (around Rs18.5 billion during 2010-2011).
The company has requested that a cap of $ 20 million may be removed and the company may be allowed an increase in the annual exploration expenditure fund to the extent of actual expenditure subject to a maximum of 30 percent of annual gross sales revenue. The company has stated that some basic activities were carried out in the initial years of exploration, such as organising and establishing exploration department, data acquisitions, G&G studies, block acquisitions etc.
The company is now involved in 15 operated/non-operated exploration blocks across the country. The company has made five new oil/gas discoveries in four operated and one non-operated block. The company has submitted the following information to assess its performance over the period: The company is of the view that due to the exploration efforts and future work programme as per Petroleum Concession Agreements, the company has reached a stage where threshold of $ 20 million determined in 2001 is proving insufficient which is undermining the exploration efforts of the company. The company has exceeded the allowable limit of $ 20 million by incurring $23.481 million in 2008-09, $20.313 million in 2009-10 and $23.506 million in 2010-11.
The sources said that the country’s appetite for energy is no more a secret and it is high time to promote local companies to participate and play a proactive role. MGCL has been successfully operating the Mari Field and it has also achieved successes on other fields, including Zarghun, Ziarat, Koonj, Hala and Karak blocks.
The Petroleum Policy 2009 also reflects the efforts of the government of Pakistan to accelerate exploitation of indigenous natural resources by attracting foreign investment with technology as well as promoting local companies to participate in E&P activities on a level playing field.
“We have recommended to the government that the limit of $20 million per annum may be enhanced by $5 million every year to gradually achieve the revised limit of $40 million per annum over a period of four years (starting from January, 2012), subject to the same condition that the revenues from new oil/gas discoveries will be credited to GPA, thus benefiting the GoP,” the sources added.
The exploration expenditures will be subject to commercial audit by the Auditor-General of Pakistan. This clause will also be suitably inserted in the Gas Price Agreement.
The sources stated that the resultant decrease in GDS will be around Rs 1.8 billion.—MUSHTAQ GHUMMAN