Thursday, July 18, 2013

Tight Gas Production Begins in Pakistan

First tight gas well  producing 15 million cubic feet per day of natural gas is on line at Sajawal gas field in Kirthar block in Sindh province, according to a report in Express Tribune. This marks a major milestone in development of unconventional hydrocarbon energy sources in Pakistan. Sajawal gas field is located 110 km south east of Karachi, Pakistan. It puts Pakistan in an exclusive club of just a few nations producing unconventional natural gas.

The tight gas well in Kirthar belt is being operated jointly by Poland's Polskie Gornictwo Naftowe i Gazownictwo (PGNiG) and Pakistan Petroleum Limited (PPL).

The state-owned Sui Southern Gas Company (SSGC) is buying gas from the joint venture at $6 per million BTUs (half the price agreed for Iranian gas) for distribution through its network in southern Pakistan. SSGC is laying a 52-kilometre-long pipeline at an estimated cost of Rs 325 million, carrying gas from the Suleman Range to the Nooriabad industrial estate.

First tight gas production launch in Sajawal is a very significant milestone for Pakistan. It augurs well for the future of both tight and gas production in the country because there are similarities in how both are extracted. Pakistan is endowed with huge deposits of both---105 trillion cubic feet (TCF) of shale gas and at least 33 trillion cubic feet of tight gas. In addition, Pakistan is also blessed with 9.1 billion barrels of shale oil which is also extracted in a similar way.

Pakistan's current demand for natural gas is about 1.6 trillion cubic feet per year. Even if consumption triples to 5 trillion cubic feet per year, the current known reserves of over 150 trillion cubic feet of conventional and unconventional gas are sufficient for over 30 years.

Wells for both of these unconventional resources (tight and shale) must be "hydraulically fractured" (fracked)  in order to produce commercial amounts of gas. Operator challenges and objectives to be accomplished during each phase of the Asset Life Cycle (Exploration, Appraisal, Development, Production, and Rejuvenation) of both shale gas and tight gas are similar, according to a paper on this subject.  Drilling, well design, completion methods and hydraulic fracturing are somewhat similar; but formation evaluation, reservoir analysis, and some of the production techniques are quite different.

The current technology known as hydraulic fracturing or fracking was developed in the United States and it has spawned shale oil and gas revolution increasing supplies and reducing gas prices. The Chinese are now working on further cutting costs to make the equipment and technology more affordable.

Like the 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, according to Reuters. The speed and size of the boom has exceeded 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. Pakistan can benefit from the Chinese in its efforts to increase tight and shale gas and oil production.

Related Links:

Haq's Musings

Why Blackouts and Bailouts in Energy-Rich Pakistan?

Pakistani Guar in Demand for American Shale Fracking

US EIA Estimates 9.1 Billion Barrels of  Shale Oil in Pakistan

Pakistan's Vast Shale Gas Reserves

Abundant, Cheap Coal Electricity

Twin Energy Shortages of Gas and Electricity in Pakistan

Pakistan Energy Security Via Shale Revolution


Armstrong said...

So does that mean that we could, potentially, be self-sufficient in Petroleum & Gas Consumption if we ever choose to utilize those resources ?

Riaz Haq said...

Armstrong: "So does that mean that we could, potentially, be self-sufficient in Petroleum & Gas Consumption if we ever choose to utilize those resources ?"

Pakistan has the world's 9th largest shale oil reserves of 9.1 billion barrels and 17th largest shale gas reserves of 105 trillion cubic feet, according to US EIA's latest report for 2013.

Pakistan can become an energy-surplus country by developing its shale resources.

Rehan said...

Riaz Sb., Thanks for your well researched and excellently written articles! Enjoy reading them.

I think you should publish some selected ones in major newspapers (like Dawn) or magazine also. More people can benefit from these.

Riaz Haq said...

Rehan: "I think you should publish some selected ones in major newspapers (like Dawn) or magazine also. More people can benefit from these."

I'm glad you enjoy reading my posts.

I find that Pakistani media people are too lazy to do their own research. But they do usually pick up on some of my blog posts a few days, and sometimes a few months, after I write them and publish the info as if it's their own research. But the publication dates don't lie.

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.

Jamshed said...

It will going to cost too much as there are foreign origin companies that are selling at $$$ cost. I think PSO who is willing to expand should try to convince GoP to do Exploration on its own for Oil, Gas and Minerals in Pakistan. Form up a company naming Pakistan Hydrocarbon and Minerals Corporation.

Riaz Haq said...

Jamshed: "It will going to cost too much as there are foreign origin companies that are selling at $$$ cost. I think PSO who is willing to expand should try to convince GoP to do Exploration on its own for Oil, Gas and Minerals in Pakistan. Form up a company naming Pakistan Hydrocarbon and Minerals Corporation."

1. PSO is a distribution and retail co; it does not do exploration and production. Pakistan's state-owned OGDC and PPL do exploration and production.

2. The price of domestic tight gas is $6 per mmBTU, half of the price agreed for Iranian gas.

3. The price SSGC or SNGC or PSO pay for domestic oil and gas will be in Pak rupees, not in US dollars. Only a portion of it will be repatriated in US dollars by foreign companies (PGNiG, ENI, UEP, etc) which have stake in joint ventures with Pakistani companies like PPL and OGDC

Ras said...

Tight Gas well development is very expensive.

They are also investing very high dollar in offshore:

Riaz Haq said...

Ras: "Tight Gas well development is very expensive."

Sui Southern is paying $6 per mmBTU for domestic tight gas from Sajawal gas field. It's more than $4 per mmBTU for conventional domestic gas but a lot less expensive than the agreed $12 per mmBTU for Iranian gas.

And Iranian gas price could go up a lot if the price of oil rises much above $100 a barrel of oil. The Iranian price formula is tied to the price of oil.

Ras said...

Maintenance on Tight Gas wells is also expensive since they are prone to flooding.

Riaz Haq said...

Ras: "Maintenance on Tight Gas wells is also expensive since they are prone to flooding."

I'm sure the producers have put all of their costs and profits with significant ROI into their calculations to arrive at $6 per mmBTU price that PNGiG and PPL Joint Venture is charging SSGC. BTW, $6 per mmBTU for tight gas is 50% higher than the price of conventional gas in Pakistan.

Akber said...

Any idea of time frame? Can substantial qty of tight/shale gas come on line before
Iran or Turkmen gas

Riaz Haq said...

Akber: "Any idea of time frame? Can substantial qty of tight/shale gas come on line before
Iran or Turkmen gas"

Tight gas production has already started in Pakistan. Ramping up production quantities will depend on how much investment and focus goes into it. The Americans with shale gas and the Chinese with tight gas have shown it can be done quite quickly.

Riaz Haq said...

Here's a link to Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) detailing facts and data on activities in Pakistan:

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.

Jugni said...

No-one in their right mind would come to Pakistan

Riaz Haq said...

Jugni:"No-one in their right mind would come to Pakistan"

Pakistan does have security challenges. But your assertion that "No-one in their right mind would come to Pakistan" is just plain wrong. There are hundreds of multi-nationals currently operating in Pakistan.

In oil and gas sector, there's an entire association called "Pakistan Petroleum Exploration and Production Companies Association" with dozens of foreign member companies working in Pakistan now.

Jugni said...

The amount of FDI is entirely insignificant.

My friend, sugar coating the truth doesn't stop it being bitter.

And let me tell you what else, from 2010, FDI fell again in 2011 to around the $1 billion mark then again in 2012 to below the half a billion mark in USD terms. That is according to the world bank.

Riaz Haq said...

Jugni: "The amount of FDI is entirely insignificant."

Yes, overall FDI figures are down.

Sector-wise, FDI has declined the most in telecom sector mainly because of delays in 3G licensing.

But FDI in oil ad gas sector has continued to be over half a billion dollars each year for many years:

2007-8 634.8
2008-9 775.0
2009-10 740.6
2010-11 512.2
2011-12 629.4
2012-13 559.6

Riaz Haq said...

Here's a Marketwatch report on oil and gas find in Pakistan:

CALGARY, ALBERTA, Feb 18, 2014 (Marketwired via COMTEX) -- Jura Energy Corporation ("Jura") CA:JEC +18.37% today announced a gas and condensate discovery at the Ayesha-1 exploration well in the Badin IV South block.

The Ayesha-1 well was completed in the 'B' Sands of the Lower Goru Formation of Cretaceous age. During a short test on 32/64 inch choke, the well flowed gas with a heating value of approximately 1,000 Btu/Scf at a rate of 11.34 MMcf/d and a wellhead flowing pressure of 1,998 psi. The condensate to gas ratio was in the range of 10-12 bbl/MMcf with minimal water cut production. Detailed testing of Ayesha-1 will continue over the next few days.

Anticipated future production from the Ayesha-1 discovery is expected to be entitled to a gas price of US$6 per MMBtu under Pakistan s Petroleum (Exploration & Production) Policy, 2012.

Shahid Hameed, CEO of Jura, commented on the Ayesha-1 test results saying: "We are delighted with the successful test results. Given Ayesha-1's proximity to existing processing and pipeline infrastructure, this commercial discovery could be brought into production on a fast-track basis. Our Badar and Guddu fields are already in production and first gas production is anticipated from Zarghun South in the first half of 2014."

The drilling rig has now been released from Ayesha-1 and mobilized for the drilling of another exploration well, Haleema-1, in the Badin IV South block. The drilling of Haleema-1 is expected to commence in the first week of March 2014.

Jura holds a 27.5% working interest in the Badin IV South block, which is operated by Petroleum Exploration (Pvt) Limited.

Riaz Haq said...

Modi on petroleum exploration in Pakistan: Referring to the exploration scope in the region, he said Pakistan has started exploring the area across the border for gas and petroleum products.

"Look across the border in Pakistan, they have started massive work in gas and petroleum sector, why can't we?" he asked.

"It is the same region. There is immense scope for gas and petroleum here. I am sure we can definitely find it here as well. It can give new strength to our nation."

Addressing the youths, he said there will be opportunities in the exploration work in future and asked them to prepare themselves for it.

"We have started a petroleum university in Gujarat and this is for youngsters. I would urge the youth here to go on Internet and search about petroleum university. I invite you to make full use of it," he said.

Riaz Haq said...

Here's a Dawn report on tight gas in Naushero Feroz in Sind:

KARACHI: The Pakistan Petroleum Limited (PPL) announced discovery of gas from Exploration Well, Naushahro Firoz X-1 in Naushahro Firoz Block, Sindh.

In a filing with the stock exchange on Wednesday, under the disclosure of ‘insider information’ in terms of section 15D(1), the PPL reminded that it holds 90 per cent working interest in the well.

M Mubbasshar Siddique, company secretary for PPL, stated that the exploration well at Naushahro Firoz X-1 was drilled down to target depth of 3,773m(MD) within Chiltan Formation.

Based on gas shows encountered during drilling and wire line logs evaluation, a cased hole drill stem test (CHDST) was carried out.

The PPL informed that after acidization, the well flowed good quality gas at variable rates with the maximum of 11.2mmscfd with a flowing wellhead pressure of 2,635psi and a minimum of 1.7mmscfd with a flowing well head pressure of 375psi at a choke size of 32/64 inches.

PPL observes: “Preliminary analysis of the test data suggests the discovery to be the tight gas. However, further evaluation is required to determine the nature and commerciality of the discovery based on the geological, geophysical and engineering data collected during the drilling and testing of the well and also by drilling of additional well(s)”.

Riaz Haq said...

#Pakistan Petroleum reports gas, condensate discovery in Gambat South. #Sanghar #Sindh …

KARACHI, Pakistan -- Pakistan Petroleum Limited, operator of the Gambat South Block with a 65% working interest, has announced another gas and condensate discovery at its Kabir X-1 exploration well in Sanghar District, Sindh, Pakistan.

Kabir X-1 was spud on April 24 and reached final depth, of 4,020 m, on June 28. Based on wire line logs, potential hydrocarbon bearing zones were identified in the Basal Sand of the Lower Goru formation.

During initial well testing, Kabir X-1 flowed at 1.94 MMscfgd along with 253 bcpd on a 16/64-in. choke.

Currently, well testing is underway to evaluate the potential of the discovery.

Anonymous said...

Copy from wiki
Analysts expect that $150 billion will be spent on further developing North American tight oil fields in 2015. The large increase in tight oil production is one of the reasons behind the price drop in late 2014.[10]

Outside the United States and Canada, development of shale oil (tight oil) resources may be limited by the lack of available drilling rigs: 2/3 of the world's active drill rigs are in the US and Canada, and rigs elsewhere are less likely to be equipped for horizontal drilling. Drilling intensity may be another constraint, as tight-oil development requires far more completed wells than does conventional oil. Leonardo Maugeri considers this will be "an insurmountable environmental hurdle in Europe".[9]

Riaz Haq said...

A review of Pakistani shales for shale gas exploration and comparison to North American shale plays
Author links open overlay panel Ghulam Mohyuddin Sohail a, Ahmed E. Radwan b, Mohamed Mahmoud c

Recent advancements in technologies to produce natural gas from shales at economic rates has revealed new horizons for hydrocarbon exploration and development worldwide. The importance of shale oil and gas has aroused worldwide interest after the great success of production in North America. In this study, different marine source rocks of Pakistan are evaluated for their shale gas potential using analogs selected from various North American shales for which data have been published. Pakistani formations reviewed are the Datta (shaly sandstone), Hangu (sandy shale), Patala (sandy shale), Ranikot (shaly sandstone), Sembar (sandy shale) and Lower Goru (shaly sandstone) formations, all of which are known source rocks in the Indus Basin. Available geological data of twenty-six wells (e.g., geological age, depositional environment, lithology and thickness), geochemical data (e.g., total organic carbon (TOC), vitrinite reflectance (Ro), rock pyrolysis analysis and maturity), petrophysical data (e.g., porosity and permeability) and dynamic elastic parameters estimated from logs (Young’s modulus and Poisson’s ratio) have been investigated. According to this study, the Pakistani shales are explicitly correlated with the most active shale gas plays of North America. The burial depths or geological position of the Pakistani shales are generally comparable to or slightly higher than the North American shales based on the available data. The thicknesses of the Pakistani (except for the Sembar shale) and North American shales fall in similar ranges. In terms of mineralogical composition, all of the Pakistani shales except the Ranikot and Hangu shales have quartz contents in the 40% to 50% range (approximately), which is similar to most of the North American shales. The high maximum TOC of the Hangu and Sembar shales (10%) is comparable to the New Albany, Antrim and Duvernay shales. The maximum TOC values for the Ranikot (3%), Lower Goru (1.5%) and Datta (2%) shales are lower than all North American shales. The TOC of Patal Shale (
5%–10%) is comparable to Fayetteville and Eagle Ford shales. The geological and geochemical parameters of all the Pakistani shales reviewed in this work are promising regarding their shale gas prospects. However, geomechanical data are required before conclusions on these shales’ economic production can be made with confidence.


The exploitation of shale gas reservoirs may enhance gas production and reduce the severity of the ongoing energy crisis. The main challenge in Pakistan is to evaluate the shales using limited data and samples. That is why only a few companies are working on shale gas reservoirs in Pakistan now. The researchers need to assess and rank prospective Pakistani shales to entice companies to consider shale gas development. The geological characterization of Pakistani shales has been investigated by several authors (e.g., Warwick et al., 1995, Kazmi and Abbasi, 2008, Ahmad et al., 2012, Hakro and Baig, 2013, Jalees, 2014), but detailed work is required on geochemical, petrophysical and geomechanical characterization for assessing the actual potential of shales in Pakistan (Abbasi et al., 2014).