Wednesday, May 1, 2019

Massive Oil Discovery in Pakistan: Hype vs Reality

Prime Minister Imran Khan has recently raised Pakistanis' hopes of ExxonMobil and ENI being on the verge of a massive discovery of offshore oil and gas reserves in Pakistan. Is this real? Or mostly hype? What is the size of these reserves? Will it be more than sufficient to meet Pakistan's current needs of over 200 million barrels of oil per year? Will Pakistan become a net exporter of oil and gas like major OPEC nations?

Top 3 Offshore Drilling Sites in Asia-Pacific. Source: Bloomberg


Why is it taking so long to get confirmation from the companies involved? What are the technical issues in getting confirmation of these huge reserves? Why is there such a big concern about blow-out? Is it because the 1.5 billion barrels pre-drill estimate of Kekra-1 well in block G of the Indus basin off the Karachi coast? Could such a large reserve cause a major blow-out accident like the one British Petroleum had in Gulf of Mexico near Louisiana in the United States? How long will it take to fix the blow-out preventer (BOP) and complete drilling of the remaining 600-800 meters of the total depth of over 5,500 meters deep in the Arabian Sea?


Offshore Blowout Preventer Stack. Courtesy: British Petroleum

Azad Labon Kay Sath host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/02oKLNPmUdk





Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Insatiable Appetite For Energy

US EIA Estimates of Oil and Gas in Pakistan

Pakistan's Debt Crisis

Can Pakistan Avoid Recurring IMF Bailouts?

Pakistan is the 3rd Fastest Growing Trillion Dollar Economy

CPEC Financing: Is China Ripping Off Pakistan?

Information Tech Jobs Moving From India to Pakistan

Methane Hydrate Release After Balochistan Quake

Thar Coal Development

Why Blackouts and Bailouts in Energy-Rich Pakistan?

Riaz Haq's Youtube Channel

14 comments:

Anonymous said...

Its not Oil discovery its most likely gas. 500 million BOE of gas. Its not barrels but Barrel oil equivalent. 500 million barrel equivalent to 2.9 TCF of gas. Sui for example has / had 2 TCF of gas. Its your next Sui and a bit more. It is no where near to say Iran's smaller gas fields.

http://www.kylesconverter.com/energy,-work,-and-heat/cubic-feet-of-natural-gas-to-barrels-of-oil-equivalent

Shehzad S. said...

Haven't we heard these fairy tales growing up in Pakistan? First it was Sui gas with enough supplies for 400 years. then it was petroleum in Balochistan. The Iranians were stopping the oil from flowing.

Blah, blah, blah. One of my relatives worked for Attock oil; he just posted in Face book and said he got production increased form 55 to 125 barrels per day. Good for him but in reality its nothing.

Personally until oil starts flowing, I would not get my hopes up. And when it does how does Pakistan and the poor man benefit?

The rich and powerful will figure it out anyway.

Rashid A. said...

Good post.

How large is the oil field?

Total volume: 1.5 Billion bbl.
Pak annual demand: 200 Million bbl
It comes at 7.5 years supply. Not much.

Also, the oil will do no good if national ethics stay the same. Somebody will just take it. Then you would see few more Towers in Dubai owned by ....

Or the Subsidy to Sugar Mafia may be increased. Our current govt. tried to refuse giving subsidy to Sugar Mafia, but to no avail. Jahangir Tareen, Asif Zardari, abd The Sharif’s are just too powerful a lobby. They got their subsidy.

Riaz Haq said...

Rashid: "Total volume: 1.5 Billion bbl. Pak annual demand: 200 Million bbl. It comes at 7.5 years supply. Not much."


The pre-drill estimate of 1.5 billion barrels is for just one well Kekra-1 in one block- Block G- of Indus basin. The overall estimate for Pakistan by US Energy Admin exceeds 10 billion barrels in two offshore basins: Indus and Makran

Please watch the video.

https://youtu.be/02oKLNPmUdk

Riaz Haq said...

Pakistan oil and gas discovery: PM Imran raises hopes with new statement

https://www.thenews.com.pk/latest/466040-pakistan-oil-and-gas-discovery-pm-imran-raises-hopes-with-new-statement

ISLAMABAD: Prime Minister Imran Khan has once again raised hopes that Pakistan can hit major oil and gas reserves in offshore drilling.

Speaking at the PTI's 23rd foundation day ceremony, the prime minister talked about the alleged corruption of the PPP and PML-N which he said has brought the country's economy to its current state.

While he vowed to correct the course, the premier said the PTI government would offer no NRO to the opposition parties.

During his speech, the prime minister said the country was blessed with everything that is considered vital to put any country on the path to prosperity.


Apart from sharing his future plan to uplift the economy, he said he was still hopeful that Pakistan would discover major gas reserves in offshore drilling being carried out in the Arabian Sea.

He said the nation could receive a good news within two weeks. The prime minister asked the nation to offer special prayers so that the expectations attached to the drilling project come true.

Imran Khan said, if found, the gas reserves would be enough to meet Pakistan's needs for the next 50 years.

Riaz Haq said...

#Exxon to report Kekra-I #oil #gas drilling results within 3-4 weeks, #Pakistan Senate told. A major drilling ship “Mother of All Rigs” along with three supply vessels is drilling offshore at the site 280 kilometers off the #Karachi coast.
https://www.pakistantoday.com.pk/2019/05/03/report-on-kekra-i-drilling-within-3-4-weeks-senate-told/#.XMzJx92qt_I.twitter

Federal Minister for Energy Omar Ayub Khan on Friday said that the report on any discovery of energy reserves at Kekra-I offshore drilling site will come within three to four weeks.

Speaking during the question hour in Senate, Ayub said that the offshore drilling for oil and gas has been underway at Kekra-I site near Karachi.

Replying a question the minister said the drilling has currently reached to 4,800 meters and the well will be drilled up to the total depth of 5,660 meters in ultra-deep waters.

It is to mention here that a delegation of Exxon Mobil informed Omar Ayub Khan in a recent meeting that the company was hopeful of finding energy resources at Kekra-I site.

The delegation was headed by Alex Volkov, chairman of LNG Market Development Exxon Mobil.

Exxon Mobil President Irtiza Syed briefed the minister about the status of offshore drilling at Kekra-I that started in January 2019. He added that Exxon Mobil is also interested in the drilling of more offshore blocks.

Drilling has now entered in its final phase where it will be easy to ascertain the presence of oil or gas deposits.

Recently international energy research agency Rystad Energy in a report said that the Eni-led Kekra project for oil and gas reserves in Pakistani waters is among three highly prospective wells in the world.

The research agency in its report on the prospective new discoveries of energy resources said that Kekra well in Pakistan has pre-drill prospective resource estimates of 1.5 billion barrels of oil or equivalent.

A group of multinational companies had started offshore drilling in January for exploration of oil and gas.

A major drilling ship, “Mother of All Rigs” along with three supply vessels started the drilling at the site.

The companies are drilling Kekra-1 well in Indus-G block, which is located some 280 kilometres away from the Karachi coast.


Rehan said...

Any estimates on cost of production per boe? Offshore development is very expensive. How would this cost of production compare with the cost of shale reserves, which are large enough by themselves.

Sarkar, ONGC India said...

The average cost for offshore rigs can be as much as 15 to 20 times greater than the average cost for land rigs. The least-expensive offshore rigs typically cost nearly $200 million. The average price for offshore oil-drilling rigs is approximately $650 million. Following the oil crisis that began in 2014, offshore rig firms believed that a recovery on the rig rental market would take place in 2018 due to increased demand, with average prices projected to rise above their current value of $200,000 per day.

Drilling Companies will offer a royalty based contract or cost based contract or a combination of both. The deeper the well, higher the initial cost and greater but constant maintenance costs. I would estimate $60 per barrel will be the break even point for Pakistan after costs and royalty charges. Shipping is additional and dependent on distance and or pipeline infrastructure.

Riaz Haq said...

Sarkar: "I would estimate $60 per barrel will be the break even point for Pakistan after costs and royalty charges"

If the cost of extraction offshore in Pakistan waters was really $60, no company, much less ExxonMobil, would drill there given that the price per barrel on world market is around $60. Dutch Shell says average for offshore is $30 a barrel. It's lower for larger finds because the initial cost is spread over more barrels of oil extracted. In Pakistan's case, we're talking about estimated 1.5 billion barrels at Kekra-1 well.

Read the following:

https://oilprice.com/Energy/Energy-General/Is-Deepwater-Drilling-More-Profitable-Than-Shale.html

"The reason why deepwater drilling is so exciting to Shell is that the cost of new projects has fallen significantly in recent years. “Deepwater can compete if not demonstrate higher returns because of fundamental cost reduction,” Brown said. “Break-even prices in deepwater — we are now talking $30 per barrel.”

That compares favorably to a lot of onshore shale plays, and in fact, it would beat out just about everywhere that shale companies are drilling. For instance, the SCOOP in Oklahoma has a breakeven price in the mid-$60s per barrel, according to data from Bloomberg New Energy Finance from earlier this year. That is on the upper end, but even more competitive areas are much costlier than the figures that Shell is citing. The Eagle Ford breaks even at between $48 and $61 per barrel, the Bakken at $53 to $56, the Niobrara at $63 and the Delaware basin (Permian) at $57 per barrel. Even the Midland Permian, arguably the most prized shale region in the country, breaks even at about $37 per barrel, BNEF says."

Riaz Haq said...

Drilling resumes for #oil #gas at Kekra-1 well (pre-drill est 1.5 billion barrels) offshore from #Karachi in #Pakistan. Now at 5,148 meters depth with 312 m still left to be spudded to reach almost 5,500 meters for final confirmation of massive reserves. https://www.thenews.com.pk/print/467995-final-phase-of-drilling-at-kekra-1-continues

ISLAMABAD: At last the drilling at Kekra-1 well in G-bloc, Pakistan’s ultra-deep sea has begun after a long pause of over almost 23 days and entered the final phase by reaching the depth of 5,148 meters and will reach at the required depth of 5,460 meters within days, a senior official told The News.


The joint venture headed by ENI is operator comprising Exxon Mobile, OGDCL and PPL started the drilling on January 13, 2019 at the cost of sunk money of $75 million, which has increased to $90 million so far.

When the drilling reaches the depth of 5,460 meters, the official said, the operator will likely do wire line logging which could take another three or four days. This will likely be followed by another casing and cementing exercise that can take four to six days. At this stage a substantial amount of information regarding the well prospects will be known, however, the results (discovery or dry well) will require completion of proper testing.

Spokesman for the Petroleum Division Additional Secretary Sher Afgan confirmed that the drilling has entered the final phase and reached the depth of 5,148 meters and only 312 meter is left to be spudded as it has to reach almost 5,500 meters. He said after reaching the required depth the operator will get the specimen that will be sent to Italy for information if there is a reservoir of oil and gas in the well or not.

The last snag hit the drilling when the blowout preventer (BOP) that prevents from any blow out or any kick pressure that can result into eruption of fire, had gone out of order and its repair took some days and then its testing took the reasonable time. Before it, the drilling stopped on April 8 because of the cementation and casing continued owing to which the drilling could not start.

So far the drilling witnessed many upheavals starting from January 2019 up till now and it has got delayed by one month as it was earlier scheduled to get completed by April end which is now rescheduled up to the middle of May at the maximum.

The drilling was initiated with 19 percent probabilities, which, according to the experts, get reduced when side tracking starts taking place. In Kekra-1 well case, second side tracking was underway. Officials said when side tracking process is initiated, this means that first plan of drilling was not well worked out.

Earlier when at Kekra well vertical drilling reached at depth of 4,799 meters on February 21, a high pressure was felt causing huge mud loss and because of unsafe operation the well was plugged by March 23. Then the first side tracking started and when it reached down to 3,100 meters, it again met failure, which is why the hole was also blocked. After that the second side tracking began which is still underway and may reach at the required depth within days.

Riaz Haq said...

Drilling resumes for #oil #gas at Kekra-1 well (pre-drill est 1.5 billion barrels) offshore from #Karachi in #Pakistan. Now at 5,148 meters depth with 312 m still left to be spudded to reach almost 5,500 meters for final confirmation of massive reserves. https://www.thenews.com.pk/print/467995-final-phase-of-drilling-at-kekra-1-continues

ISLAMABAD: At last the drilling at Kekra-1 well in G-bloc, Pakistan’s ultra-deep sea has begun after a long pause of over almost 23 days and entered the final phase by reaching the depth of 5,148 meters and will reach at the required depth of 5,460 meters within days, a senior official told The News.


The joint venture headed by ENI is operator comprising Exxon Mobile, OGDCL and PPL started the drilling on January 13, 2019 at the cost of sunk money of $75 million, which has increased to $90 million so far.

When the drilling reaches the depth of 5,460 meters, the official said, the operator will likely do wire line logging which could take another three or four days. This will likely be followed by another casing and cementing exercise that can take four to six days. At this stage a substantial amount of information regarding the well prospects will be known, however, the results (discovery or dry well) will require completion of proper testing.

Spokesman for the Petroleum Division Additional Secretary Sher Afgan confirmed that the drilling has entered the final phase and reached the depth of 5,148 meters and only 312 meter is left to be spudded as it has to reach almost 5,500 meters. He said after reaching the required depth the operator will get the specimen that will be sent to Italy for information if there is a reservoir of oil and gas in the well or not.

The last snag hit the drilling when the blowout preventer (BOP) that prevents from any blow out or any kick pressure that can result into eruption of fire, had gone out of order and its repair took some days and then its testing took the reasonable time. Before it, the drilling stopped on April 8 because of the cementation and casing continued owing to which the drilling could not start.

So far the drilling witnessed many upheavals starting from January 2019 up till now and it has got delayed by one month as it was earlier scheduled to get completed by April end which is now rescheduled up to the middle of May at the maximum.

The drilling was initiated with 19 percent probabilities, which, according to the experts, get reduced when side tracking starts taking place. In Kekra-1 well case, second side tracking was underway. Officials said when side tracking process is initiated, this means that first plan of drilling was not well worked out.

Earlier when at Kekra well vertical drilling reached at depth of 4,799 meters on February 21, a high pressure was felt causing huge mud loss and because of unsafe operation the well was plugged by March 23. Then the first side tracking started and when it reached down to 3,100 meters, it again met failure, which is why the hole was also blocked. After that the second side tracking began which is still underway and may reach at the required depth within days.

Rehan said...

Please also highlight in separate article the potential for Pakistan's geothermal power generation / cooling or heating. One estimate is 30,000 MWe . However significant work needs to be done.

References:
1. http://pubs.geothermal-library.org/lib/grc/1033590.pdf
2. www.indjst.org/index.php/indjst/article/download/131158/97211
3, https://dbdh.dk/download/member_area/.../Geotermisk%20Middle_East_Update.pdf
4. orkustofnun.is/gogn/Skyrslur/ISOR-2016/ISOR-2016-008.pdf

Riaz Haq said...

#ExxonMobil, #ENI complete offshore drilling 280 km off #Karachi coast in #Pakistan. Initial tests indicate availability of around 9 trillion cubic feet of #gas with a large quantity of #oil in the Kekra-1 well- Xinhua | English.news.cn http://www.xinhuanet.com/english/2019-05/14/c_138058229.htm#0-twi-1-43110-7250227817ecdff034dc9540e6c76667

A consortium of four major oil exploration companies has completed the offshore drilling process near the southern port city of Karachi in Pakistan after a hard work of four months.

According to the local media reports on Tuesday, ExxonMobil, ENI, Oil and Gas Development Company, and Pakistan Petroleum Limited are conducting the drill stem test to determine the real size of the oil and gas reserves in the Kekra-1 well, located around 280 km away from Karachi.

The joint venture of four oil giants spudded the Kekra-1 well to the depth of 5,470 m at a cost of 14 billion Pakistani rupees.

According to the officials in the Ministry of Petroleum, the Drill Stem Test would be completed in the next three days. After the completion of the Drill Stem Test, a report will be prepared about the total quantity of the oil and gas reserves within a week.

They further stated that the initial tests had estimated the availability of around 9 trillion cubic feet of gas with a large quantity of oil in the Kekra-1 well, which had excited the nation, including Prime Minister Imran Khan who openly spoke about it on numerous occasions.

The four-firm joint venture had started the offshore drilling process on Jan. 11, 2019, which was expected to be completed by March. However, the process was delayed by critical issues, but ENI stayed committed to the completion of the offshore drilling.

The technical problems during the offshore drilling forced the drilling team to spend an additional 100 million U.S. dollars to procure surplus steel and cement because the team had to change the direction of the drilling process of the Kekra-1 well.

The Petroleum Ministry officials informed the local media that changing the direction of the drilling was a challenging task because the joint venture was running out of time to complete the drilling process as sea waves generally become unstable by the end of May. The stability of a drilling ship by the end of May would have been quite a daunting task, they added.

They informed that within the next 10 days, the joint venture team would be able to determine the actual size of the oil and gas discovery. According to senior officials of the Petroleum Ministry, the necessary infrastructure would be erected in the sea for oil and gas exploration only if the price of total reservoir quantity was worth more than 10 billion U.S. dollars.

The economic experts believe that if the four major oil exploration companies are able to find the reservoir quantity according to the estimates, it would cut down Pakistan's oil import bill by 6 billion U.S. dollars every year.

Anonymous said...

https://www.thenews.com.pk/latest/473016-kekra-1-well-in-deep-sea-no-reservoir-found-drilling-halted

Kekra-1 well in deep sea: Hopes fade as no oil, gas reservoir found; drilling halted

KARACHI: Special Assistant to Prime Minister Imran Khan on Petroleum Nadeem Babar has said that drilling at Kekra-1 well in deep sea near Karachi has been stopped after no oil or gas reservoir could be found.