Saturday, May 14, 2011

Pakistan's Vast Shale Gas Deposits

Reports of new gas reserves of 40 trillion cubic feet (upped to 105 TCF in 2013 by US EIA) are specially welcome at this moment in Pakistan when it is facing a very serious and growing energy crisis. The US Energy Information Administration (EIA) puts the estimates even higher at 51 trillion cubic feet. Even if the demand doubles from the current one trillion cubic feet a year to two trillion cubic feet a year, the estimated current gas reserves can last as long as 30 years or more.

Pakistan is particularly heavily dependent on natural gas for its energy needs. Demand for natural gas in Pakistan has increased by almost 10 percent annually from 2000-01 to 2007-08, reaching around 3,200m cubic feet per day (MMCFD) last year, against the total production of 3,774 MMCFD, according to Pakistani official sources. But, during 2008-2009, the demand for natural gas exceeded the available supply, with production of 4,528 MMCFD gas against demand for 4,731 MMCFD, indicating a shortfall of 203 MMCFD.

The gas supply-demand imbalance is expected to grow every year to cripple the economy by 2025, when shortage will be 11,092 MMCFD (Million standard cubic feet per day) against total 13,259 MMCFD production. The Hagler Bailly report added that Pakistan's gas shortage would get much worse in the next two decades if it did not bring on any alternative sources.

Shale gas offers an alternative source for energy-starved Pakistan. Rough estimates indicate the presence of at least 33 trillion cubic feet of unconventional gas reserves trapped in tight sands, according to an ENI Pakistan report. Another report by Shahab Alam, technical director of Pakistan Petroleum Concessions, puts the estimate at 40 trillion cubic feet of tight gas reserves in the country. These unconventional gas reserves are in addition to the remaining conventional proven gas reserves of over 30 trillion cubic feet.

With the pioneering work done in the United States on deep drilling and hydraulic fracturing (fracking) to extract hydrocarbons from shale rock, it is now estimated that the US alone has over 1000 trillion cubic feet of recoverable unconventional gas, according to the Wall Street Journal. Unlike the bulk of world's conventional natural gas reserves that are found in Russia, Iran, Venezuela and Qatar, the shale gas reserves have been discovered in rock formations spread across many parts of the world, including Australia (396 TCF), China (1275 TCF), North America (1931 TCF), South America (1225 TCF), Europe (639 TCF), South Africa (485 TCF), India (63 TCF) and Pakistan (51 TCF). Many energy analysts argue that tapping these new hydrocarbon resources could be a game-changer in terms of global economics and geo-politics.

Increased production of gas from shale in the US has created a glut, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $4.23/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.

Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for gas imports, according to a report by Platts.

Although it does burn much cleaner than coal and oil, the process of extraction of shale gas in Pakistan, or anywhere else, is not without risks, particularly risks to the environment. In the United States, there have been many reports of ground water contamination from chemicals used to fracture rocks, as well as high levels of methane in water wells. In the absence of tight regulations and close monitoring, such pollution of ground water could spell disaster for humans and agriculture.

Given Pakistan's heavy dependence on natural gas for energy and as feedstock for industries such as fertilizer, fiber and plastics, it's important to pursue shale gas fields development under reasonably tight environmental regulations to minimize risks to the ground water resources.

Related Links:

Haq's Musings

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises
Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics
US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan


Khalid said...

Riaz Bhai:
Thanks for giving us a good news in very difficult times. May Allah Bless you for the effort.

I have been living in Pennsylvania for the Last 40 years , and only in last few years they have discovered a layer of Gas bearing, shale rock approximately a mile below ground surface. They estimate that trillions of cubic meters of gas will be extracted in next decades to come.
This new found gas in Pakistan could alleviate lot of miserable conditions in my home Land.

Riaz Haq said...

Khalid Sahib,

Pakistanis are a very resilient people, and in spite of all the bad news we hear, I remain hopeful for Pakistan's future.

There is a new book by Prof Anatol Lieven, former Times correspondent to Pakistan and current professor at King's College, London, about Pakistan.

Here are summary and salient points of the book Pakistan: "A Hard Country":

In the past decade Pakistan has emerged as a country of immense importance. Large, heavily populated, strategically placed between Iran, Afghanistan and India, Pakistan has since its creation just over sixty years ago been pulled in several different, irreconcilable directions.

In the wake of Pakistan's development of nuclear weapons, Osama Bin Laden's presence in its unpoliceable border areas, its shelter of the Afghan Taleban, and the spread of terrorist attacks by groups based in Pakistan to London, Bombay and New York, there is a clear need to understand this remarkable and highly contradictory place.

Far from seeing Pakistan as the failed state often portrayed in the media, Lieven's extraordinary new book instead treats it as a viable and coherent state that, within limits and by the standards of its own region rather than the West, does work. Lieven argues strongly against US actions that would risk destroying that state in the illusory search for victory in Afghanistan.

This work is based on a profound and sophisticated analysis of Pakistan's history and its social, religious and political structures. Lieven has interviewed hundreds of Pakistanis at every level of society, from leading politicians and soldiers to village mullahs and rickshaw drivers. In particular, his examination of the roots of popular sympathy for the Taleban in Pakistan draws on the testimony of people whose views are rarely consulted by Western analysts.

1. For most of the years since 1947, Pakistan has had higher economic growth rates than did India. Pakistan does not have the same pockets of extreme poverty, or for that matter the extreme wealth. The level of economic equality in Pakistan is relatively high.

2. Charitable donations run almost five percent of gdp, one of the highest percentages in the world and this reflects the emphasis on alms-giving in Islam.

3. A good quotation from a businessmen: “One of the main problems for Pakistan is that our democrats have tried to be dictators and our dictators have tried to be democrats.”

4. Agriculture pays virtually no tax and the government lends lots of money to businesses and doesn’t seriously ask for it back. As a result Pakistan collects far less revenue than does India, even comparing areas of comparable per capita income. If Pakistan were a state of India, it still would be considerably richer per capita than India’s poorest regions, such as Bihar.

5. The Pakistani state is nonetheless a lot more stable than most people think. In part this is because of the conservative structure of kinship and landholder power in the country.

6. The main threats to the future of Pakistan have to do with ecology and water, not politics.

7. The end of the book has a very interesting discussion about how U.S. actions in Pakistan affect different coalitions, feelings of humiliation, relative status relationships, etc.

Definitely recommended, as are Lieven’s books on the Baltics and Ukraine.


Khalid said...

Dear Riaz Bhai:
May Allah Bless you.
In a long time something positive from a Western writer, gives me a glimmer of hope for our bright future. It is my faith and belief that Pakistan is going to come out of these difficult times a stronger and stable country. May Allah make it come true. Ameen

Kindly, keep up the good work. Your analysis are timely and very helpful to give me a realistic hope. Allah will Bless you for this service. Ameen.
Sincere Regards

Anonymous said...

Natural gas is cleaner-burning than coal or oil. The combustion of natural gas emits significantly lower levels of carbon dioxide (CO2), nitrogen oxides, and sulfur dioxide than does the combustion of coal or oil. When used in efficient combined-cycle power plants, natural gas combustion can emit less than half as much CO2 as coal combustion, per unit of electricity output.

However, there are some potential environmental concerns that are also associated with the production of shale gas. The fracturing of wells requires large amounts of water. In some areas of the country, significant use of water for shale gas production may affect the availability of water for other uses, and can affect aquatic habitats.

Second, if mismanaged, hydraulic fracturing fluid — which may contain potentially hazardous chemicals — can be released by spills, leaks, or various other exposure pathways. Any such releases can contaminate surrounding areas.

Finally, fracturing also produces large amounts of wastewater, which may contain dissolved chemicals and other contaminants that require treatment before disposal or reuse. Because of the quantities of water used and the complexities inherent in treating some of the wastewater components, treatment and disposal is an important and challenging issue.

Anonymous said...

In part this is because of the conservative structure of kinship and landholder power in the country.

Isn't this the very structure that is preventing modernization?
This is the same structure India dismantled in 1950s itself.

Riaz Haq said...

Anon: "Isn't this the very structure that is preventing modernization?
This is the same structure India dismantled in 1950s itself."

It's true that Nehru dismantled feudal landowning and Pakistan did not early on.

But it's also true that India has a much more reprehensible system of caste-based Apartheid and misogyny that keeps more than two-thirds of India far more backward than Pakistan. Pakistan is much more urbanized with a larger middle class as percentage of its population than India...and the power of the feudal landowners is steadily eroding.

There is a massive female genocide unfolding in India, and India leads the world in child marriages and teenage mothers.

Besides, India has much bigger percentage of landless farmers than Pakistan, and 200,000 of such farmers have taken their own lives in the last decade.

India's constitution framer Dr. Ambedkar put it well when he said that "Democracy is only the top dressing on an undemocratic soil" in India.

Rahul said...

The facts you present have no authentic source...Anyways there is no hope for your country, so I just laugh at what u write...

vicks1980 said...

I am also reading Lieven's book, Riaz, and while he does not share the doomsday prophesies about Pakistan that come from the West from time to time, he does potray the dangerous and negative aspects of Pakistan pretty well too, which of course you have not mentioned. Fair love your country, and you are inclined to see the good that people write about it, not the bad. What does grate however, is your continuous effort at running down India and Hinduism. I suggest that you start covering up your intrinsic dislike of the 'infidels' better than what you do. What is amazing are your rants against Hindu culture and society and your talking about Hindu communalism and so on. Pretty much the same muck can be levelled at what you seek to defend.

Jai Singh said...

In his book Social Stagnation, Dr. Ambedkar was very critical of Islam.He wrote that Muslim society is "even more full of social evils than Hindu Society is" and criticized Muslims for sugarcoating their sectarian caste system with euphemisms like "brotherhood". He also criticized the discrimination against the Arzal classes among Muslims who were regarded as "degraded", as well as the oppression of women in Muslim society through the oppressive purdah system. He alleged that while Purdah was also practiced by Hindus, only among Muslims was it sanctioned by religion. He criticized their fanaticism regarding Islam on the grounds that their literalist interpretations of Islamic doctrine made their society very rigid and impermeable to change. He further wrote that Indian Muslims have failed to reform their society unlike Muslims in other countries like Turkey.

Riaz Haq said...

Jai Singh: ".He wrote that Muslim society is "even more full of social evils than Hindu Society is" and criticized Muslims for sugarcoating their sectarian caste system with euphemisms like "brotherhood". "

Clearly, Ambedkar was an optimist who couldn't foresee that Apartheid in Hindu India would continue long after it has ended in South Africa and the rest of the world.

Over 250 million people are victims of caste-based discrimination and segregation in India. They live miserable lives, shunned by much of society because of their ranks as untouchables or Dalits at the bottom of a rigid caste system in Hindu India. Dalits are discriminated against, denied access to land, forced to work in slave-like conditions, and routinely abused, even killed, at the hands of the police and of higher-caste groups that enjoy the state's protection, according to Human Rights Watch.

In what has been called Asia's hidden apartheid, entire villages in many Indian states remain completely segregated by caste. Caste-based abuse is also found in Nepal, Sri Lanka, Bangladesh, Pakistan, Japan, and several African states.

In support of its assertions of Dalit abuse in India, the Human Rights Watch has documented the following abuses:

* Over 100,000 cases of rape, murder, arson, and other atrocities against Dalits are reported in India each year. Given that Dalits are both reluctant and unable (for lack of police cooperation) to report crimes against themselves, the actual number of abuses is presumably much higher.

* India's own agencies have reported that these cases are typically related to attempts by Dalits to defy the social order, or demand minimum wages and their basic human rights. Many of the atrocities are committed by the police. Even perpetrators of large-scale massacres have escaped prosecution.

* An estimated forty million people in India, among them fifteen million children, are bonded laborers, working in slave-like conditions in order to pay off a debt. A majority of them are Dalits.

* According to government statistics, an estimated one million Dalits are manual scavengers who clear feces from public and private latrines and dispose of dead animals; unofficial estimates are much higher.

* The sexual slavery of Dalit girls and women continues to receive religious sanction. Under the devadasi system, thousands of Dalit girls in India's southern states are ceremoniously dedicated or married to a deity or to a temple. Once dedicated, they are unable to marry, forced to become prostitutes for upper-caste community members, and eventually auctioned into an urban brothel.

Although there are laws in India to deal with caste-related problems of bonded labor, manual scavenging, devadasi, and other atrocities against Dalit community members, the reality is that such laws are widely ignored by the law-enforcement agencies and the perpetrators.

The International Convention on the Elimination of All Forms of Racial Discrimination (ICERD) now includes discrimination based on caste. Dating back to 1969, the ICERD convention has been ratified by 173 countries, including India. Despite this, and despite the United Nations Sub-Commission on the Promotion and Protection of Human Rights reiterating that discrimination based on work and descent is a form of racial discrimination, the Indian government's stand on this issue has remained the same: caste is not race.

Riaz Haq said...

Jai Singh, Rahul and vicks1980,

You should worry about energy and food-starved India with only 63 TCF of shale gas for 1.2 billion people vs Pakistan's 51 TCF for just 1/7th the Indian population.

India is expected to surpass China as the world's most populous nation by 2025. As the Indian population rises rapidly amidst its depleting land and water resources, the widespread hunger problem could grow worse unless serious steps are taken now to remedy the situation.

IFPRI said India's hunger index score has worsened over the last three years from 23.7 to 23.9 to 24.1 and its ranking moved from 66 to 65 to 67 on a list of 84 nations....while Pakistan's hunger index score has improved over the same period reported since 2008 from 21.7 (2008) to 21.0 (2009) to 19.1 (2010) and its ranking has risen from 61 to 58 to 52.

With the growing population and worsening water shortages, the prognosis for hunger in India is not good, according to the author of National Geographics cover story in its latest issue on population.

India is ranked 33rd and Pakistan 39th among the most overcrowded nations of the world by Overpopulation Index published by the Optimum Population Trust based in the United Kingdom. The index measures overcrowding based on the size of the population and the resources available to sustain it.

Roland said...

Anonymous said...

Hi Riaz

To an extent I completely agree with you.

1. I have seen victims of bonded labor in Thane district of Maharashtra. Also read about them employed(?)in bidi factories in MP, Chhattisgarh & Vidarbh.
2. Yes, caste system very much prevails in India even today. I am high cast Hindu & were I had to give my daughter's hand.....IT will be to high cast Hindu only.
3. The extent to which I do not agree with you is only because, I am not well read & obviously cannot comment, thus there is disagreement either so far.

Anyways, we have strayed from main topic of your blog!!!!!!!!!!!!!!!

Good Luck to you,

Prasad Junnarkar-Nagpur, India

Muhammad Iftikhar said...

Dear sir, i'm student of Geology i'm doing my final thesis work on shale gas of Pakistan specially potential of Lower Goru shale's in badin. so, if any one some idea about such gas in Pakistan plz help me this is a new topic Introduced in Pakistan in field of Oil & gas industry if there is little bit potential found in any formation of any area like sulaiman or kirthar plz... inform me about.. that, which sort of criteria present over there.

Anonymous said...

You should worry about energy and food-starved India with only 63 TCF of shale gas for 1.2 billion people vs Pakistan's 51 TCF for just 1/7th the Indian population.

Pakistan also on a per capita basis has a lot more coal than India but its incmpetence keeps it from extracting any of it,I have no reason to believe it has become any more competent as a state to exploit shale gas.

India has some of the world's largest reserves of iron,aluminum,titanium,coal and manganese which has been properly utilized which is why India is currently world #5 in industrial production and Pakistan has to import everything from cellphones to satellites.

No amount of obscure statistics can hide the fact that India is a successful and currrently the world's fastest growing economy and pakistan is not.

Riaz Haq said...

Iftikhar: "inform me about.. that, which sort of criteria present over there."

There are several links in my post which you should click on and follow to find material that might be useful in your research.

For example, check out:

1. Scope of Tight Gas Reservoir
In Pakistan

By Salah Heikal (Eni Pakistan)

2. Potential of Tight Gas in Pakistan: Productive, Economic and Policy Aspects By Shahab Alam

Mayraj said...

Manufacturing sector as big hope for this? First they need power plants for that!
In Benares Indian manufacturers are heading off to China because of this lack of adequate energy problem..and I assume it is not only example, just one mentioned in a media article.

Riaz Haq said...

Qatar, the world’s largest liquefied natural gas exporter, said LNG sales to the U.S. are being limited by shale gas discoveries in the country, according to Bloomberg.

More LNG supplies are being diverted to the Asia-Pacific region instead, Qatari Energy Minister Mohammed Saleh Al Sada said in Doha today.

The minister said 60 percent of Qatari LNG “moved to the east” in 2009.

Roland said...

"... it's important to pursue shale gas fields development under reasonably tight environmental regulations to minimize risks to the ground water resources."

you're kidding, of course!?

Riaz Haq said...


Are you suggesting that any activity that poses any risk to the environment should be opposed in Pakistan regardless of any larger benefits to society?

Muhammad Iftikhar said...

yes of,course it's good to develop such sort of fields of shale gas, but due to low permeability of shale there is a technique applied for enhancement of permeability known as "Hydraulic Fracturing" contain liquid material with gases & Chemicals injected to produce fractures that flow of gas come in well. so, that may contaminate our Ground main problem of Hydraulic Fracturing.

Riaz Haq said...

Iftikhar: "that may contaminate our Ground main problem of Hydraulic Fracturing."

Look at the schematic carefully.

Water aquifers are quite shallow, while shale rock is quite deep, and there is a seal between these layers that must be maintained to prevent leak from fracking fluid into the water table.

And the fracking fluid must be disposed off carefully to avoid ground water contamination.

All these measures raise the cost of shale sightly, but it'll still be a lot cheaper than Iranian gas or LNG from Qatar.

Muhammad Iftikhar said...

In United States Scientists tested water samples taken from 68 private wells & in five counties Pennsylvania and New York to explore accusations that "hydro-fracking" a contested technique to extract shale gas contaminated groundwater.
Methane was found in 85 percent of the samples, and at sites within a kilometer (0.6 mile) of active hydro-fracturing operations, levels were 17 times higher than in wells far from such operations, said the study by researchers at Duke University in North Carolina.

Riaz Haq said...

Iftikhar: "Duke University in North Carolina"

Yes, I have heard these reports too.

I believe these are early days of shale fracking, and I expect the learning from the Pennsylvania experience to improve the drilling and fracking techniques to protect ground water better in the future....and I expect US Congress and EPA to make new laws and regulations to ensure that.

Mayraj said...

Technological breakthroughs in methods for drilling for natural gas have opened up the possibility of vast new supplies. However, environmental concerns may turn out to be significant.

Stuart Staniford has taken a look at a study of the effects of shale-gas extraction on drinking water recently published in the Proceedings of the National Academy of Sciences.

Anonymous said...

I think the key problem of India is how to share the cake economically speaking whereas Pakistan is yet to learn how to bake one.

India has an advanced industrial sector probably the second most advanced in the developing world after China but the key challenge is distributing this largess equitably.

Pakistan on the other hand except perhaps those industrial units allied to defence production has a primitive industrial base mostly dependant on the soil ie food processing,textiles(dependant on cotton crops),sugar,cement and the like.

Unfortunately this is just not sustainable and the IMF/WB is at the end of the day not competent to advise on industrial base creation all countries that have created industrial bases have done it counter to advise of these institutions be in China,South Korea or India.

Riaz Haq said...

Here's a BBC report on lack of enthusiasm of foreign investors in India's energy sector:

The country is hoping for massive investment in the explorations sector to speed up the hunt for sources of oil.

But despite the efforts by the government, investment has slowed in the last couple of years.

Overall foreign direct investment (FDI) flowing into the country dipped sharply by 22%, to $21bn (£13bn) in 2010 from $27bn in 2009.

FDI is crucial to energy-hungry India. It is hoping for at least $40bn investment in the exploration sector to reduce its dependence on foreign oil.
Despite the optimism of industry watchers, the indicators point in the opposite direction.

In March this year under NELP, the government had offered 34 exploration blocks for auction, of which one didn't have any bidders and 14 got just one bid each.

Major explorers, like Exxon Mobil, Chevron, BP and Royal Dutch Shell, avoided the auction.

Analysts say that this is a worrying trend for the development of the sector.

"There is a requirement of expertise, which these international companies can bring with them, and that would make a huge difference in the energy scenario going forward," said Varun Bhutani, of Halliburton Consulting.

However, some analysts see this reluctance on behalf of foreign investors as almost a tribute to the growing confidence and expertise of the Indian companies.

"You have Indian players who can take up the responsibility going forward. So the reliance on foreign players to that extent has come down," said Nabin Ballodia, of KPMG

Riaz Haq said...

Here's an International Power announcement of Uch II power plant in Pakistan:

(London – 21 January 2011) International Power plc is pleased to announce that it has signed the financing to develop Uch II, a 375MW CCGT extension to the existing 572MW Uch plant in Pakistan. Uch II will be 100% owned by International Power.

Philip Cox, CEO of International Power, said, "Uch II represents an excellent opportunity for International Power to add new capacity adjacent to our existing Uch site and help tackle the issue of power shortages in the country. A key attraction of this investment is that it will also use domestic gas to produce competitively priced power."

The total project cost is estimated at US$480 million (£300 million), which will be funded by debt and equity in a 75:25 ratio. International Power’s equity investment of US$120 million (£75 million) will be funded from current liquid resources. The US$360 million (£225 million) of debt will be provided by multilateral and bilateral agencies that include the Asian Development Bank, International Finance Corporation, Korean EXIM and the Islamic Development Bank.

The electricity generated from Uch II will be sold through a 25-year US$ indexed power purchase agreement with the National Transmission and Despatch Company, which is wholly owned by the Government of Pakistan. Gas will be supplied from the existing gas field under a gas supply agreement with the Oil and Gas Development Company of Pakistan.

The Uch II project will be constructed under an EPC contract with Hyundai Engineering Company and Descon Engineering. It will comprise two GE9E gas turbines and one steam turbine. The plant is expected to be operational in 2013 and will be operated by the existing Uch facility under an Operations and Maintenance agreement.

Riaz Haq said...

Two new power plants add 390MW to national grid, according to The Express Tribune:

Two private sector power projects, having cumulative net capacity of 390 megawatts, have been added to the national grid in the last one month.

This was told in a meeting of the Private Power and Infrastructure Board (PPIB) held on Monday under the chairmanship of Minister for Water and Power Syed Naveed Qamar, said a press statement.

One was a gas-based independent power producer (IPP) named Fauji Daharki Power Project with a capacity of 176.6 MW and was commissioned on April 22 and the other was 213.8MW Hubco-Narowal Power Project which started commercial operations on May 16.

Participants of the meeting said that another three IPPs were in construction phase which included 209MW Bhikki Power Project, which is expected to be commissioned soon, 84MW New Bong Hydropower Project and 375MW Uch-II Power Project based on gas, expected to be completed by 2013.

Qamar said that the government believed in the policy of facilitating investors and removing hurdles in processing of projects, adding the Power Generation Policy for 2002 was being reviewed to make it more investor-friendly, in consultation with public and private sector stakeholders.

He added that in order to make electricity affordable, the concept of converting existing thermal IPPs to cheaper fuels like coal, LNG, etc was being seriously considered.

Appreciating the role of PPIB in bringing investment in the power generation sector, the minister asked PPIB to focus on the development and implementation of power projects based on water and coal for medium and long-term needs.

Riaz Haq said...

In addition to shale gas in many parts of Pakistan, there are also shale oil in Dera Ghazi Khan and Kohat basin, according to the following report:

ISLAMABAD: Pakistan has sought German assistance in developing its oil shale potential and transfers of clean coal technologies for utilising Thar lignite coal.

Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon has expressed this desire during his visit to headquarters of the German Institute of Geosciences and Natural Resource (BGR) in Hannover. He has led a three member Pakistani delegation to Germany to explore avenues of Pak-German cooperation in the energy sector, says a message received here on Friday.

The two sides reviewed the past cooperation between BGR with Pakistani institutions including HDIP, GSP and WAPDA. BGR also informed Mr Jadoon about their work in earthquake-affected areas of Pakistan for damage prevention and mitigation purposes.

The minister highly appreciated the contribution of BGR in economic and social development of Pakistan and urged them to continue their good work in the energy sector of Pakistan. He said that Pakistan economy’s growing at a rate of 7 percent per year requires increasing quantities of energy for its socio- economic needs.

In the wake of increasing international oil prices, Pakistan is seriously looking at developing alternatives to hydrocarbon, like oil and gas. A significant potential of oil shale deposits was identified in Pakistan in Dera Ghazi Khan and adjoining areas by HDIP and BGR in 1990s. Mr Jadoon invited BGR to work with HDIP to asses feasibility and potential of economic utilisation of oil shale resources of Pakistan.

The minister also showed keen interest in BGR’s technology for upgradation of brown lignite coal into smokeless briquettes, which can be used as clean and cheap household fuels in rural and urban areas of Paksitan. He invited BGR to develop technical cooperation with Pakistani institutions for production of such briquettes. He expressed the hope that this technology would be very useful not only for Pakistan but also for the entire South Asia region. The minister took round of BGR laboratories in Hannover dealing with petroleum geochemistry and application of satellite remote sensing methods in oil and gas exploration.

Riaz Haq said...

Pakistan is seeking Chinese investment for oil and gas exploration and development, according to media reports:

Islamabad – While Pakistan is facing acute energy shortage, urgent steps are needed to explore the vast potential of hydrocarbon in Pakistan. In this connection President Zardari and Prime Minister Gilani have rightly sought Chinese assistance in onshore and offshore drilling for oil and gas as well as for reactivating the depleted and abandoned fields in different parts of the country.

Talking to a delegation of Chinese oil and gas conglomerate, Orient Group, the two leaders assured that Pakistan would facilitate the Chinese investment, Pakistan Observer reported.

The Chinese group has already acquired BP projects in Pakistan and is investing more so as to increase the production of oil products. Certainly Chinese companies are in a position to help Pakistan in oil exploration as they have the necessary technical know how, rich experience in drilling and the financial resources.

Federal Minister for Petroleum and Natural Resources Dr Asim Hussain has also assured the delegation to provide necessary facilities for investment in oil and gas sector. “If arrangements for exploration of natural resources is matured with the Chinese and an enabling environment is provided, it will certainly go a long way in achieving a breakthrough. We think there is lot of potential for some major discovery in offshore but so far half hearted efforts made for the purpose has yielded no results.”

The need is that the Chinese Company be persuaded to enter into a joint venture with OGDCL for drilling in the offshore prospective areas.

Many countries in the region have discovered oil in the offshore areas and there is every possibility to strike a major find in Pakistani territorial waters. If routine bottlenecks are removed and security situation is improved, we think Pakistan can discover at least some major gas fields in Balochistan and in the offshore areas.

The existing gas fields are depleting and as a result the country is facing acute shortage of gas and twice a week loadshedding is being applied at the CNG stations. If new discoveries were not made, the situation would get worse in the coming winter season.

Riaz Haq said...

Here is a report on Chinese interest in Pakistan's oil and gas business:

See the latest market Sina Financial News July 15 News, Alliant Energy Chairman and Executive Director Zhang Hongwei, said at a news conference to $ 775 million (approximately HK $ 6.0 billion) acquisition of British Petroleum in Pakistan's oil and gas business, expected to be 7 the end of the transaction. He pointed out that the first half of this year, the project's production of crude oil and natural gas, 129 oil wells, the average monthly net production of 2.29 million barrels of oil equivalent per day, of which 73% of natural gas production in the project's oil and gas producers in Pakistan accounted for 18% share of natural gas share of 6 percent, he added referring the project area is currently mined only 16% of the total area of exploration potential( News

When asked whether there are tender when the central enterprises to participate, Zhang Hongwei, said bids are at different stages of the central enterprises expressed interest, but the Chinese government do not want to engage in international tenders in internal competition, it is noted that other central enterprises into joint energy first bid program, will no longer enter.

Zhang Hongwei also pointed out that Pakistan is an old oil field project, and only land-based oil fields have been mined, there is exploitation of offshore oil field yet, so there is no risk of oil spills.

He expects oil prices will shock upstream on the existing basis.$-6.0-billion-purchase-of-oil-and-gas-projects-in-Pakistan

Riaz Haq said...

Pakistan's oil and gas sector titled "Pakistan Economy 1947-2011":

KARACHI: Oil and gas sector in Pakistan has seen phenomenal growth since the independence in 1947, as till now 791 wells have been drilled by various local and international exploration companies with over 250 oil and gas discoveries, official data revealed.

The data suggests that these discoveries have brought the gas reserves to 29 trillion cubic feet (TCF), whereas the crude oil recoverable reserves are estimated at 304 million barrels.

At the time of independence, the oil quantities produced were scarce and at that time there was no gas production. Over these years the petroleum industry has played a significant role in the national development by making large indigenous gas discoveries and inviting huge investments, both local and foreign, in the sector.

An investment of $810 million was spent in drilling activities with 30 new wells drilled during the last year.

After the independence of Pakistan, the government promulgated Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 and issued rules there under in 1949.

The aim of the act was to provide regulatory certainty for exploration and production business that was essential to encourage and accelerate petroleum exploration activities.

Thereafter BOC and AOC established local companies, Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL), respectively and transferred exploration activities to these companies.

In 1952, a well drilled on the Sui structure in Central Indus Basin, made the maiden discovery of large reserves of natural gas in the Sui Main Limestone of Early Eocene age.

The original recoverable gas reserves were estimated to be over 10 trillion cubic feet (TCF) equivalent to about one billion barrels of oil.

The discovery of Sui Gas Field was the first major milestone in the search for hydrocarbons in Pakistan.

Following the natural gas discovery at Sui, several foreign oil companies took active interest in carrying out exploration in Pakistan. This led to further exploratory drilling in prospective areas.

The government of Pakistan then decided to undertake the search for oil and gas directly and established the state oil exploration company.

The Oil and Gas Development Corporation was established in September 1961, subsequently, incorporated as a joint stock company with the listing at the local stock exchanges under the name of the Oil and Gas Development Company Limited (OGDCL).

OGDCL’s first success was the small gas discovery at Sari Singh in Sindh in 1965.

Pakistan remains an active and prospective exploration country. Significant finds continue to be made in the existing producing areas, as well as in less-explored regions.

The proven rate of exploration success and a sizeable domestic oil and gas market present promising investment opportunities.

In order to remain attractive in highly competitive global exploration market, the government has been making progressive changes in the investment polices and regulations at regular intervals. With first E&P policy of 1991, Pakistan caught the attention of international petroleum industry.

Further subsequent improvements through policies of 1993, 1994, 1997 made Pakistan an attractive location for upstream investment.

Pakistan overhauled the policy in 2001 and then in 2009. On account of combination of factors such as improved returns on investment based on new fiscal incentives, transparent and open regulatory environment, induction of market reforms and technological advances, the government expects positive influence on local upstream market and hopes that forward momentum will be maintained.

Riaz Haq said...

Here's an interesting excerpt from a report about Pakistan's power sector published in Miami Herald:

There is no place where the country's energy shortage isn't profound. Rural areas are without electricity for up to 16 hours a day while towns often go without for as many as 12 hours daily, forcing factories to close and plunging homes into darkness.

Natural gas supplies are rationed, with factories in the country's most populous province, Punjab, going without two days a week.

Pakistan's economic output is cut by at least 4 percent because of the shortages, the government estimates, something that hampers the country's hopes to battle extremism by creating more economic opportunities. The outages also feed political discontent, triggering frequent, if local, street protests.

Solving the energy problems is a top priority for the United States' aid program, with a State Department delegation here this week, led by Ambassador Carlos Pascual, the Obama administration's special envoy on international energy affairs.

But Pakistan's plans for a 1,700-mile natural gas pipeline from Iran, which would provide Pakistan with a cheaper source of fuel for electricity generation, is a stumbling block.
Despite Pakistan's huge hydroelectric potential, it hasn't built a big dam project since the 1970s. Since the U.S.-backed government of President Asif Zardari was elected in 2008, a mushrooming chain of "circular" debt has enveloped the power sector.

The government has assumed $3.6 billion of the power industry's debt. The government-owned power grid owes another $2.5 billion to private-sector generators, even as the government, according to Finance Ministry figures, spent at least $7.4 billion on electricity subsidies during the 2008-2010 period.

Washington and international lenders such as the International Monetary Fund have repeatedly urged Pakistan to cut subsidies, which anemic government finances cannot afford.

Critics say that the government hasn't added to the electricity infrastructure in its three-and-a-half year term, while sinking billions of dollars into unproductive subsidies and taking on debt.

Of the $3.6 billion debt the government assumed, half were bills the government itself hadn't paid, said Ejaz Rafiq Qureshi, the spokesman of the Pakistan Electric Power Co., the state-owed national electricity grid. The rest is owed by private consumers.

At the end of August, a group of nine private power plants demanded that the government pay them within 30 days $540 million it owed for power generation.

Roughly half of Pakistan's current electricity output of 13,000 megawatts comes from the private generators. But there is more capacity that the government doesn't use. Government-owned equipment that could generate another 2,000 megawatts has been sidelined because of poor maintenance. Private equipment that could generate another 2,500 megawatts has been taken out of service because the government hasn't paid its bills, said Abdullah Yusuf, who represents the private producers. Combined, that amounts roughly to the entire immediate shortfall.

"If you had this capacity available, straight away your problem would be solved," said Yusuf.

A longer-term energy project is Pakistan's proposed $12 billion Diamer Basha dam, which would add 4,500 megawatts to Pakistan's electricity generating capacity. Washington is considering providing significant funding to the project. Separately, the U.S. Agency for International Development is currently working on projects that will add 900 megawatts to the Pakistani grid next year.

Read more:

Riaz Haq said...

Here's David Brooks of NY Times on "shale gas revolution" in America:

The United States is a country that has received many blessings, and once upon a time you could assume that Americans would come together to take advantage of them. But you can no longer make that assumption. The country is more divided and more clogged by special interests. Now we groan to absorb even the most wondrous gifts.

A few years ago, a business genius named George P. Mitchell helped offer such a gift. As Daniel Yergin writes in “The Quest,” his gripping history of energy innovation, Mitchell fought through waves of skepticism and opposition to extract natural gas from shale. The method he and his team used to release the trapped gas, called fracking, has paid off in the most immense way. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is 30 percent and rising.

John Rowe, the chief executive of the utility Exelon, which derives almost all its power from nuclear plants, says that shale gas is one of the most important energy revolutions of his lifetime. It’s a cliché word, Yergin told me, but the fracking innovation is game-changing. It transforms the energy marketplace.

The U.S. now seems to possess a 100-year supply of natural gas, which is the cleanest of the fossil fuels. This cleaner, cheaper energy source is already replacing dirtier coal-fired plants. It could serve as the ideal bridge, Amy Jaffe of Rice University says, until renewable sources like wind and solar mature.

Already shale gas has produced more than half a million new jobs, not only in traditional areas like Texas but also in economically wounded places like western Pennsylvania and, soon, Ohio. If current trends continue, there are hundreds of thousands of new jobs to come.

Chemical companies rely heavily on natural gas, and the abundance of this new source has induced companies like Dow Chemical to invest in the U.S. rather than abroad. The French company Vallourec is building a $650 million plant in Youngstown, Ohio, to make steel tubes for the wells. States like Pennsylvania, Ohio and New York will reap billions in additional revenue. Consumers also benefit. Today, natural gas prices are less than half of what they were three years ago, lowering electricity prices. Meanwhile, America is less reliant on foreign suppliers.

All of this is tremendously good news, but, of course, nothing is that simple. The U.S. is polarized between “drill, baby, drill” conservatives, who seem suspicious of most regulation, and some environmentalists, who seem to regard fossil fuels as morally corrupt and imagine we can switch to wind and solar overnight.

The shale gas revolution challenges the coal industry, renders new nuclear plants uneconomic and changes the economics for the renewable energy companies, which are now much further from viability. So forces have gathered against shale gas, with predictable results.

The clashes between the industry and the environmentalists are now becoming brutal and totalistic, dehumanizing each side. Not-in-my-backyard activists are organizing to prevent exploration. Environmentalists and their publicists wax apocalyptic.

Like every energy source, fracking has its dangers. The process involves injecting large amounts of water and chemicals deep underground. If done right, this should not contaminate freshwater supplies, but rogue companies have screwed up and there have been instances of contamination.

The wells, which are sometimes beneath residential areas, are serviced by big trucks that damage the roads and alter the atmosphere in neighborhoods. A few sloppy companies could discredit the whole sector...........

Riaz Haq said...

Here's a Bloomberg report on new gas fields in Pakistan:

July 14 (Bloomberg) -- Oil & Gas Development Co., Pakistan’s biggest fuels explorer, plans to spend a record $1 billion this year to drill 48 new wells and increase production, to help bridge the nation’s record energy deficit.

“We are following a very aggressive exploration policy,” Chief Executive Shah Mehboob Alam said in an interview at his office in Islamabad yesterday. “We are targeting a number of discoveries.”
A “sizeable” discovery in the northwest will be announced in “a couple of days,” Alam said, without giving details.
The company expects the Zin Block in Baluchistan to generate its first gas flows within two years. The block has estimated gas reserves of 10 trillion cubic feet and drilling is scheduled to start as soon as the government approves security plans within the next two weeks, he said.

“We drilled only five out a planned 15 wells in Baluchistan last year because of security issues,” he said. “Now, we have submitted a plan to the Finance Ministry under which the Frontier Corp. will raise a special force of 500 to 600 people.”

Baluch nationalists want political autonomy and a share of the resources in the province, where the country’s largest gas fields, including Sui, are located. The Frontier Corp. is part of Pakistan’s paramilitary force.

The company is also working in fields in western Baluchistan, including the Samandar field, west of Karachi, and Shahana, which is near the border with Iran, Alam said.

Fresh Bids

Oil & Gas will invite bids today for the development of Kunar Pasakhi Deep and Tando Allah Yar fields in the southern province of Sindh, Alam said. Previously awarded tenders had been canceled after being challenged in court for not complying with regulatory procedures.

The two fields may produce 280 million cubic feet of gas a day, 360 metric tons of liquefied petroleum gas a day and 4,300 barrels of oil a day, Alam said.

The company drilled 26 wells and made six discoveries in the year ended June 30, including at Nashpa in the northwest, which is producing 15 million cubic feet a day of gas and 4,700 barrels of oil a day, he said. Oil & Gas Development discovers fuel in one out of every 2.3 wells drilled, compared with an industry average of one in every 3.8, he said.

New Compressors

Oil & Gas Development will increase production after installing new compressors to plug leaks at the Qadirpur gas field by September, Alam said. The company plans to buy two new rigs this year.

The Qadirpur field in the southern province of Sindh contributes about 40 percent of the company’s total gas output.

Oil & Gas Development produces about 1 billion cubic feet of gas a day, or a quarter of the country’s total output. Its oil production is 60 percent of the nation’s total of 62,000 barrels a day. Pakistan imports 85 percent of its oil needs.

The company’s profit in the 12 months ended June 30, will be “higher than last year,” Alam said, without giving details. Oil & Gas reported a net profit of 55.5 billion rupees ($647 million) in the year ended June 30, 2009, according to data compiled by Bloomberg.

Riaz Haq said...

Here's a Bloomberg hydrocarbon update for Pakistan:

Nov. 15 (Bloomberg) -- Oil & Gas Development Co., Pakistan’s biggest energy explorer, expects to increase output by as much as 20 percent in the year through June after adding resources in the country’s northwest.

“New oil and gas discoveries will certainly increase our profitability,” Managing Director Basharat Mirza said yesterday in an interview in Islamabad. “I expect a 15 percent to 20 percent addition to our oil and gas production this year.”

OGDC, the largest company on the Karachi Stock Exchange, reported a gas find this week at the Nashpa-2 well in Khyber Pakhtunkhwa province. The discovery may help boost energy supplies in a country where factories are facing three days a week without gas this winter.

The company plans to spend $270 million on drilling some 27 new wells this financial year, Mirza said. It expects to produce 10 million to 12 million cubic feet of gas a day at Nashpa-2 and 5,000 barrels of oil, he said at the company’s headquarters.

An increase in domestic energy supplies may help boost South Asia’s second-biggest economy, which has been hurt by terrorism and dwindling foreign investment. Pakistan is preparing for a gas shortfall of 1.05 billion cubic feet a day by February, Petroleum Minister Asim Hussain said Nov. 13. That may exacerbate the daily power cuts that have forced textile and engineering plants to close and caused riots across the country.

Shares Slip

OGDC dropped 0.6 percent to 155.11 rupees at the close in Karachi yesterday, extending its decline this year to 9.2 percent. The benchmark KSE100 Index is little changed over the period.

As it expands in Khyber Pakhtunkhwa, the company has limited its exploration in the western province of Baluchistan, where attacks on pipelines and other energy infrastructure have disrupted gas supplies, Mirza said. OGDC has taken all “low- hanging fruit” and is left with “difficult areas that include Baluchistan and offshore blocks that require huge investment.”

The company has the protection of the Pakistan army at its Zin block in Baluchistan, where it plans to produce its first gas flows in the “next four weeks” to gather data on the reservoir, Mirza said. The block holds an estimated 10 trillion cubic feet of gas reserves, former Chief Executive Officer Shah Mehboob Alam said last year.

OGDC also expects a further 100 million cubic feet a day from a well in Tando Allah Yar in Sind province by December after completing a pipeline, according to Mirza. Further infrastructure at the field would allow an increase in output capacity to 400 million cubic feet a day, he said.

Payment Defaults

The company is pressing ahead with its investment plan even as domestic oil refineries and gas distributors fail to pay for supplies.

The company is owed about 93 billion rupees ($1.07 billion) in back payments, Mirza said, adding that “so far this default by our customers has not impacted our ability to finance our exploration. We might issue bonds or borrow from banks if this situation persists, let’s say for another year.”

Power utilities, whose earnings are sapped by unpaid customer bills and price controls, have delayed payments to fuel suppliers, which in turn owe money to the oil refiners. The total dues, known as circular debt in Pakistan, amount to more than 300 billion rupees, according to government estimates.

OGDC reported net income of 63.5 billion rupees in the year ended June 30, up 7 percent from the previous year, according to data compiled by Bloomberg.

Riaz Haq said...

Here's a Daily Times report on Nashpa oil & gas field:

KARACHI: The Oil and Gas Development Corporation Limited (OGDCL) operator of Nashpa Exploration License, together with its joint venture partners Pakistan Petroleum Limited (PPL) and Government Holding Private Limited (GHPL) have discovered a new hydrocarbon-bearing horizon from its appraisal well Nashpa 02, located in District Karak, Khyber Pakhtoonkhwa. The structure of well was delineated, drilled and tested utilising indigenous expertise.

Nashpa Well No 02 was drilled down to the depth of 4340 metres targeting to test the oil and gas potential of Datta, Shinawari, Samanasuk, Lumshiwal, Hangu and Lockhart formations.

Significant reserves of hydrocarbons have been found at Nashpa Well No II. The first targeted zone “Datta Sandstone” has been tested and produced 3370 barrels per day of crude oil and 11 MMCFD gas through 32/64” choke at well head flowing pressure 3800 psi.

This discovery will add to the hydrocarbon reserves base of the company and joint venture partners, bringing significant savings to the country in term of oil import bill. Testing of another four potential reservoir formations will also be undertaken wherein similar encouraging results are expected. The full flow potential of this well and the extent of the discovery will be determined after completing the testing programme.\11\15\story_15-11-2011_pg5_5

Riaz Haq said...

Pakistan Petroleum Limited (PPL) hosted a special session on 'Exploiting Shale Gas in Pakistan' ahead of the SPE-PAPG Annual Technical Conference 2011 Monday at a local hotel, according to Business Recorder:

The session, a first of its kind in the country, drew high-level participation from government representatives, management and technical staff of leading local and international Exploration and Production (E&P) companies, including overseas delegates.

Welcoming the participants, Managing Director and Chief Executive Officer PPL Asim Murtaza Khan highlighted the significance of the session not only in bringing shale gas exploration on the country's E&P map but also encouraging participation by leading international E&P players in the dialogue around the policy and fiscal framework necessary for a breakthrough in this direction.
He hoped that the session would provide a platform for collective thinking and knowledge sharing around the issue and fuel further strategic interest and engagement by the international E&P community in exploiting shale gas resources in the country to meet future energy needs in the face of depleting conventional reservoirs.

Secretary Petroleum Muhammad Ejaz Chaudhry also spoke on the occasion, reiterating the government's resolve to open new E&P opportunities in line with the global shift towards exploration of unconventional gas reservoirs and ensure an enabling business environment to attract international expertise and investment.

"The government looks forward to the recommendation emerging from the session today which will be incorporated into the country's E&P policy."

Chaudhry expressed his gratitude to the Government of Poland for its proactive role in strengthening bilateral ties with Pakistan, particularly with respect to the E&P sector, evident by the presence of Polish Ambassador Andrzeg Ananicz at the seminar.

He also acknowledged the efforts of the Pakistan Embassy in Warsaw in this regard.

Similarly, Chaudhry lauded PPL's efforts in serving as the conduit for drawing local and international attention to prospects for shale gas exploration in the country and organising the session to forge a way forward for government and industry.

"It is initiatives such as these through which local E&P companies can serve as the eyes and ears of the ministry, helping us move forward with our ambitious agenda."

Local and foreign delegates presented several papers during a dedicated segment of the session chaired by Peter Seitinger, General Manager, OMV (Pakistan) Exploration Gmbh.

These included Methodology and Technology for Prospecting Unconventional Plays, especially Shale Gas, in Pakistan by PPL's General Manager Exploration Moin Raza Khan and Senior Manager Dr Nadeem Ahmad, Lessons Learned: Shale Gas Exploitation in Poland by Marcin Józwaik of PGNiG Technologie Sp.zo.o, Shale Gas Exploitation in North America and its Replication in Pakistan by Robert Kuchinski, Wireline Business Development Manager, Weatherford, Middle East and North Africa.

A roundtable was also held on the Technical, Commercial and Fiscal Strategies to Promote Shale Gas Exploitation in Pakistan with Paolo Giraudi, Managing Director, Eni Pakistan Limited in the chair.
"Going by the valuable ideas exchanged and the enthusiastic response of key players, including government and international E&P companies, I am led to conclude that this session has indeed been successful in spotlighting prospects for shale gas exploration and reiterating foreign interest in Pakistan's E&P sector."
Preliminary estimates suggest 65 Tcf of shale gas resources within the country's accessible basins and regions.-PR

PMU said...

I am amazed with the amount of information on this blog. Shale gas and coal energy are definitely, Pakistan should look at.

Dawood Ashraf

Riaz Haq said...

Here are some gas production & consumption stats by Pak provinces as provided by Minister of Petroleum Asim Husain on National TV:

Sindh produces 69% and consumes 41%

Balochistan produces 17% consumes 7%

KPK produces 10% consumes 7%

Punjab produces 4% consumes 45%

Riaz Haq said...

Gas crisis in Pakistan will subside by 2013 claims Federal Minister of Petroleum and Natural Resources, according to News Pakistan:

Thursday, January 12, 2012: The Federal Minister of Petroleum and Natural Resources, Dr Asim Hussain, has painted a rosy picture for Gas crisis in Pakistan. The minister during the inauguration of Kunar-Pasakhi
gas field in Tandojam claimed that by the end of 2013, Gas shortfall in the country will subside.

Asim declared that a total of 2.6 billion cubic feet of gas will be pumped up into the system; the promised increase will include 1,058 million cubic feet per day of gas produced locally and over 1.5 bcf of imported gas from projects
which are yet to materialise.

Kunar-Pasakhi gas field, which was inaugurated by by Prime Minister Yousaf Raza Gilani at Sui Southern Gas Company office in Deh Bukhari, Hyderabad, has a production capacity of 100 mmcfd.

The cost of project is estimated to be Rs1.49 billion. The SSGC and Sui Northern Gas Company Limited will share 50 mmcfd each from the supply. The inflow of 50 mmcfd gas will ease shortage in Punjab, which has been struck the hardest.

The Prime Minister of Pakistan at the inauguration said, “We inherited an energy crisis when we came to power but we will ensure that the next governments do not face the same. Pakistan is endowed with all kinds of natural resources;
the need is to harness them at the right time.”

The Kunar-Pasakhi field was discovered some eight years ago but work was delayed due to lawsuits. According to Azeem Iqbal Siddiqui, SSGC Managing Director, the project will benefit up to 2.5 million consumers and produce 387 tons
of liquefied petroleum gas (LPG) and 400 tons of liquefied natural gas (LNG).

The natural resources minister said the present government will give a plan of action for five and ten years for energy production. According to him, current projects under development in Sindh and Balochistan will contribute over
1,058 mmcfd in the next two years. He expects another 1 bcf from Iran over the next year besides LNG import of 500 mmcfd.

Riaz Haq said...

Here's an Express Tribune story of a man inadvertently discovering oil in Bhawalpur:

When landlord Muneer Ahmed ordered the digging of a well in Bahawalpur, the last thing he expected to strike was black gold.

Following the discovery of oil near the Lal Sohanra National Park, the area was taken into custody by the ministry of petroleum and natural resources. The ministry also deputed security officials around the well and its surrounding areas.

A joint team of Pakistani and Chinese engineers has been formed to work in the area, said an official from the petroleum ministry. A large oil reservoir has been discovered but we are trying to locate its depth, the official said.

He added that engineers are also studying other areas in district Bahawalpur to check the availability of oil in the region.

The property where oil was found had been part of agricultural land donated to farmers, said Hassan Daha, former mayor from the area.

The land, however, is under the jurisdiction of Lal Sohanra National Park, he added.

Ahmed, who made the inadvertent discovery, said he was not aware of it earlier but has now been informed by officials that the area where the discovery was made did not fall in his property. The China National Petroleum Corporation has been tasked to work, in coordination with local engineers, in the area.

Meanwhile, the site has been cordoned off with barbed wire on the orders of local police chief Ishaq Jehangir.

Riaz Haq said...

Here's an interesting idea proposed by BioNitrogen Inc, a Florida start-up, to make inexpensive fertilizer in South Asia:

In what may become a precursor of things to come in the Urea Fertilizer Industry, local fertilizer manufacturing plants in Pakistan were forced to shut last year for over six months. These shutdowns resulted in critical shortages of fertilizer which subsequently sent the costs of fertilizer rising one-hundred forty one (141) per cent in just 2 years. Industry officials sighted the country's gas load management plan as a key component of the shutdowns. The urea production shutdowns were the result of natural gas shortages which severely hampered the manufacturing of urea thus dealing a severe blow to Country's Agriculture Sector which many believe is the backbone of the entire economy.(2) In neighboring India, there are discussions that Urea prices will be linked directly to gas prices which would increase pressure on the farmers of India to maintain economic stability in the face of rising fertilizer prices.(3)

Industry data and global production data charts for nitrogen based urea fertilizer, often correlate the price of nitrogen fertilizers is directly related to the price of natural gas (methane).(4) (5) Manufacturing one (1) ton of anhydrous ammonia fertilizer requires 33,500 cubic feet of natural gas. In other words, natural gas is used to produce fertilizer which is used to grow crops. This relationship also has a direct impact on not just the agriculture economies of the world, but also the production of wheat, the main food staple in many countries throughout the world, which also plays a strong role in producing the feed for millions of livestock in not just Pakistan but Countries around the world.

What interests Dr. Terry R. Collins, the CEO of BioNitrogen, is the news accounts coming out of Pakistan often state for the record "It is a matter of fact that there is no alternative of gas for urea manufacturers as urea manufacturing process cannot be completed without gas supply." Dr. Collins offers this perspective, "There is in fact a viable alternative to using natural gas to produce to nitrogen based urea. BioNitrogen has developed a patent-pending process which specializes in the conversion of renewable agricultural waste biomass into urea fertilizer. Our small-format production facilities are designed for implementation in local farm communities, close to their required feedstock and abundant biomass."

Adds Dr. Mario Beruvides, BioNitrogen's CTO, "BioNitrogen is excited about introducing ourselves to the world as an extremely cost-effective and ecologically friendly alternative for producing extremely high quality nitrogen based urea fertilizer. If Pakistan were using our production methods and facilities, there likely would have been no closures in their country and no economic impact. This is part of BioNitrogen's corporate mandates of not only producing urea fertilizer, but we're absolutely committed to protecting the environment and contributing to local economic development while helping to feed to our planet."

As he continued to reflect on the events in India and Pakistan, Dr. Collins concluded, "Compared to traditional urea manufacturing facilities that use natural gas as a feedstock, our BioNitrogen plants will be much smaller and can be constructed and brought online for production much more quickly. ...

Riaz Haq said...

Here's Bloomberg on Pakistan's "vibrant" petroleum sector:

March 2 (Bloomberg) -- Pakistan Petroleum Ltd. Chief Executive Officer Asim Murtaza Khan speaks about plans to increase exploration and production. Pakistan Petroleum, the nation’s biggest gas producer, said it will explore for shale gas and start its own seismic and drilling units. Khan spoke with Bloomberg's Naween Mangi and David Merritt in Karachi yesterday.(Source: Bloomberg)

Riaz Haq said...

Here's a Reuters report on award of engg contract by Pakistan to a German-Austrian firm for Iran-Pakistan Gas Pipeline:

BERLIN – ILF Consulting Engineers, a German-Austrian company, confirmed on Monday that it is providing “advice and planning” work in the technological development of an Iranian-Pakistan pipeline project.

The German-Austrian involvement may violate US and EU sanctions barring the supply of technology to the Islamic Republic.

“Advisory and planning engineers” are working on the project, Rüdiger Ophoven, a spokesman for ILF’s gas and oil department, told The Jerusalem Post on Monday. He stressed that ILF is only involved in the Pakistani side of the project.

The Pakistan paper The Nation reported on Sunday that “according to the secretary of petroleum, Pakistan has offered $250 million to a German company, ILF Engineering, for laying the gas pipeline inside its territory.

The gas pipeline would be completed till 2014, the secretary added.”

Iran’s Persian- and English-language press reported extensively on the pipeline project and Germany’s role in its development.

When asked about the value of ILF’s contract, Ophoven told the Post that such a project is “less than 10 million euros.”

He said he did not know if ILF’s legal department had examined whether the deal violated US, UN or EU sanctions.

The United States pressed Pakistan in 2009 to refrain from entering into a pipeline agreement with Iran. However, the Pakistani government moved forward with its Iranian partners.

Austria and Germany are considered by experts in Europe to be the weakest links in the enforcement of the sanctions regime targeting Iran. Germany remains Iran’s most important EU trade partner, with an annual bilateral trade of roughly 4 billion euros.

Ophoven could not confirm or deny whether German regulators had approved the deal with Pakistan.

Nasrin Amirsedghi, a leading German-Iranian intellectual and a close follower of trade relations with Tehran, told the Post on Monday that chief executive officers of companies look “for a way to circumvent” the sanctions.

She criticized ILF’s explanation that it has a contract only with Pakistan.

“Do we want to prevent an atomic catastrophe in the Middle East? Do we want to support Israel and the Iranian people? Then all European and Western governments should end their diplomatic, cultural and scientific relations with Iran — the cancer of terrorism and war in the region,” Amirsedghi said.

She added that by severing relations with the Islamic Republic, the “sanctions will have an effect.”

Ophoven told the Post that the project entails a “1.5- to 2-year phase,” and there may be additional phases. ILF is providing the Pakistanis with “state-of-the-art technology” that deals with the know-how to build the pipeline project, he said.

Riaz Haq said...

Here's a NASDAQ report on new oil & gas discoveries in Pakistan:

With Pakistan having awarded some 47 exploration licences to various oil and gas exploration companies from 2007 up to last year 2011, a total of 38 new oil and gas reservoirs have been unearthed that helped boost the country's combined oil and gas production to 4,165 million cubic feet per day (MMcfd) from the previous 3,973 MMcfd.

Quoting unnamed sources from the Ministry of Petroleum and Natural Resources, the Associated Press of Pakistan reported a to tal of 102 wells have been drilled up in various parts of the country in the last four years.

The same sources said Pakistan may expect additional boost once the expected 800 Mmcfd gas from local reservoirs is added in the system by August or September this year.

The Petroleum Policy in 2009, which extended incentives to oil and gas exploration companies in Pakistan, proved to be a much effective tool to entice as well as enable achieve self-sufficiency in the sector.

The policy has undergone a number of changes and revisions, but in principle, the Policy for 2012 would help further attract more local and foreign investment in Pakistan's oil and gas sector, the Council of Common Interests told the Associated Press of Pakistan. The federal government is expected to announce soon the Policy for 2012.

The Pakistan government is also working on establishing a number of pipeline construction projects to support its growing energy demand, including the Iran-Pakistan ( IP ) gas pipeline and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects.

"Work on the IP gas pipeline project is at a fairly advanced stage. Under the project, Pakistan will construct approximately 800 km pipeline from Iran-Pakistan border to Nawabshah. The venture has entered into the implementation phase and work on Front End Engineering and Design, Feasibility and Detailed Route Survey has already been started. It is scheduled to be completed by June 2012," sources said.

Invitations for bids to construct the pipeline will be made after survey completion.

The IP gas pipeline project is a 56-inch diameter development that covers 1,931 kilometres starting from Iran's South Pars gas field. The project implementation and construction is targeted in four years, with the first gas flow available by end December 2014, the Associated Press of Pakistan reported. The expected 750 mmcfd gas volume production will help generate 4,000 MW electricity, as well as provide job opportunities in backward areas of Baluchistan and Sindh.

With the $ 7.6 billion TAPI gas pipeline project, meanwhile, the first gas flow is expected in 2016, where Pakistan will receive 1,325 Mmcfd of gas, double to that of the IP project.

Read more:

Riaz Haq said...

Here's an Express Tribune report about Russia's interest in financing and building Iran-Pakistan gas pipeline after Chinese reportedly pulled out:

As a Chinese bank has backed off from financing the $1.5 billion Iran-Pakistan gas pipeline project amid pressure from the United States, Russia has caught the attention of Pakistan, which is planning to explore this viable option first.

The decision to negotiate a deal with Russia came in a recent meeting of the sub-committee formed by the Economic Coordination Committee (ECC) of the cabinet.

Earlier, Russia had offered Pakistan that it would fully finance the pipeline if its energy giant Gazprom was awarded the contract without bidding during a four-day visit of Foreign Minister Hina Rabbani Khar to Moscow in February. In order to give its assent to the offer, the government will have to waive Public Procurement Regulatory Authority (PPRA) rules – designed to ensure transparency in government dealings.

“A delegation will visit Russia soon to negotiate a deal with Gazprom,” Petroleum Secretary Ijaz Chaudhry told The Express Tribune. Recently, he said, the ECC sub-committee had considered different options for going ahead with the vital gas pipeline project.

“No decision, however, has been taken yet to award the contract to Russia, but Pakistan will discuss this option,” he clarified.

Chaudhry also dispelled perception that the Industrial and Commercial Bank of China (ICBC) had distanced itself from the project and said “we have written a letter to ICBC, asking it to clear its position as financial adviser to the project.”

The Inter-state Gas Systems (ISGS) had signed a deal with financial advisers for raising funds for the project, except for ICBC which was in the process of taking approvals.

“It is apprehended that a probable reason for not signing the agreement could be geo-political situation in the region,” said a summary tabled before ECC.

Earlier, the sub-committee had considered approaching China and Russia to seek financial assistance for the project. However, Russia now appeared to be leading the race, a ministry official said, adding the committee also studied the Iranian offer of $250 million for constructing the pipeline....

Riaz Haq said...

Here's Bloomberg on Pakistan seeking Russian investment in Iran-Pakistan gas pipeline:

Officials from Pakistan’s petroleum ministry will travel to Russia early next month for talks with Gazprom OAO (GAZP) as the South Asian country seeks financial and technical help to revive a stalled gas pipeline from Iran.

Pakistan is exploring different options and a visit by technical experts to Russia is part of those efforts, Abdul Basit, a spokesman for Pakistan’s foreign ministry, told reporters in Islamabad today. The nation is struggling to finance the $1.3 billion pipeline, already delayed by a decade, in the face of sanctions over Iran’s nuclear program.

New sources are crucial to Pakistan’s attempts at easing its worst energy crisis as power blackouts for as long as 18 hours a day in major cities crimp economic growth and trigger street protests against Prime Minister Yousuf Raza Gilani’s government. The $175 billion economy grew 2.4 percent in the year through June 2011, one of the smallest expansions in a decade, according to official data.

The ministry of finance on March 13 said a consortium of Industrial and Commercial Bank of China and Pakistan’s Habib Bank Ltd. (HBL) is showing “less interest” in the pipeline project. The country may impose a tax on consumers, or seek government- to-government arrangements with Iran, China and Russia to build the pipeline, the ministry said the same day.
Alternative Project

Pakistan is responsible for completion of the pipeline by 2014, a deadline agreed by the two countries in 2010 after political and security concerns delayed the project. Under the agreement, Iran will provide about 21.5 million cubic meters of gas a day to Pakistan for 25 years. The deal can be extended by five years and volume may rise to 30 million cubic meters a day.

U.S. President Barack Obama has publicly supported an alternative gas pipeline project, from Turkmenistan to Afghanistan, Pakistan and India, that would bypass Iran. The U.S. and its allies have tightened sanctions against Iran saying the Islamic Republic’s nuclear program is a cover to make weapons, while the Persian Gulf country has said it is only for peaceful civilian purposes.

Pakistan’s gas shortfall is forecast to reach 2.22 billion cubic feet a day in the fiscal year that began July 1, according to government data. The pipeline will carry gas from the South Pars field via Baluchistan province in southwest Pakistan to an off-take point in Nawabshah. South Pars, which extends from Qatar’s North Field, is the largest known gas deposit in the world.

Riaz Haq said...

Here's a News report on increase in oil and gas production in Pakistan:

According to Pakistan Petroleum Information Services (PPIS), Pakistan’s gas production has increased to 4,339mmcfd by March from 4,011mmcfd in June 2011. Similarly, oil production has jumped to 72,411bpd in March from 65,659bpd in June 2011.

The Oil and Gas Development Company Limited (OGDCL) is leading the industry volume growth as a renewed focus of management on early development of fields and success on appraisal drillings, which led to a strong 12-13 percent volumetric growth.

A key positive surprise in the fiscal year stems from production recovery on Pakistan Petroleum Limited (PPL) operated Sui field as production jumped by five percent in the second quarter, defying previous trend of four to five percent decline in production
and prospect of 100mmcfd of gas volume addition on Kadanwari in which OGDCL stake is 50 percent, with initial 30-40mmcfd already hooked up.

Fawad Khan, an analyst at KASB Securities, said that the regulatory issues post-introduction of 18th Amendment, poor law and order situation in selected areas and backlog of incomplete wells have restricted the drilling activity.

All exploration activities are concentrated in the onshore area, he said, adding that year to date, the E&P sector has drilled 14 exploration and 24 development wells against the fiscal year targets of 31 exploration and 45 development wells.

Unlike previous years, foreign E&P companies have contributed heavily to the exploration activities with the United Energy, which acquired BP Pakistan assets last year, drilling six exploration wells in the year so far.

A successful drilling in high-profile well at Zin, though results are below expectation, finds in Hilani near Tal Block by Mari Gas and successful development drillings in Sui are noteworthy events.

However, appraisal activity has slowed down. Results of Nashpa III and Makori East II, which were earlier targeted in the third quarter, have now slipped into fourth quarter due to reconfiguration of the target depth.

Similarly, the start of appraisal drilling in Maramzai and Mamikhel, both in Tal Block, earlier scheduled for the third quarter is now likely in the fourth quarter.

Riaz Haq said...

Pakistan & Qatar deadlocked over LNG pricing, reports Express Tribune:

Talks between Pakistan and Qatar over the price for liquefied natural gas (LNG) have reached a deadlock as the latter is stuck to its stance and is not ready to supply gas at less than $18 per million British thermal units (mmbtu).

“Qatar has refused to export LNG below the price of $18 per mmbtu,” said a senior official of the Ministry of Petroleum and Natural Resources who is familiar with the developments.

Pointing to the reason, he said global LNG demand had surged and prices had increased following shutdown of nuclear power plants in Japan.

In comparison, gas import from Iran will cost $11 per mmbtu while gas supply through Turkmenistan-Afghanistan-Pakistan-India pipeline will cost $13 per mmbtu.

“Following Qatar’s reluctance to show flexibility, Petroleum Minister Dr Asim Hussain will visit Malaysia to discuss the possibility of LNG import,” the official said.

Last month, a government delegation went to Qatar to finalise a price for the import of LNG on government-to-government contract. Pakistan and Qatar have already signed a memorandum of understanding (MoU) in this regard.

According to the MoU, Pakistan will import 500 million cubic feet of LNG per day (mmcfd) which will be utilised to generate 2,500 megawatts of electricity.

Earlier, in a meeting of Pak-Qatar Joint Ministerial Commission held in the last week of February in Islamabad, Qatar sought a price of $18 per mmbtu, but Pakistani authorities believed that Doha would show flexibility in its stance later. Qatar also sent a term sheet seeking $18 per mmbtu for LNG.
Private sector importers have already sought $18 per mmbtu for LNG supply, but this has invited a lot of criticism from different quarters. Even the Oil and Gas Regulatory Authority (Ogra) has opposed this high price and called for discussing the matter in the Economic Coordination Committee (ECC). Buyers of gas, including power companies, have also rejected such a high rate.

According to sources, the petroleum ministry has prepared a summary for the ECC which will discuss initiation of an integrated LNG import project. They say the government will furnish guarantees and receive gas from the parties qualified through a bidding process.

This is what private LNG importers had desired. Under this plan, imported LNG will be injected into pipelines of gas distributors – Sui Northern Gas Pipelines and Sui Southern Gas Company – and the government will take a weighted average price of gas.

As a result, the ministry official said, prices of domestic gas are expected to rise to $9 per mmbtu against existing $4.5 per mmbtu, which will affect all categories of consumers.

“The price of furnace oil is equal to $20 per mmbtu, therefore, LNG price of $18 per mmbtu is affordable for the industry,” an official said but added the industry, which was getting local gas at cheaper rates, was not ready to buy expensive LNG.

Riaz Haq said...

Pakistan has over 50 trillion cubic feet of shale gas, according to US Energy Information Admin. The US companies have the technology and the funds to extract it profitably.

Under the new policy, exploration companies will be offered 40-50% higher prices for the extracted gas compared with the $4.26/Btu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years will get 50% hike over the 2009 price and if it takes more time they will get only a 40% hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years instead of 30 in the 2009 policy, the official said.

Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan will have to pay a maximum of $6.50/Btu for the gas compared with $11-18/Btu for gas imports, according to a report by Platts.

Pakistan should ask US to help extract shale gas in exchange for abandoning the Iran-Pakistan gas pipeline.

Riaz Haq said...

The shale gas boom in the US has led to a big drop in its carbon emissions, as power generators switch from coal to cheap gas, reports Financial Times:

According to the International Energy Agency, US energy-related emissions of carbon dioxide, the main greenhouse gas, fell by 450m tonnes over the past five years – the largest drop among all countries surveyed.

Fatih Birol, IEA chief economist, attributed the fall to improvements in fuel efficiency in the transport sector and a “major shift” from coal to gas in the power sector. “This is a success story based on a combination of policy and technology – policy driving greater efficiency and technology making shale gas production viable,” Mr Birol told the Financial Times.

Shale gas has transformed the US energy landscape, with surging production pushing gas prices down to 10-year lows and heralding an industrial renaissance. But it is also the subject of a heated environmental debate, with critics alleging that the production process can pollute groundwater.

Gas is fast becoming the new fuel of choice for the US power sector: in the past 12 months, coal generation has slumped by 19 per cent while gas generation has increased by 38 per cent, according to US Department of Energy figures. A gas-fired plant produces half the CO2 emissions of a coal-fired one.

Overall, however, the IEA said 31.6 gigatonnes of CO2 were released into the atmosphere last year, mainly through the burning of fossil fuels – one gigatonne more than in 2010 and much higher than the average annual increase of 0.6 GT between 2006 and 2010. “The impact of this increase is going to be catastrophic,” said John Sauven, executive director of Greenpeace. “We’ve really got to act now, with a real sense of urgency – which up till now has been completely lacking.”

The increase will make it harder to keep global temperatures from rising more than 2 degrees Celsius above pre-industrial levels – which scientists believe is the threshold for potentially “dangerous climate change”.

Riaz Haq said...

Here's an Edmonton Journal report on use of South Asian guar bean in fracking for oil & gas:

Who would have thought that an obscure bean could eat into the profits of some of North America‘s largest oil services companies?

The humble guar bean, grown primarily in India and Pakistan, has shot to instant fame in oil markets as it is a crucial ingredient in fracking fluid mixtures used to blast natural gas and oil out of shale rock.

“Shortages of guar beans, an essential component in the shale gas ‘fracking’ process, have resulted in huge price hikes for the commodity in 2012,” said risk consultancy Maplecroft in a 70-page report. “This has hit the profits of oil and gas companies hard and a search is under way to find supply chain alternatives, such as direct farm contracts and man-made substances.”

In India, the National Commodity and Derivatives Exchange (NCDEX) banned trading of guar future on March 21 after prices rallied nine-fold to a record US$1,680 per 100 kilograms, according to Bloomberg data. But for now shale gas producers remain highly dependent on guar gum from India and Pakistan, which exposes them to significant supply chain risks.

In June, Halliburton Co., the world’s largest provider of fracking service warned that it expects to see lower second-quarter margins due to rising guar costs.

“Everybody’s struggling for guar,” Halliburton Chief Financial Officer Mark McCollum told an investor conference. “We’re aware that there are some of our primary competitors missing jobs because of the unavailability of guar.”

Calgary-based Trican Wells Services also reported on July 4 that its bottomline would be directly hit by the elusive and expensive bean.

“Average guar costs increased sequentially in the second quarter and we were largely unable to pass these costs on to our customers due to the competitive pricing environment,” the company said, explaining its larger-than-expected estimated loss of $24-million to $34-million.

But the inventive oil service companies are already looking for guar substitutes. Trican, for example, is looking to introduce a new hybrid fluid system that will reduce its guar usage.

“We have started to see a reduction in guar prices and we expect guar prices to continue to decrease throughout the remainder of 2012 as a result of the development of hybrid systems and guar substitutes, and the new guar crop that is expected to increase supply later in 2012.”

There may be other good reasons for services companies to move away from the bean.

India and Pakistan dominate global production and processing of guar, with India accounting for an estimated 80% of production and Pakistan a further 15%, but sourcing guar from both countries is beset with a range of risks, notes Maplecroft. Labour violations, corruption, a lack of regulation and environmental risks as factors within these countries that can not only impact the price of guar, but also expose oil and gas companies to legal and reputational risks, as they try to secure stable supplies, said the risk consultancy....

Riaz Haq said...

New gas discovery in Pakistan, according to Businessweek:

Italy’s largest oil company, reported a natural gasdiscovery in Pakistan, a country where reserves have been in decline.

The find was made 350 kilometers (269 miles) north of Karachi in the Khirtar Fold Belt region. The well was drilled in the Badhra Area B block to a depth of 2,450 meters, Eni said in a statement today.

Eni said the size of the discovery was probably 300 billion to 400 billion cubic feet of gas in place. Pakistan’s total gas reserves were 27.5 trillion cubic feet at the end of 2011, down 5.5 percent from a year earlier, according to BP Plc (BP/)’s Statistical Review of World Energy.

The discovery is 20 kilometers east of Eni’s Bhit gas processing facility and the company said it has already started discussions with the Pakistani regulator to speed up the production from the discovery. The company produced approximately 54,800 barrels of oil equivalent per day in 2011 in Pakistan, making the Rome-based explorer the country’s largest producer.

“The drilling of Badhra North B-1 is part of Eni’s new strategy in Pakistan which aims to refocus exploration activities in the neighboring areas to productive fields,” the company said.

The Badhra block is operated by Eni, with a 40 percent stake in the project, Premier Oil Plc (PMO), which has 6 percent, Kufpec Pakistan Ltd. with 34 percent and Oil & Gas Development (OGDC) Company Ltd., which has 20 percent.

Premier Oil’s shares rose as much as 3.2 percent, to 391.4 pence. They were trading at 383.5 pence as of 9:56 a.m. London time. Eni SpA’s shares were up 0.7 percent at 18.42 euros after reaching a high of 18.56 euros.

Riaz Haq said...

Here's Platts on Pakistan's new energy exploration policy:

Pakistan has released 60 oil and gas exploration and production blocks for auction, a Ministry of Petroleum official said Tuesday.

The release is part of a new policy to spur development of the country's oil and gas industry that includes a rise in rates for any gas produced to $6-6.60/MMBtu, from $4.20/MMBtu earlier, the official said. The rate for offshore blocks in areas designated shallow zones is set higher at $7/MMBtu, deep zones at $8/MMBtu and ultra-deep zones at $9/MMBtu.

"Interested oil and exploration companies and countries have almost two months to submit bids, the official said.

The bids will be opened December 13 and the names of successful bidders announced a week later, he added.

The government is hoping to sell four of the blocks under government- to-government agreements, he added.

Exploration activity in Pakistan has slowed in recent years due to the low prices offered by the government and the impact of circular debt issues in the oil and gas sector. The country has gas reserves of 23 Tcf/day.

Pakistan's current domestic gas demand exceeds its production capacity of 4.2 Bcf/day by 1.2-1.4 Bcf/day, which increases to 2 Bcf/day in winter. If adequate gas is not discovered within 3-4 years, the shortfall is projected to increase to 2.5-3 Bcf/day.

Riaz Haq said...

Here's BR on PPL introducing new petroleum exploration technology in Pakistan:

A PPL statement here on Saturday said that developed by NXT Energy Solutions (NXT), a geophysical service company based in Canada, SFD is a proprietary cutting edge, eco-friendly airborne reconnaissance method to identify potential hydrocarbon traps and reservoirs in a time- and cost-effective manner, especially in unexplored on- and off-shore frontier regions with limited access and infrastructure.

It said that the SFD is expected to be particularly useful in the current energy scenario, warranting fast track identification of, and production from, relatively deeper, more complex reserves of hydrocarbons to bridge the supply-demand gap.

Welcoming the guests, PPL's Managing Director and Chief Executive Officer, Asim Murtaza Khan, underscored the increasing importance of deploying latest exploration technology to meet production and reserves replacement targets to address the current deficit and ensure future energy security. SFD technology has been successfully applied by leading oil and gas companies in North America, Colombia and other countries. PPL is proud to be the first company to apply the technology in Pakistan', he said.

Riaz Haq said...

Here's a Dawn report on PPL exploring for oil and gas:

ISLAMABAD, Jan 8: The Pakistan Petroleum Limited, in collaboration with ENI, a foreign exploratory firm, is set to start drilling of a well in the Arabian Sea along Pakistani waters for discovery of oil.

The PPL has acquired exploration rights in a block located at 100km from Baghdad for oil exploration and it is hopeful about discovery of oil.

In a briefing to Senate Standing Committee on Petroleum and Natural Resources at the Parliament House, the PPL MD, Asif Murtaza, informed that drilling of exploratory well has already started in the block acquired in Iraq and there are bright chances of oil discovery.

In case of major success, the Pakistani company would benefit. The company is already working in Yemen on two blocks.

Regarding previous attempts made by the company to find oil from the sea, off Pakistani coast, the PPL MD informed the committee that in Mekran deep sea, some 12 exploration wells were drilled, but none succeeded.

The committee, which met with Senator Mohammad Yousuf in the chair, was informed that many foreign exploration companies still have interest in drilling of exploration well in Mekran Deep Sea. However, drilling has been delayed for one year due to various reasons.

Additional Secretary of Petroleum Naeem Malik informed the committee that drilling of an exploration well in deep-sea requires at least $100 million investment and foreign companies take decisions with due care.

The federal government recently announced new exploration incentives and the companies which would make first three discoveries in deep-sea would be given extra benefits with incentives to encourage more companies to come forward. The PPL MD informed that PPL is working in Zandan Block (Khyber Pakhtunkhwa) and is planning to acquire five more blocks in KPK as Tal Block area has great potential of discoveries.

To exploit un-conventional gas reserves in the country, some seven exploratory wells, eight appraisal wells, and 19 development wells have been planned in the next five years and the expected outcome would be 150bcf shale and tight gas production in the country.

He informed that shale gas and tight gas price approval has been sought from the regulator to speed up exploration activity. He further informed that some seven pilot projects have been planned for exploration of shale and tight gas reserves. He further informed that in Kirthar block, one exploratory well Rahman-1 is under way.

He informed that Hala, Kotri, Notari North, Jangshahi, Gambat and South blocks are potential areas for discovery of shale and tight gas reserves.

The committee was informed that PPL has geared up its seismic survey in the country and some 780sq kms were surveyed in 2011-12, while during the current fiscal year, some 1,400sq km have been surveyed.During the meeting, it was informed that District Kohlu (Balochistan) has huge gas reserves and due to law and order situation, exploration companies do not go there.

The committee was informed that the federal government was collecting 12.5 per cent royalty on gas production and the entire amount is transferred to provinces and if any provincial government is not spending the amount on welfare of its population or in the relevant district, where oil and gas have been found, it is their internal issue.

Riaz Haq said...

Here's a Eurasia report on oil and gas in Pakistan's FATA region:

According to an Energy Intelligence Report, Pakistan’s tribal areas are believed to have massive reserves of oil and natural gas—which Pakistani officials have suddenly become very keen to demonstrate. But this is a highly restive, war-torn area where one right move could make all the difference, and one wrong move could ignite a conflict with irreversible consequences.

For now, the area remains unexplored and it was only in 2008 when Pakistani geologists began to study the area in earnest, with the support of the local authorities. The results of this research were collected, processed and digitized in June 2012. The geologists discovered seven new oil and gas seepages during the mapping. The geologists also claim that 11 oil and gas exploration companies have already reserved 16 blocks in Fata.

Geologists say the area, bursting at the seams with gas, is poised to become a ‘new oil state’ whose production could rival Dubai’s in only five years.

The interest is evident from: 1) seventeen companies have initiated operations in Khyber, Orakzai, North and South Waziristan, Peshawar, Kohat, Bannu, Tank and Dera Ismail Khan), 2) Tullow has been active in Pakistan since 1991, but since 2008 it has sought to transfer its Asian licenses to focus on Africa and the Atlantic Margin, 3) other players include Mari Gas Company (Pakistan), HYCARBEX (part of American Energy Group ), Saif Energy (Pakistan), MOL Pakistan Oil and Gas, Orient Petroleum International (Ocean Pakistan/Cayman Islands), ZHEN (China), and others and 4) Oil and Gas Development Company (OGDC) of Pakistan is set to begin exploratory drilling in the area soon.

The report has also talked about Gwadar port. In terms of infrastructure, China has been the chief architect, and investor. China has already invested around $300 million in the deepwater Gwadar Port close to Gulf of Oman.

Construction began in 2002 and the goal was to make this port a transit hub for landlocked countries (Afghanistan and Central Asia) and to boost transit from the Persian Gulf to East Africa. China plans to invest a total of $1.6 billion in the port—so far it’s cost $200 million to build the first three berths, which can handle $2 billion in cargo annually.

Despite its capacity, cargo has been slow to move through this port, largely because it’s not connected to the rest of the country.

Riaz Haq said...

Here's a BR report on unconventional oil ad gas policy in Pakistan:

Advisor to Prime Minister on Petroleumand Natural Resources Dr. Asim said that Pakistan offers great potential in the oil and gas sector and the government is doing its part by introducing new policies to meet the rising energy demand .

He was presiding over a seminar organized by the Petroleum Institute of Pakistan (PIP), a representative body of the oil and gas industry, on the topic "Shale Gas Potential in Pakistan" on Saturday.

The purpose of holding this seminar was to create awareness aboutpotential and challenges of shale gas in Pakistan and establish PIP'sprofessional standing in view of assisting the government on dealing with the energy crises in the country.

The forum consisted of 150 distinguished guests from the oil and gas fraternity including government officials, media personnel and students from Karachi's top universities/colleges.

Dr. Asim Hussain said he has been advocating the need to balancecountry's energy mix, which currently is heavily dependent on natural gas.

He stated that the US Energy Information Administration have estimated 51 TCF Shale Gas Reserves in Pakistan, while as estimated reserves for Low BTU Gas are 2 TCF and that of tight gas are 40 TCF.

He added that Shale Gas exploration is high technical and costly, therefore, in order to encourage its exploration, pilot projects are planned.

The Ministry of Petroleum and Natural Resources will facilitate E&P Companies wishing to explore shale gas, by granting special concessions through transparent process and based on merit.

Chairman PIP Asim Murtaza Khan stressed on PIP's role as an effective energy sector advisory body, supporting government and industry in Pakistan todevelop a progressive and sustainable roadmap to meet present and futurechallenges.

He said that PIP is planning to hold series of seminars in nearfuture. The big ticket items that will be discussed and which need theimmediate attention will be the "LPG Outlook in Pakistan", "Fast-trackingimports of LNG", "Refining Vision 2020", "Energy conservation" and"Restructuring of the Pakistan's gas sector".

Riaz Haq said...

Here's ET piece on energy-hungry South Asia looking to energy-rich Central Asia:

.Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan and Tajikistan are all rich in oil and gas. According to available data, they have a combined 8.2 billion tons of proven oil reserves and 8.4 trillion cubic metres of natural gas reserves.

On the other side, South Asia faces a deficit in energy, rapidly picking up on economic growth. Connecting South Asian energy consumption centres to energy-rich Central Asian states is a win-win solution. It can bring economic growth to Central Asia through oil and gas revenues, and it can help South Asia continue on the path of stable economic growth and prepare the subcontinent as a future consumption market, which can support trade needed to sustain G-8 countries at the present level.---------

At the moment, three principal gas pipelines can bring gas to the subcontinent. These are the Turkmenistan-Afghanistan-Pakistan-India gas pipeline (TAPI), the Qatar-Pakistan-India (QPI) submarine gas pipeline, and the Iran-Pakistan-India (IPI) gas pipeline. The QPI, for a considerable portion, has to be laid down in the seabed of the Arabian Sea. The option, at present, is too expensive to be adopted. Even after completion, its estimated annual maintenance cost is a considerable portion of the profit margin, and the host consortium may not find it feasible to run.

A Memorandum of Understanding (MoU) was signed on March 15, 1995, between Turkmenistan and Pakistan to build a gas pipeline from the Daulatabad gas field in Turkmenistan to Multan in southern Punjab. US company Unocal, in consort with Saudi oil company Delta, prepared to start work on the project. The two companies later joined the CentGas consortium in which several international petroleum companies joined in, including Russian petroleum giant Gazprom.

Later on, in June 1998, Gazprom relinquished its share in the project, while Unocal withdrew in August 1998 after attacks on American Embassies in Nairobi and Darussalam. The project was then put on the backburner.


The $7.6 billion pipeline, with initial capacity of 27 billion cubic metres of natural gas per year, will deliver 2 billion cubic metres of gas to Afghanistan and 12.5 billion cubic metres each to Pakistan and India.


The proposed pipeline was designed to bring gas to Pakistan and India. The pipeline can initially supply 22 billion cubic metres of natural gas per year, which was expected to be raised later to 55 billion cubic metres per year. The project was supposed to be commissioned by 2013 (this year) at a cost of $7.5 billion. After reaching Multan, a spur line had been proposed, which would deliver gas to India. Under the gas purchase agreement, Pakistan was supposed to get gas at a price of $11 per million British thermal units (MMBTU). The price is $2 per MMBTU cheaper than the TAPI pipeline gas, which costs $13 per MMBTU. The Iranian gas is also $7 per MMBTU cheaper than imported LNG.

In 2008, after signing a civilian nuclear deal with the US, India withdrew from the project.

Pakistan’s federal government in January this year has approved a $1.5 billion government-to-government deal with Iran for laying the 785-kilometre segment of the pipeline in Pakistan. The federal cabinet has finally approved the project, and a special committee has been formed to expedite it. The US has been quick to register its concerns over the deal.

South Asian consumption

In Pakistan per capita natural gas consumption in 2010 was 229 cubic metres, whereas in India this is as low as 55 cubic metres..

Riaz Haq said...

Here's an Oilprice report on "water flooding" to extract oil from shale in US:

The cheapest and most profitable oil North America has ever seen is now “flooding” into the market, as producers once again use old technology to create a wave of new profits.

Producers are using “waterfloods”— pushing water into underground formations to flush a large amount of oil out to nearby producing wells — to increase production and profits. It’s the next big money-making phase of the Shale Revolution.

Waterflooding has been around for 70 years or more, but the Big Question over the last five years has been — can you do it effectively with tight oil?

The answer is a Big Yes, and waterflood potential has become so important that institutional investors now see them as major share price catalysts for junior producers—and track them closely.

Waterfloods start 1-2 years after drilling the well, in a time window producers call “secondary recovery.” (Drilling is primary recovery.) Waterfloods are cheap to try and cheap to run (with most operations costing just $5-10 per barrel!), and now the industry is seeing that they are sometimes doubling reserves from a well.

“Secondary recovery is where you really make all your money in this industry,” says Dan Toews, VP Finance and CFO of Pinecrest Energy (PRY-TSX.V).

Pinecrest is very vocal about their waterflood potential. They say they can double the amount of oil they recover (called the Recovery Factor, or RF) from a well — at less than $15/barrel — half the price of primary recovery costs, which are over $30/barrel.
“Everyone is trying to find a new resource play,” says Toews. “First you find a resource, and then you drill it like crazy. But the second stage is to go in for your secondary recovery, through waterflooding of some kind if possible.”

To date, Pinecrest isn’t yet flowing even one barrel of waterflooded oil—so their powerpoint slide is just projections. Toews and his team expect to be waterflooding all of their operations by the end of this quarter. But analysts are already seeing the waterfloods as a share price catalyst.

“Just about every investor and institution we talk to wants to know the status with our waterfloods,” says Toews. “The buy side (fund managers = buy side, brokerage firms = sell side—ed.) is very savvy on waterfloods. Once we apply the method, this is what has the potential to shoot up our share prices.”

Realistically, the effects can be seen within 2-3 months, but it’s best to give them a year—or more—of operations before judging their impact. Waterfloods can last up to 20 years or more.

Another Canadian oil junior, Raging River Exploration (RRX-TSX), also explains the waterflood potential in their powerpoint. They expect to be swimming in 1 million EXTRA recoverable barrels of oil per square mile, courtesy of waterfloods—at an even cheaper cost of $5-10 barrel, vs $30 barrel for the first 600,000 barrels.

Raging River is developing the Viking formation in SW Saskatchewan—a large, tight oil play that since the 1950s has had an improved outlook from 2 billion barrels of oil to an estimated 6 billion barrels of oil in place, all thanks to horizontal drilling.
Raging River expects waterflooding to increase its RF from 8% from primary recovery methods (drilling vertical and horizontal wells) using 16 wells/section, to 16-20%. The simple math says that will increase the number of barrels recovered from 480 million at 8% to 1.25 billion at 20% RF.

If Raging River—or any producer—can show a steady RF for over a year, I would suggest to investors those barrels will be worth $10-$15 each—creating huge value to shareholders on a buyout.

Some Viking waterfloods have even seen results as high as 30% RF....

Riaz Haq said...

Here's an AFP report about discovery of new gas reserves near Karachi:

ISLAMABAD: Pakistan has discovered a new gas reserve in southern Sindh province that would help reduce acute gas shortages for industry and transport, the petroleum ministry said Friday.

Italian energy major ENI with joint venture partners Pakistan Petroleum Limited and Kuwait Foreign Petroleum Exploration Company made the discovery in the Kirthar Fold Belt region 270 kilometres (170 miles) north of Karachi.

"During the production testing gas flowed at 33 million cubic feet per day highlighting an excellent potential for the future for energy needs of the country," the ministry said in a statement.

Officials said that under an early production scheme, gas supply from the new reserve would be possible within three years.

Pakistan's Minister for Petroleum and Natural Resources Sohail Wajahat Siddiqui said that the discovery was "good news for the nation and the energy sector of Pakistan".

The discovery of new oil and gas reservoirs were "vital" to cope with the prevailing energy shortage in the country, Siddiqui said.

ENI has been in Pakistan since 2000 and is the country's largest producer, with an average production of 54,800 barrels of oil equivalent per day in 2011.

Pakistan has had an endemic energy crisis for years, characterized by frequent blackouts, which has crippled the economy.

The crisis is blamed on chronic mismanagement and corruption.

Riaz Haq said...

Pakistan has more shale oil than Canada, according to the US Energy Information Administration (EIA) report released on June 13, 2013.

The US EIA report estimates Pakistan's total shale oil reserves at 227 billion barrels of which 9.1 billion barrels are technically recoverable with today's technology.  In addition, the latest report says Pakistan has 586 trillion cubic feet of shale gas of which 105 trillion cubic feet (up from 51 trillion cubic feet reported in 2011) is technically recoverable with current technology.

The top ten countries by shale oil reserves include  Russia (75 billion barrels), United States (58 billion barrels), China (32 billion barrels), Argentina (27 billion barrels), Libya (26 billion barrels), Venezuela (13 billion barrels), Mexico (13 billion barrels), Pakistan (9.1 billion barrels), Canada (8.8 billion barrels) and Indonesia (7.9 billion barrels).

Pakistan's current  annual consumption of oil is only 150 million barrels. Even if it more than triples in the next few years, the 9.1 billion barrels currently technically recoverable would be enough for over 18 years. Similarly, even if Pakistan current gas demand of 1.6 trillion cubic feet triples in the next few years, it can be met with 105 trillion cubic feet of  technically recoverable shale gas for more than 20 years. And with newer technologies on the horizon, the level of technically recoverable shale oil and gas resources could increase substantially in the future.

Riaz Haq said...

Here's an Express Tribune piece on oil and gas prospects in FATA:

The Federally Administered Tribal Areas (Fata) and Frontier Regions (FR) have enormous reserves of minerals, oil and natural gas that can augment economic activity in the war-torn areas, a research project concluded.
Talking to The Express Tribune ‘Source Rock Mapping and Investigation of Hydrocarbon Potential (SRMIHP)’ Project Coordinator Dr Fazal Rabi Khan said that exploration and excavation of oil and gas will introduce a new era of development and prosperity in the tribal areas.
“There can be many job opportunities created for people in the tribal belt if mineral exploration and extraction is pursued properly,” said Khan, who is also the chairman of the Geology Department in Abdul Wali Khan University Mardan (Palosa Campus).
The project was launched in 2008 under an agreement between the Fata Development Authority and National Centre of Excellence in Geology University of Peshawar. The project, which was completed at an estimated cost Rs40 million, was completed in June 2012.
Khan said that their objectives include identifying hydrocarbon generating rocks and its distribution in the region, preparing a geo-database regarding hydrocarbon potential and generating a systematic data to attract oil and gas companies for exploration.

The project has successfully collected, processed and digitised the data as a result of which, 80% of the project area has been mapped digitally. “This mapping has led to the discovery of seven new oil and gas seepages.”
He added that 11 oil and gas exploration companies have reserved 16 blocks in Fata, which go across from FR Peshawar and Kohat to Khyber, Orakzai, Bannu, Tank and up to North and South Waziristan.

He said that recently 17 oil and gas exploration companies initiated their operations in Khyber, Orakzai, North and South Waziristan agencies as well as in FR Peshawar, Kohat, Bannu, Tank and DI Khan.
Khan said that Mari Gas Company, HYCARBEX Inc, Oil and Gas Development Company, Tullow, Saif Energy, MOL Pakistan Oil and Gas, Orient Petroleum International, Pakistan Petroleum, ZHEN, ZAVER and others are currently working in Fata.
Oil and Gas Development Company (OGDC) will start drilling in these areas for the exploration of oil and gas reservoirs. The chairman said that the foreign oil company, Tullow, has obtained a licence for the exploration of oil and gas in North Waziristan Agency and Bannu, while MOL has shown interest in Khyber Agency, Kohat and Peshawar.
“Although law and order problems can become a hindrance, the project can be managed considering its importance,” he added.....

Riaz Haq said...

Here's an Upstream report on the start of tight gas production by Polish firm PGNiG in Pakistan:

Polish explorer PGNiG has commenced production in Pakistan for the first time, bringing two wells online at the Rehman field in southern Pakistan.
The Kirhtar licence area wells are producing on test at an expected rate of around 100 million cubic metres of gas per year.

The gas is being fed directly to the Pakistani transmission system, with the field’s entire output being sold to Pakistani authorities, the Warsaw-headquartered explorer said.

Test output is due to last 22 months, with total gas resources at the licence area estimated at around 12 billion cubic metres.

Situated in the western part of Sindh province, the Kirthar licence is operated by PGNiG on a 70% stake, with Pakistan Petroleum on 30%.

Pakistan is the explorer’s second international location for operated production after Norway.

Riaz Haq said...

Here's a Polish report on Pak gas production:

Poland’s gas monopolist PGNiG may sport over 20 bcm in natural gas reserves of its Pakistani licenses and for now suspended the process of selling the licenses, acting CEO Miroslaw Szkaluba told PAP Polish news agency.

"The potential reserves of the two areas may exceed 20 bcm," Szkaluba said.

PGNiG holds 70% in the Kirthar license with reserves of some 12 bcm, and it received prolongation of a neighboring license, where it will start exploration works at the turn of the year, the official said.

For now, the company suspended works on selling the licenses.

Test production works in the country will take 22 months. In the initial stage, PGNiG expects to produce 0.1 bcm of gas annually.

Riaz Haq said...

Here's a Daily Times report on 33 TCF of tight gas in Pakistan:

KARACHI: Pakistan has an estimated tight gas reserves of 33 trillion cubic feet (tcf) which are more than the existing estimated natural gas reserves of 27 tcf in the country, said the Deputy Managing Director (operations) of Sui Southern Gas Company (SSGC) Syed Hassan Nawab.

Hassan Nawab was delivering a presentation on “Natural Gas Industry in Pakistan: Progress and Prospects” at 7th International POGEE Conference 2011 for Oil and Gas and Energy Industry at Karachi Expo Centre on Wednesday. Joint Secretary Ministry of Petroleum and Natural Resources Raashid Bashir Maser was the chairman of the session. Referring to a report of Pakistan Petroleum Exploration and Production Companies Association (PPEPCA), Hassan Nawab said the country will have sufficient natural gas if tight gas is explored with the help of advanced technology. He pointed out that the government has prepared the draft policy for tight gas and it is currently with the Council of Common Interest (CCI) and this will be approved soon.

Quoting some of the incentives in the draft tight gas policy, he said that investors will be offered 40 percent premium on the current gas price for exploring tight gas. Similarly, 50 percent premium will be offered on current gas price to investors if they commission their project by December 2011.

Hassan Nawab said that Pakistan can also produce gas from Thar coal with the help of underground coal gasification (UCG) technology. There is a potential to produce 35 tcf of coalbed methane from Thar coal, he noted.

He said that the availability of natural gas can be enhanced through import of liquefied natural gas (LNG) from neighbouring countries like Qatar and Iran—through 3rd party arrangments. He said the country has a very large network of pipelines and the importer of LNG can pump this gas to their buyers in upcountry destinations.

Riaz Haq said...

Here's a Reuters' report on tight gas revolution in China:

SULIGE, China (Reuters) - At the heart of the vast desert region of Inner Mongolia, half a dozen young engineers from PetroChina <0857.HK> watch huge, flat screens in a brightly lit central control office that oversees 5,000 wells at China's largest gas field.

Just a few years ago, two workers travelling in a truck would need three days to check conditions at 50 wells at the Sulige field, which spans 20,000 sq km (7,700 sq miles) in the middle of Maowusu, China's third-largest desert: now, the task can be done in just five minutes.

Remote Sulige, which means "uncooked meat" in Mongolian, is testament to China's success in developing its giant reserves of so-called "tight gas", part of a drive to dramatically boost consumption of cleaner burning natural gas to help replace dirty coal and costly oil imports.

Like the better-known shale gas revolution in the United States, tight gas is transforming China's gas production - accounting for a third of total output in 2012 -- and will form the backbone of the country's push to expand so-called "unconventional" gas production nearly seven-fold by 2030.

The speed and size of the boom has outstripped forecasts and has been led by local firms developing low-cost technology and techniques, already being rolled out by Chinese companies in similar gas fields outside of China.

Like shale gas, although less difficult to extract, tight gas is an unconventional deposit that needs special technology such as horizontal drilling or fracturing to free gas trapped in tiny cavities in rocks like sandstone.

Output of tight gas hit 30 billion cubic metres (bcm) in 2012 -- nearly a third of China's total gas output -- and is expected to rise to 100 bcm by 2030, leading an unconventional fuel boom ahead of shale or coal-seam gas.

"We found our own approach to develop tight gas," said Hu Wenrui, a former Petrochina vice president and a key architect behind developing the deposits. "With this, China's tight gas has entered the fast track."

Forecasts by the China Academy of Engineering (ACE) put 2020 output of tight gas at 80 bcm, more than a forecast 50 bcm of coalbed methane and 20 bcm of shale gas combined.

Despite the excitement over shale gas, of which China holds larger reserves than the United States, the world's top energy user has taken only baby steps to exploit the more complex deposits, drilling just 80 or so wells by the end of last year.

Its output of coal-seam gas continues to disappoint after two decades of development, reaching about 6.5 bcm in 2012.....

Riaz Haq said...

Here's Alexander's Gas and Oil Connections on tight gas reserves (TGR) in Pakistan:

Misuse of policy has to be avoided for early development of over 33 tcf of Tight Gas Reserves (TGR) estimated at upper and middle Indus, Kirthar areas. The tight gas reserves are 120 % of Pakistan's existing reserves where development process has to be accelerated in the face of persisting energy crisis.
Energy experts however feel that besides government's seriousness in developing untapped resources, the situation calls for the institutional capacity of the regulator body to ensure fast decision making on TGR and avoid misuse of the policy. However in order to minimize the chances of policy misuse, the government has introduced third-party auditing, sources said.

The US pressure against Iran gas pipeline is likely to accelerate the pace of development of domestic gas resources to meet the growing demand for energy in the country, sources said.
It will be interesting to note that besides the measured gas resources, the TGR potential of lower Indus, Potwar, Kohat and offshore areas is yet to be established. It is expected that the new policy on TGR which is in the pipeline will open a new vista of investment and reserve additions in unconventional but highly promising areas.

Active players in the exploration sector are of the view that the pricing and fiscal incentives are not exactly in line with industry demand, notwithstanding small requisite changes in policy are recommended as introduction of new technology/skills, which could prove challenging and may leave the field open for foreign E&P companies in the initial stages.
If current gas production is as a guide, companies with gas production concentrated in Sindh should benefit most. On this count, OGDC and PPL ideally placed. Miano and Sawan, two producing fields operated by OMV, reportedly carry cumulative 400 mm cfpd gas production potential.

It may be noted that the thrust of the policy seems to be on early production from known TGR fields. Companies too are likely to focus on existing fields for TGR potential in order tomeet the rising energy demand. As far as the incentive offered in the policy was concerned it provides a 40 % premium over 2009 policy prices, which translates into $ 3.4-6.2mm Btu, significantly below industry demand of 80 % of imported gas cost of $ 4.6-11.6/bbl.
The definition of TGR is generous relative to standards elsewhere and should encourage TGR development. Sources said that the areas in the policy need improvement are gas price incentives which are only available at the appraisal stage after audit by a third party, which minimizes incentives for active exploration for TGR.

While gas sales to a third party can only be made on prices at a maximum 50 % discount to the 2009 policy, which once again discourages exploration in areas where gas transmission network is unavailable. Under the proposed formula, the effective floor-ceiling on gas prices is at $ 3.4-6.2/mm Btu at $ 20-100/bbl oil prices.
The floor on gas prices based on a proposed formula of $ 3.4/mm Btu warrants attention given the high drilling and operating costs involved.

Another area that requires revision is early production incentives. Any companies that develop a TGR field within two years after approval will be subject to a further 10 % additional premium over 2009 policy prices (total 50 % premium).
Unlike other polices for conventional fields, the proposed TGR policy allows Exemption from windfall levies. Similarly, the delivery point for supply of gas is defined as the outer flung of the gas processing facility, which effectively transfers the burden of constructing pipeline to government-nominated parties.

Riaz Haq said...

Here's a Pakistan Times report on oil and gas drilling and production activities in Pakistan:

ISLAMABAD: The Ministry of Petroleum and Natural Resources has drilled 131 exploratory wells during the last five years to meet the growing needs of oil and gas in the country.

"It a fact that the production of oil and gas in the country is less than their demand. However, the government has taken numerous steps to enhance their production," official sources said on Saturday.

The sources said exploration licences for 30 blocks were granted during the year 2010. In the Petroleum Exploration and Production Policy - 2011, additional incentives have been offered to the investors for exploration of oil & gas in Pakistan, they added. The sources said the additional incentives would take care of extra risk taken by exploration and production companies for doing business under the prevailing security, law and order situation in the country.

They said presently 133 exploration licences had been granted for exploration of oil & gas in the country while 130 D&P leases were operative for the enhancement of production of oil and gas. Some 127 fields were producing 64,655 barrels of oil and 4215 Million Cubic Feet gas per day. They said efforts were also being made to put newly made discoveries on production during 2011-2013.

The sources said the completion of pending development projects would enhance daily oil and gas production, adding that enhanced exploration in all areas would add new oil and gas reserves by improving law & order and providing conducive environment to local and foreign companies.

A basin study has already been carried out to co-relate entire data of different basins which will help identify new play types while through state-of-the-art data repository centre, digitized data is also available to existing and new companies to participate in exploration which will help in expediting exploration of oil and gas.

The sources said concentrating on more exploration in deeper prospects and under-explored geological frontiers would add new reserves. A tight gas policy has been notified which will offer 40-50 per cent higher prices than petroleum policy- 2009 gas price to attract exploration companies to invest in tight gas fields, they added.

The sources said the country had estimated recoverable tight gas reserves of 24 TCF and initially 100-150 mmcfd would be added depending on its success rate. The Ministry of Petroleum and Natural Resources is also working on "Low Btu Gas Policy and Shale Gas Policy" to encourage the investors to exploit these reservoirs.

Riaz Haq said...

Here's an ET story on pricing of domestic shale gas in Pakistan:

Pakistan Petroleum Limited (PPL) and Italy’s Eni have calculated that the price of shale gas should be $14 per million British thermal units (mmbtu), which has been rejected by the government as too much for the country’s existing tariff regime to absorb, an official told The Express Tribune.
The price was determined on the basis of expenditure required to drill for hard-to-reach shale gas reservoirs following a rise in interest in tapping this potential on the back of reports that Pakistan has massive reserves.
“There has to be a steady transition from conventional gas to tight and then finally to shale gas,” said Moin Raza Khan, Deputy Managing Director of PPL and head of its exploration operation. “This has to be a slow process because of the economics involved in the operations.”

Almost all the 4,000 million cubic feet per day (mmcfd) of gas produced in Pakistan comes from conventional gas fields, which can be reached relatively easily. Tight gas is trapped in impermeable rocks whereas gas trapped in shale formation is called shale gas.
Average consumer gas price is around $4 per mmbtu, undermining the prospects for shale gas to be brought into the system at this stage, Khan said.
“One reason why the US produces shale gas in abundance is because of the economies of scale. We would have to do that to make it feasible and this can’t happen overnight,” he said.

So for the time being exploration firms including PPL are focusing on tight gas, for which the government has increased the price by 40% through a separate petroleum policy.
First tight gas flows entered the transmission and distribution system in June this year as production of 15 mmcfd started from Kirthar block, which is a joint venture between a Polish firm and PPL.
Sui dilemma
For more than 57 years, Sui gas field fuelled the economy, so much that natural gas became synonymous with Sui gas. And now it has depleted.
“If you ask me I think the gas pressure will sustain for another 10 to 12 years,” Khan said. “The pressure used to be 1,300 psi (pounds per square inch), which has come down to only 300 psi.”
To tackle that problem, the company regularly installs compressor plants on the wells to maintain the pressure. “We are considering installing equipment for 100 psi and even 50 psi.”
Offshore expedition
PPL along with its local and foreign partners plans to drill a well in offshore Block-G in the Indus, the world’s second largest delta after the Bay of Bengal.
“Having a discovery offshore is very important,” he said, referring to the successive past failures. “So far, 13 wells have been drilled in Indus. Gas was found only in one and that wasn’t commercially feasible to take out.”
Pakistan has a coastline spread over 1,990 km and sub-divided into Indus and Makran deltas. Indus delta alone is spread over 1.1 million square kilometres. Pakistan’s area covers over 240,000 sq km of this....

Riaz Haq said...

Here's a Polish report indicating the price of first tight gas produced in Pakistan is set $6 per mmBTU:

PGNiG and Sui Southern Gas Company Limited (SSGC) on Tuesday singed Gas Sales Purchase Agreement (GSPA), adding 30 Million Cubic Feet (MMCFD) of ''tight gas'' from Kirthar block in Sindh in SSGC''s system. After the signing ceremony, Dr Asim Hussain, the Prime Minister''s adviser on Petroleum and Natural Resources, told reporters that this is the first-ever ''tight gas'' GSPA in Pakistan.

The agreement was signed by Pakistan Petroleum Limited (PPL), Sui Southern Gas Company Limited (SSGCL) and Polskie Gornictwo Naftowe i Gazownictwo (PGNIG). The agreement signing ceremony was witnessed by Dr Asim Hussain, Dr Waqar Masood, the Secretary Ministry of Petroleum and Natural Resources and other officials. The Kirthar block is jointly owned by the Polish firm and Pakistan Petroleum Limited (PPL) and production from the field would start in May next year. Officials said that the price of ''tight gas'' would be $6 per mmbtu, which would be much higher than the current gas price. Hussain said that ''tight gas'' production would start in May 2013 and SSGC would lay a 52-kilometre-long pipeline at an estimated cost of Rs 325 million, carrying gas from the Suleman Range to the Nooriabad industrial estate.

He said that production from two wells that would produce 15 million cubic feet gas per day (mmcfd) each. He said that the Polish firm and PPL would further provide gas to the Sui Southern Gas Company limited and supply it to industries in the Nooriabad industrial estate in Sindh.

Hussain said that polish firm had invested $40 million to explore tight gas from Kirthar block in Dadu district while $20 million would be further invested. "The Polish firm has explored ''tight gas'' from two wells. It will also dig other wells to explore more gas," Hussain said

He rejected reports that Pakistan was facing any external pressure against the Iran-Pakistan gas project, adding that the nation would soon hear "good news" about this project. Hussain reiterated that the agreement was a significant step in the implementation of Pakistan''s Tight Gas Policy announced in 2011 for providing economically viable sources of energy. He stressed that the government had introduced incentives and investor-friendly policies for boosting investment in the Oil and Gas sector for substantially bridging the demand and supply gap of natural gas. Waldemar Woiciech Bak, Managing Director of PGNiG Pakistan thanked MD PPL for the support PPL has extended as a joint venture partner throughout this period to bring the project to its current status.

MD PPL Asim Murtaza Khan hoped that the timely completion of Rehman project will increase the gas supply significantly. He assured POL''s full support in this endeavour. MD SSGCL Zuhair Siddiqui appreciated JV partners for leading the industry in unconventional gas production and hoped that they will be bringing in more gas to the system in near future. An agreement between the Polish firm and SSGCL for laying the 52-kilometre-long pipeline from PGNIG''s Rehman Field to Naing Value Assembly of SSGCL in Dadu, was also signed on the occasion. SSGCL was awarded the contract for laying the pipeline. The project is likely to be completed by April next year.

Riaz Haq said...

An Express Tribune story says ENI wants $14 an mmBTU for shale gas.

I think the ET correspondent has misunderstood the figure.

The COST (not price) calculation I have seen from ENI is $14 per boe (barrel of oil equivalent).

Each boe has 5.55 mmBTU energy. So $14 per boe works out to about $2.53 per mmBTU.

Of course, the price would be significantly higher than the cost production to incentivize investors.

ENI proposes putting the floor at $42 per boe which translates into $7.57 per mmBTU cost plus some additional profit margin.

It also suggests using oil price as reference and shows a graph that puts gas price at $10 per mmBTU when oil price is $100 a barrel.

Riaz Haq said...

Here's a brief tutorial from Shell on shale and tight gas:
What is shale gas?

Shale gas is a description for a field in which natural gas accumulation is locked in tiny bubble-like pockets within layered sedimentary rock such as shale. Think of it as similar to the way tiny air pockets are trapped in a loaf of bread as it bakes.

While geologists have known for decades that shale gas existed deep beneath many areas of the North American continent, traditional vertical oil and gas drilling methods were able to access only a small fraction of the gas within these formations. But recently, operational efficiencies and proven technology have come together to make shale gas both accessible and economically competitive.

To extract the gas from shale formations, Shell uses thoroughly tested technology in a responsible way.

What is tight gas?

While shale gas is trapped in rock, tight gas describes natural gas that is dispersed within low-porosity silt or sand areas that create a tight-fitting environment for the gas. How tight? Tight gas is defined (in the U.S.) as having less than 10 percent porosity and less than 0.1 millidarcy permeability.

Porosity is the proportion of void space to the total volume of rock. For example, fresh beach sand has around 50 percent porosity. Tight gas is held in pores up to 20,000 times narrower than a human hair.
Permeability is the ability of fluid to move through the pores. A person can blow air through a rock sample having about 1000 millidarcies permeability.
Horizontal drilling. This technology makes it possible for a well to be drilled vertically several thousand feet or meters, then curved to extend at an angle parallel to the earth’s surface, threading the well through the horizontal gas formation to capture more pockets of gas. From a central location Shell can drill multiple wells in different directions that penetrate the reservoir vertically or horizontally. This limits the number of drilling locations – known as well pads – on the surface.
S-shaped drilling. In some geological settings, it is more appropriate to directionally drill s-shaped wells from a single pad to minimize surface disturbance. S-shaped wells are drilled vertically several thousand feet or meters, then extend in arcs beneath the earth’s surface.
During drilling, mobile drilling units are moved between wells on a single pad. This avoids dismantling and reassembling drilling equipment for each well, making the process shorter and saving resources.

Riaz Haq said...

Here's a CNBC report on Prince Walid Bin Talal's concern about growing shale oil and gas hurting Saudi economy:

Saudi billionaire Prince Alwaleed bin Talal warned that the Gulf Arab kingdom needed to reduce its reliance on crude oil and diversify its revenues, as rising U.S. shale energy supplies cut global demand for its oil.

In an open letter to Oil Minister Ali al-Naimi and other ministers, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from OPEC member states was "in continuous decline".

He said Saudi Arabia's heavy dependence on oil was "a truth that has really become a source of worry for many", and that the world's biggest crude oil exporter should implement "swift measures" to diversify its economy.

(Read more: Oil prices jump as US crude takes bigger role on world oil stage)

Prince Alwaleed, owner of international investment firm Kingdom Holding, is unusually outspoken for a top Saudi businessman.

But his warning reflects growing concern in private among many Saudis about the long-term impact of shale technology, which is allowing the United States and Canada to tap unconventional oil deposits which they could not reach just a few years ago. Some analysts think this may push demand for Saudi oil, as well as global oil prices, down sharply over the next decade.

Over the past couple of years the Saudi government has taken some initial steps to develop the economy beyond oil - for example, liberalising the aviation sector and providing finance to small, entrepreneurial firms in the services and technology sectors.

Nowhere Is Immune from Unrest: Saudi Prince
Saudi Prince Alwaleed Bin Talal, talks to CNBC about turmoil in the Middle-East and the price of oil.
Naimi said publicly in Vienna in May that he was not concerned about rising U.S. shale oil supplies. Prince Alwaleed told Naimi in his open letter, which was dated May 13 this year, that he disagreed with him.
"Our country is facing a threat with the continuation of its near-complete reliance on oil, especially as 92 percent of the budget for this year depends on oil," Prince Alwaleed said.

(Read more: Don't mess with West Texas: US oil to keep outpacing Brent)

"It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately," he said, adding that the country should move ahead with plans for nuclear and solar energy production to cut local consumption of oil.

The shale oil threat means Saudi Arabia will not be able to raise its production capacity to 15 million barrels of oil per day, Prince Alwaleed argued. Current capacity is about 12.5 million bpd; a few years ago the country planned to increase capacity to 15 million bpd, but then put the plan on hold after the global financial crisis.

While most Saudi officials have in public insisted they are not worried by the shale threat, the Organization of the Petroleum Exporting Countries (OPEC) has recognised that it needs to address the issue.

(Read more: OPEC ministers: falling demand is our top concern)

In a report this month, OPEC forecast demand for its oil in 2014 would average 29.61 million bpd, down 250,000 bpd from 2013. It cited rising non-OPEC supply, especially from the United States.

At its last meeting in Vienna in May, OPEC oil ministers spent time discussing shale technology and set up a committee to study it.

Riaz Haq said...

Here's a Daily Times on oil and gas drilling in 2012-13 in Pakistan:

Exploration and production drilling activities in financial year (FY) 2012-13 was the highest-ever development drilling in Pakistan as total 62 wells were drilled, up 82 percent on yearly basis, analysts said on Tuesday.
Meanwhile target of 105 wells for FY 2013-14 is modest and leaves room for improvement, said Fawad khan an analyst at Foundation Securities.
Pakistan has achieved highest-ever development drilling with total 62 wells in FY 2012-13, registering 82 percent yearly increase. The sharp pickup in activity is driven primarily by private sector and should lead to modest increase in production, as most of the drilling is concentrated in low-yielding wells in Badin.
United Energy Group (UEG-Chinese exploration and production giant)) has emerged as the largest contributor to Pakistan drilling programme with over 43 percent drilling in FY 2012-13. Once again stratigraphic traps in Badin received huge focus on exploration. UEG efforts to unlock the potential in Badin block and new exploration leases are bearing fruits out of 17 exploration wells, UEG found hydrocarbons in at least 12 wells.
Oil and Gas Development Corporation (OGDC) and Pakistan Petroleum Limited (PPL) are yet to touch their full potential on drilling activity. OGDC has drilled only 24 wells in FY 2012-13, up 41 percent on yearly basis, but still below start of the year drilling target of 29 wells.
Khan said available details on FY 2013-14 drilling suggest both PPL and OGDC have not set significantly higher drilling target. Total industry drilling target is set at 105 wells like FY 2012-13. UEG will lead drilling with 55-60 wells drilling programme.
Ongoing exploration in high profile Zin block (OGDC), exploration drilling in Tal at Kot (particularly POL) and complete results on exploration wells in Gambat South (PPL) can bring significant reserve and production upside.
A number of important development projects are slated to come online during FY 2013-14, which are important for materialisation of overall earnings and production targets.
Khan particularly highlighted the Gas Processing Facility at Makori, development drilling in Makori East and Nashpa and progress on second phase production ramp-up on Kunnar Pasakhi Deep (KPD) field.
He estimated FY 2013-14 earnings growth for OGDC, PPL and POL of 36 percent, 28 percent and 32 percent driven by 15 percent, 6 percent and 11 percent volume growth respectively.
Despite a swift bidding round for 60 exploration leases following approval of 2012 E&P policy, actual award of leases has faced certain regulatory hiccups in certain cases. This can potentially delay the impact of new policy on drilling programme, which typically takes at least three years to materialise. Just to recap, 2012 policy offered 26percent, 100 percent higher oil/gas prices over 2001 policy pricing.
Government initially offered attractive conversion terms for areas under previous policies but later on changed certain conditions. Through award of 57 blocks, the government received minimum work commitment of $372 million.

Riaz Haq said...

Here's Wall Street Journal on India's shale gas production efforts:

India is hoping to unlock its shale gas reserves, which are spread across wide and difficult to reach terrain, by inviting investments from private companies.

The country is believed to have about 63 trillion cubic feet of recoverable shale gas reserves, more than 20 times the size of the country’s largest gas deposit Reliance Industries500325.BY -1.44%’ KG-D6 block in the Krishna-Godavari basin off the eastern coast.

That’s enough to run the country’s gas-fired power stations for at least 20 years at current consumption rates, according to industry analysts.

But experts say it may take years for the country to access and realize profits from the valuable natural resource because of a lack of infrastructure, opposition to raising gas prices and paucity of information about exactly where to find the gas.

Minister of Petroleum Veerappa Moily and his top aides have repeatedly promised that the government is on the verge of finalizing a policy on shale gas exploration.

But slow assessment of the size and accessibility of actual reserves and how to price the gas, have hindered progress towards developing a roadmap for shale gas extraction.

Shale gas is trapped deep below ground between rocky formations and is hard to extract. But recent technological advances have made it possible to extract. Oil companies inject chemically-treated water at high pressure into the ground that helps to release the gas from underground, a process known as hydraulic fracturing or fracking.


The extraction of domestic shale gas deposits will be critical to India’s aim of zero energy imports by 2030, according to another petroleum ministry official. The country currently imports 75% of its energy requirements.

But even if contracts are simplified and gas prices are freed from government control, there are other obstacles standing in the way of extraction.

India’s gas reserves belong to the government rather than private landowners as in the U.S. so private operators must obtain government contracts to begin exploration instead of dealing directly with a landlord.

India also needs to map out the reserves accurately. Preliminary findings show that they are spread out predominantly over eastern and western parts of the country mainly in the western state of Gujarat and eastern states including West Bengal. There are also some isolated deposits in central India.

Experts say the bulk of the reserves in eastern India lack the necessary network of pipelines to transport the gas–a task that many private operators are wary about undertaking.

“There are plans to have connecting pipelines and build a major highway gas pipeline,” said B.K Chaturvedi, member for energy in the government’s policy think tank, the Planning Commission.

But he added that it would take at least four to five years from any policy announcement to actual production of fuel from domestic shale gas reserves.

Riaz Haq said...

A news story in Pakistan's Express Tribune claims that US EIA estimates of Pakistan shale oil and gas reserves are "exaggerated".

I find such claims by journalists and the people they quote totally ridiculous.

Their opinion is not based on any knowledge about shale geology and methods of assessment of oil and gas reserves.

Americans know more about shale oil and gas based on actual experience of the ongoing shale revolution in America.

Opinions of US EIA experts are much more reliable in this regard.

Riaz Haq said...

Here's a China Daily report on what China can learn from US shale energy development:

WASHINGTON -- The surging shale energy output in recent years has been centering in North America, but it can also happen in other places like China, a US energy expert said Friday.
Shale gas will come to play a more important role in China's energy mix in the long term, said IHS Cambridge Energy Research Associates Chairman Daniel Yergin at a seminar on energy boom in North America.
"China has great potential for shale gas but it will take perhaps five to 10 years to develop, due to the lack of infrastructure and logistic capabilities," Yergin told Xinhua.
He added that Chinese energy companies among others are learning the necessary technologies from their American counterparts to unlock the unconventional energy including shale oil and gas.
The energy industry was concerned a decade ago that US energy output had hit the ceiling and started to go down, but now the United States is about to overtake Russia in terms of oil and gas production, said Yergin.
The United States produced the equivalent of 22 million barrels a day of oil, natural gas and related fuels in July, according to figures from the Energy Department.
The shale energy bonanza reduced US imports of natural gas and crude oil by 32 percent and 15 percent respectively in the past five years.
However, the environmental implications of shale gas extraction, a process that includes hydraulic fracturing, remain uncertain.
Hydraulic fracturing involves pumping water, sand and chemicals deep underground into horizontal gas wells at high pressure to crack open hydrocarbon-rich shale and extract natural gas.
Accelerated shale gas drilling and hydrofracking in recent years has fueled concerns about contamination in nearby drinking water supplies.

Riaz Haq said...

NY Times on why oil prices are falling:

When Morse and Jaffe wrote their article last year, the price of oil was more than $100 a barrel. Today, the per-barrel price is in the low- to mid-$80s. It has dropped more than 25 percent since June. There was a time when $80 a barrel would have been more than satisfactory for OPEC members, but those days are long gone. Venezuela’s budgetary needs requires that it sell its oil at well above $100 a barrel. The Arab Spring prompted a number of important OPEC members — including Saudi Arabia and the United Arab Emirates — to increase budgetary spending to keep their own populations quiescent. According to the International Monetary Fund, the United Arab Emirates needs a price of more than $80 to meet its budgetary obligations. That’s up from less than $25 a barrel in 2008.

Not long ago, Venezuela asked for an emergency OPEC meeting to discuss decreasing production. Iran has said that such a meeting is unnecessary. Meanwhile, Saudi Arabia has made it clear that it is primarily concerned with not losing market share, so it will continue to pump out oil regardless of the needs of other OPEC members. This is not exactly cartel-like behavior. The next OPEC meeting is scheduled for late November, but there is little likelihood of an agreement.

Continue reading the main storyContinue reading the main storyContinue reading the main story
And why does OPEC suddenly find itself in such disarray? Simply put, the supply of oil is greater than the demand, and OPEC has lost its ability to control the supply. Part of the reason is a slowdown in global demand. China’s economy has slowed, and so has its voracious appetite for oil. Japan, meanwhile, is increasingly turning to natural gas and nuclear power.

But an even bigger part of the reason is that the shale revolution in North America is utterly changing the supply-demand dynamic. Since 2008, says Bernard Weinstein, an energy expert at Southern Methodist University, oil production in the United States is up 60 percent. That’s an additional three million barrels a day. Within a few years, predicts Morse, America will overtake Russia and Saudi Arabia and become the world’s largest oil producer.

What’s more, according to another article Morse wrote, this one for Foreign Affairs magazine, “the costs of finding and producing oil and gas in shale and tight rock formations are steadily going down and will drop even more in the years to come.” In other words, the American energy industry might well be able to withstand further price drops easier than OPEC members.

When I got Jaffe on the phone, I asked her if she thought OPEC was a spent force. “You can never say never,” she replied, and then laid out a few dire scenarios — mostly revolving around oil fields being bombed or attacked — that might make supply scarce again. But barring that, this is a moment we’ve long been waiting for. Thanks to the shale revolution, OPEC has become a paper tiger.

Riaz Haq said...

From Financial Times on shale production costs:

As oil prices have fallen, the cost of production from US shale has emerged as a critical question for investors.
In a downturn, higher-cost supply is most at risk, and the need for horizontal wells and hydraulic fracturing – “fracking” – in shale reserves means they are more expensive to develop than many oilfields in the Middle East.

If oil prices fall further, however, US production costs are likely to fall too, providing a safety valve to reduce the pressure on producers.
There is no single answer to the break-even price for shale developments: it varies from area to area and well to well.
Even with US crude prices of about $100 a barrel earlier in the year, the small and midsized exploration and production companies that led the US shale revolution were running large cash deficits.
If oil remains at its present level of roughly $82 per barrel, it will put back the point at which they will be able to cover their capital spending from their cash flows.
However, their costs have already fallen sharply, and could fall further. The median North American shale development needs a US crude price of $57 a barrel to break even today, compared with $70 a barrel in the summer of last year, according to IHS, the research company.
EOG Resources, one of the most successful of the shale oil producers, cut its cost per well in the Leonard shale on the border of Texas and New Mexico from $6.9m in 2011 to $5m this year, while raising average production from each well.

Melissa Stark, a managing director at Accenture, the consultancy, says the industry still has a lot of room for improvement.
With more than 18,000 horizontal wells set to be drilled in the US this year, she argues that improving the “manufacturing model” of repeated similar projects could deliver large savings.
Accenture believes the average cost of a US shale well could be cut by up to 40 per cent by better management of factors such as planning, logistics, and relationships with suppliers.
David Vaucher of IHS says that if prices remain at around today’s levels, rates charged to oil producers for fracking and other services are likely to remain about where they are.

Riaz Haq said...

#Austrian company OMV finds new gas reserves in #Sindh #Pakistan …

Austrian oil and gas company, OMV, claimed to have discovered new gas reserves at the Latif exploration block in Sindh, a press release issued by the company stated.

The Latif South-1 well had a gas throughput of 2,500 barrels of oil equivalent (boe) a day during testing, the company said in a statement.

“We are very pleased with this exploration success. The appraisal and development of this discovery will potentially enable us to enhance the production in Pakistan,” OMV Executive Board Member responsible for Upstream, Johann Pleininger, said.

Read: Iran has not much gas for sale, Pakistan must act swiftly

The company also said that the Latif South-1 well had a gas throughput of 2,500 barrels of oil equivalent a day during testing.

“This discovery has opened up new exploration opportunities in the area,” the company said, adding that “further appraisal work is needed to confirm the size of the discovery.”

OMV’s global production was 309,000 boe a day last year, the company, which has a 33.4 per cent stake in the Latif exploration licence, said. Its partners are Pakistan Petroleum Ltd (PPL) and Italian energy group Eni, which hold 33.3 per cent each.

OMV Pakistan, a wholly-owned subsidiary of OMV Exploration & Production GmbH, started exploration activities in the desert area of Sindh in 1991 and is amongst the largest international natural gas producers in Pakistan in terms of operated volumes.

As a key investor in the oil and gas sector in the region, OMV also holds a 10% stake in Pak-Arab Refinery Limited (PARCO), a joint venture between Pakistan and Abu Dhabi.

Pakistan is currently pursuing two major projects of gas import, including the Iran-Pakistan (IP) pipeline project, which will supply 750 million cubic feet of gas per day (mmcfd) to Pakistan and the volume will be enough to generate 5,000MW of electricity.

Read: After nuclear deal, Pakistan and Iran seek to increase trade

Pakistan faces over 7,000-megawatt power shortfall in the peak summer season that causes blackouts in many areas and cripples life and business. Estimates suggest that the energy shortage strikes 3% off economic growth every year.

In addition to electricity shortages, the country endures gas scarcity that reaches its peak in winter when even domestic consumers are left scrambling for the vital heating and cooking fuel.

Riaz Haq said...

#ExxonMobil acquires 25% stake in #offshore #oil and #gas drilling in #Pakistan. Other stakeholders: Government Holdings Private Limited (GHPL), PPL, #Italy's Eni and OGDC.

In a major development, US energy giant ExxonMobil has acquired 25% shareholding in offshore drilling in Pakistan.

Earlier, Oil and Gas Development Company (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy firm Eni had 33% stake each in offshore drilling in the country. Now, ExxonMobil has acquired 25% shareholding, reducing the share of all partner companies to 25% each.

An agreement in that regard was signed at the Prime Minister’s Secretariat on Monday among ExxonMobil, Government Holdings Private Limited (GHPL), PPL, Eni and OGDC.
ExxonMobil has vast experience of offshore drilling for the search of hydrocarbons and it will help boost efforts of partner companies for oil and gas exploration in the country.

Offshore drilling has brought a revolution in the US oil and gas market and even shaken the monopoly of Organisation of Petroleum Exporting Countries (OPEC) – a global grouping of major oil producers and exporters.

Oil falls as OPEC, Russia look to raise output amid US surge

A new technology in offshore drilling is a major reason behind the boost to shale oil and gas exploration and officials believe ExxonMobil will help bring state-of-the-art technology to Pakistan. The company has been working on oil and gas exploration in different countries and Pakistan has now become part of its expansion plan.

“An agreement has been signed with ExxonMobil that will acquire 25% shares in offshore drilling in Pakistan,” GHPL Managing Director Mobin Saulat told The Express Tribune.

Oil refinery to be set up in Kohat

Another official said a study would be conducted in the potential areas allocated to the four companies before undertaking drilling activities.

In its first assessment, the US Agency for International Development (USAID) estimated that Pakistan had massive deposits of 10,159 trillion cubic feet of shale gas and 2.3 trillion barrels of shale oil – figures that were several times higher than those released by the US Energy Information Administration (EIA).

According to the EIA assessment in April 2011, Pakistan had 206 trillion cubic feet of shale gas in the lower Indus Basin, of which 51 trillion cubic feet were recoverable. However, in June 2013, it revised the estimate upwards to 586 trillion cubic feet, of which 105 trillion cubic feet were technically recoverable.

Apart from this, the EIA saw the presence of 9.1 billion barrels of shale oil that were technically recoverable out of estimated deposits of 227 billion barrels.

Why Canada is the next frontier for shale oil

In its study, the USAID collected data of 1,611 wells, used 70% of data to prepare the study and sent samples to New Tech Laboratory in Houston for assessment.

Though technology is available in advanced countries for tapping shale reserves, environmental concerns, requirement of a huge quantity of water and high cost of drilling are real challenges. A well requires three to eight million barrels of water. Pakistan has water supplies, but the real issue is its disposal.

Estimates suggest shale gas will cost $10 per million British thermal units, which will come down with the increase in recovery of untapped reserves.