Saturday, April 27, 2019

Blowout Concerns Delay Confirmation of Pakistan Offshore Oil Discovery

Blowout concerns have stopped offshore drilling in Pakistan yet again. It was underway to confirm discovery of oil and gas in at Kekra-1 well in G-bloc with pre-drill estimate of over 1.5 billion barrels of oil. It was scheduled to restart on April 20, 2019 after pause of 12 days, according to Pakistani media reports. Now it is delayed until the blowout preventer equipment is fixed and ready to use again.

Offshore Blowout Preventer Stack. Courtesy: British Petroleum

Blowout Preventer Problem: 

The drilling was stopped on April 8 at the depth of 4,810 meters for cementing and casing process which took almost 12 days to complete. Now there are concerns about the proper functioning of the blowout preventer (BOP). Once the BOP repair is completed, Mobile Exxon and ENI as joint operators at Kekra-1 well will resume drilling of the remaining 650-800 meters.

Time required to drill the remaining 650-800 meters will depend on the rate of penetration (RoP).  Pakistan petroleum ministry officials were quoted by The News as saying that they "don’t yet have precedents to form a reliable estimate for the RoP for offshore Indus-G, where Kekra-01 is being drilled. An RoP of 10 meters per hour (generally considered low) would mean that it would take 80 hours or a little more than three days to reach the target depth.’’

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

Exxon-Mobil's Entry in Pakistan:

American energy giant Exxon-Mobil has joined the offshore oil and gas exploration efforts started by Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy giant ENI, according to media reports.

Each company will have 25% stake in the joint venture under an agreement signed at the Prime Minister’s Secretariat in May among ExxonMobil, Government Holdings Private Limited (GHPL), PPL, ENI and OGDC.

Exxon-Mobile's entry in Pakistan brings deep offshore drilling technology, its long experience and financial resources to the country. It is expected to accelerate exploration and more discoveries.

Pakistan Oil Basins:

A Pakistan Basin Study conducted in 2009 found that the country has six onshore and two offshore basins; offshore basins being the Indus basin and the Makran basin in the Arabian Sea.

The Indus offshore basin is a rift basin that geologists say developed after the separation of the Indian Plate from Africa in the late Jurassic period. It is believed to be the second largest submarine fan system in the world after the Bay of Bengal with high probability of hydrocarbon discoveries.

The Makran Offshore basin is separated from the Indus Offshore basin by Murray ridge, according to Syed Mustafa Amjad's report in Dawn. It is an oceanic and continental crust subduction zone with deepwater trenches and volcanic activity. The basin consists of oceanic crust and periodic emergence of temporary mud islands along the coast suggesting strong evidence of large hydrocarbon deposits.

Pakistan Hydrocarbon Potential:

The United States Energy Information Administration (EIA) estimates that Pakistan has 586 TCF (trillion cubic feet) of gas in Pakistan of which 105 TCF is technically recoverable.

In addition to gas deposits, US EIA estimates there are 227 billion barrels of oil in Pakistan with 9.1 billion barrels being technically recoverable.

Pakistan also has 185 billion tons of coal deposits in Thar desert which are just beginning to be extracted by Sindh Engro Coal Mining Corporation.

Oil and Gas exploration and production companies are currently planning to drill 90 wells in different parts of  the country. Under the plan, as many as 50 exploratory and 40 development wells would be drilled in a bid to make the country self-sufficient in the energy sector, according to media reports.

During the last five years, the sources said the exploration and production companies drilled 445 new wells, out of which 221 were exploratory, adding that the increased exploration activities resulted in 116 new oil and gas discoveries.

Current Account Deficits:

Energy imports make up a big chunk of Pakistan's total imports. Bulk of the annual 200 million barrels of oil demand has to be imported. Rising oil prices worsen the current account deficit and put pressure on Pakistan's reserves, forcing the country to seek periodic IMF bailouts.

Pakistan's trade deficit is nearly $40 billion a year and debt service costs are about $11 billion a year. How can Pakistan fund this balance of payments deficit of about $50 billion? Remittances of $21 billion in current FY2019 from Pakistani diaspora are expected to reduce it to $30 billion. PTI government has taken on billions of dollars in loans from Gulf Arabs and China. Given the low rates of foreign investments in the country, a big chunk of the remaining deficit will have to be met by borrowing even more funds which will further increase future debt service costs.

Pakistan's Current Account Deficit. Source: Trading Economics

As a result, Pakistan is now battling massive twin deficits, deteriorating foreign currency reserves, low exports, diminishing tax revenues, a weak currency, onerous external debt payments, and soaring sovereign debt. This crises has forced the country to seek IMF (International Monetary Fund) bailout, the 13th such request in Pakistan's 72 year history.

Summary:

Blowout concerns have stopped offshore drilling in Pakistan yet again. It was underway to confirm discovery of oil and gas in at Kekra-1 well in G-bloc with pre-drill estimate of over 1.5 billion barrels. Pakistan made 2 key oil and gas discoveries in 3rd quarter and another 3 discoveries in the 4th quarter of 2017. These discoveries appear to have prompted US-based Exxon-Mobil to join off-shore drilling efforts in Pakistan.  American energy giant's entry in Pakistan brings advanced ultra deep sea drilling technology, its long experience in offshore exploration and financial resources to the country. It is expected to accelerate exploration and lead to more discoveries.  US Energy Information Administration (EIA) estimates that Pakistan has technically recoverable deposits of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil. Reducing energy imports by increasing domestic production will likely ease Pakistan's current account deficits and reduce its need to seek repeated IMF bailouts.

Here's a discussion on the subject:

https://youtu.be/7o2MbUs2U38



Here's a video explaining offshore drilling for oil and gas:

https://youtu.be/anM9hZDA_cE





Related Links:

Haq's Musings

South Asia Investor Review

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:

Bilal B said...

Finally some good news for all of us. That is about 5 trillion dollar asset we are sitting on. Pakistan will be accepted into Arabian gulf and full member OIC very soon.

Riaz Haq said...

Bilal: "That is about 5 trillion dollar asset"

Not quite. 1.5 billion barrels at $65 per barrel it is about $100 billion. But there's hope for more offshore.

As to OIC, Pakistan is founding member of it. The first Islamic summit was held in Lahore in 1970s.

Anonymous said...

Dear Sir,

Can you please elaborate the following paragraph...

"The United States Energy Information Administration (EIA) estimates that Pakistan has 586 TCF (trillion cubic feet) of gas in Pakistan of which 105 TCF is technically recoverable.

In addition to gas deposits, US EIA estimates there are 227 billion barrels of oil in Pakistan with 9.1 billion barrels being technically recoverable".

specially NON-discoverable assets...

Regards:

Moh said...

Thank you for the post. It was really informative.

However, I have been watching the drill site daily and the drillship Saipem 12000 left the site approximately end of March maybe early April.
The live map marine traffic map can be found here: https://www.marinetraffic.com/en/ais/home/centerx:66.105/centery:22.505/zoom:12

The Blowout prevent or can only be replaced by a rig (offshore drillship equivalent). This is because you need the proper hydraulics and ESVs (emergency shutdown valves) in place if you are opening a well under pressure during a workover. The reason is if you are to lose control and of the well, you need to inject high density mud (of barite) under a pressure greater than the formation pressure to kill the well.

The only ships that's have been frequenting the site are:
Pacific Heron
Pacific Gull
Pacific Gouse
These are support or development ships. I am not sure if they can or cannot service a large offshore BOP.

Links to info on the ships listed above are here:
https://www.marinetraffic.com/en/ais/details/ships/shipid:123206/mmsi:563028200/imo:9579121/vessel:PACIFIC HERON

https://www.marinetraffic.com/en/ais/details/ships/shipid:5372230/mmsi:563043800/imo:9742869/vessel:PACIFIC GROUSE

https://www.marinetraffic.com/en/ai...msi:563057300/imo:9742883/vessel:PACIFIC_GULL

I am sorry, but I am less inclined to believe all the recent stories in the media about the well still needs to be completed.

I think the best information we can get is from ExxonMobil itself once they release their official report. Everything else is just speculative as of yet.

I do not have offshore experience so I may not be fully aware of the processes. However, I know enough about onshore operations to guesstimate how the Kekra-1 is probably progressing.

Muneeb said...

So 200m is Pakistan's annual demand and Kekra I is estimated by most at 500m and earlier estimates at 1.5b barrels puts that at between 2.5 years and 7 years worth of oil. Only 50% of the oil is owned by Pakistan with the rest with ExxonMobil and ENI plus we'd have to refine it too. So the discovery would be a blessing but not goldmine like for the Arabs

Riaz Haq said...

Muneeb: "So the discovery would be a blessing but not goldmine like for the Arabs"

Kekra 1 is just one well in one block labeled G, not the entire Indus basin and Makran basin

The United States Energy Information Administration (EIA) estimates that Pakistan has 586 TCF (trillion cubic feet) of gas in Pakistan of which 105 TCF is technically recoverable.

In addition to gas deposits, US EIA estimates there are 227 billion barrels of oil in Pakistan with 9.1 billion barrels being technically recoverable.

James said...

If the ocean based drilling process uses the old type of annular snubber and hydraulic rams is more than likely to cause spills. These types of so called blowout Prevention valve system cannot be tested periodically to verify proper operation. There's no way of knowing if it will work until needed. In deep horizon's case it failed. If this type of bop valve works the doughnut snubbed closes and hydraulic rams crush the line closed. Now production stopped and have a line unable to bring back into service as repairs cannot be made without causing a spill. It's been 9 years since the macondo well blowout and still using the same valves, much less passing it off that it works. This type of valve costed the owners of deep horizon upwards of 100 billion and still rising. I'm the designer of the caphead that stopped the deep horizon's/macondo well leak. I'm a oilfield employee in Alaska's North slope oilfields in Prudhoe Bay. I have over 30 years of experience in pipeline repair and maintenance. Currently still employed 2019. Kuparuk river unit. In June 2010 I watched as the horizon crew cut bent sections off of the piping left several feet of 7 inch pipe sticking out of the seafloor, also had a flange inches from pipe end. I designed a caphead spool that could be lowered onto the piping and using wings/ears could lock onto the flange securing to the well head. Chevron seals would be forced by wells own pressure sealing the caphead. I submitted online to the "horizon helpline" but neglected to file for a patent and was cheated out of my design as the horizon helpline later emailed me stating my design was unusable. Several weeks later I watched as my design caphead was used to stop the macondo well runaway leak. After further study found that most wells use the same type blowout prevention valves, at the top is an anular doughnut seal, bottom are hydraulic valve which crush the wells lines closed. This type of bop can't be tested until needed. Once activated and of it works leaves the well unusable. Production stops and are left with a leak only sealed by crushed piping. Not a good idea and leaves ocean based oil production platforms open to Better upgraded designs that can handle kicks and are capable of testing to verify operation. My designs are capable of being maintained while isolating pressure. Bop valves that need repair or replacement can be performed while returning back to service and production can go on. If the oils production industry intends to use this type of bop system take the risk of blowouts or stopping production as well as cost of loss of life and environmental damage. Deep horizons cost 100 billion plus. My design as will be patented and not free but will guarantee a safer method of oil production of ocean based drill platforms. Future plans involve starting a deep water repair company as well as designing and marketing bop valve systems. If the old type bop system is used you can bet on calling me. The difference is small between upgrades or billions for oil spill clean up and repairs. "007".

Anonymous said...

Pakistan is a country made with a progressive vision from allah and we are blessed. Pakistan will prosper and leave our enemies far behind. Our mulk is also blessed with strong army to defend us because we are resilient people. We may have less but we help our less fortunate inshallah and remove poverty. Economy will grow too inshallah.


Ghulam

Anonymous said...

The best speech by DGISPR Major Ghafoor on economy, CPEC, foreign relation and enemies Pakistan India and PTM also. Too much for IK and PTI govermnent unless Supreme Court allow President power. Army should take care of all departments right now without IK getting President powers because that will be best for Pakistan. IK cannot take care chor and dacoits without Army help and save Pakistan. DGISPR also spoke very clear message to India and PTM

Ghulam

Riaz Haq said...

Pakistan bullish on oil, gas discovery at Kekra-1

https://www.thenews.com.pk/print/465327-pakistan-bullish-on-oil-gas-discovery-at-kekra-1

Pakistan is expecting discovery of oil and gas reserves in ultra-deep waters offshore Karachi as the drilling at Kekra-1 has almost reached its climax, an official said on Tuesday.


“There is an optimistic prospect of finding energy resources at Kekra-1,” the Special Assistant to the Prime Minister for Petroleum Nadeem Babar said. He was talking to a delegation, headed by Alex Volkov, chairman of Liquefied Natural Gas (LNG) Market Development at Exxon Mobil.

Led by US oil and gas company Exxon Mobil, a consortium consisting of Italian ENI, Oil and Gas Development Company and Pakistan Petroleum Limited is currently conducting offshore drilling at the block. The joint venture of Indus-G block spud an exploratory well – namely Kekra-1 – in ultra-deep water on 13 January, 2019. The well will be drilled up to the total depth of 5,660 meters in ultra deep waters, which is currently at 4,810 meters.

“Drilling has been entered in the phase where it will be easy to estimate that there is any oil or gas,” an official statement said.

Minister for Petroleum Omar Ayub Khan said the government would give all assistance to international investment. The government will defend free and safe investment in the country. The minister said employment would be generated after exploration.

Irtiza Syed, president of Exxon Mobil said the Exxon Mobil is interested in drilling of more offshore blocks and in LNG imports into the country. The company could also help in making of environmental friendly policy for off shore drilling.

The entry of Exxon Mobil in Pakistan is a positive signal for the exploration and production sector of the country. The petroleum division of ministry of energy has already drafted Pakistan Offshore (Exploration and Production) Rules 2019 and Model Production Sharing Agreement 2019, which will be submitted to the cabinet for approval. The government has already waived duties and taxes on import of drilling equipment to encourage indigenous exploration and production of energy resources as the country is confronted with widening gap in energy demand and supply.

The Oil and Gas Regulatory Authority (Ogra) said the gap between the supply and demand is expected to increase to the tune of 4,600 million metric cubic feet / day in FY2022/23 and 6,700 mmcfd by the FY2027/28. The country currently produces around 4,000 mmcfd of natural gas – accounting for 48 percent share in the primary energy mix – against demand of more than 6,000 mmcfd. The demand-supply gap of gas during FY2017/18 was 1,447 mmcfd. The gap is expected to rise to 3,720 mmcfd in the next fiscal year starting from July 2019.

“The possible gap would be bridged through enhancement in indigenous gas exploration and production through incentivising the sector, import of interstate natural gas – through development of cross-country gas pipelines – and increased import of liquefied natural gas,” the Ogra said in its latest state of petroleum industry report.

Riaz Haq said...

160 oil and gas reservoirs discovered in Pakistan in last 10 years

https://dnd.com.pk/160-oil-and-gas-reservoirs-discovered-in-pakistan-in-last-10-years/165344

ISLAMABAD, Pakistan: The Minister for Energy (Petroleum Division) Omar Ayub Khan has said that a total of 160 oil and gas reservoirs have been discovered in Pakistan during the last 10 years.

In a written reply submitted in the National Assembly, Omar Ayub said that the discovered reservoirs are in different stages of appraisal and development, therefore, the estimated volume and value may vary based on actual production and its recovery factor.

The province wise break up of aforesaid discoveries during the year 2008-2018:160 oil and gas reservoirs discovered in Pakistan in last 10 years


Furthermore, the minister for energy told the House that at present total annual requirement of oil of the country is around 25.8 million tons per annum.

Required purchase and sale rates of petroleum products in Pakistan:

Sindh 131, Punjab 13, Balochistan 3, KPK 13


The minister said that the prices of petroleum products in the Country are linked with the International Arab Gulf market prices which fluctuate on daily basis and not in the control of government. Accordingly, the domestic oil prices are increased/decreased by including notified taxes and other cost components incurred on the supply of oil across the country.

Omar Ayub said that the government takes steps from time to time for providing relief to the consumers by adjusting any hike in international oil prices through reduction in the rate of taxes.


Petrol/Liter: Purchase Price Rs 62.55, Distribution/Transportation: Rs. 9.84, Taxes: Rs. 26.50. Total/Liter Rs. 98.89

Riaz Haq said...

#Oil, #gas reserves found in district Tando Muhammad Khan, #Sindh, #Pakistan in a well drilled 2,676 meters deep . It has tested 10.44 million cubic feet per day of gas and 120 barrels per day of oil condensate. https://www.dawn.com/news/1482184

Oil and Gas Development Company Ltd (OGDCL) told the stock exchange on Monday that gas and condensate was discovered from its exploratory cum appraisal Mangrio Well 1, which is located in district Tando Muhammad Khan, Sindh.

The well was drilled down to the depth of 2,676 metres. It has tested 10.44mmscfd gas, 120 barrels per day condensate through choke size 32/64 inches at wellhead flowing pressure of 2,085 Psi from lower Guru B-Sand.

PPL terminates contract with SPEC Energy

Pakistan Petroleum Limited (PPL) terminated Engi­neering, Procurement, Construction and Comm­issioning Contract with SPEC Energy DMCC, for the construction of a Gas Processing Plant for processing 60 MMScfd gas from the company’s Shahdadpur field.

Riaz Haq said...

Ogdcl finds gas onshore Pakistan

https://www.kallanishenergy.com/2019/05/15/ogdcl-finds-gas-onshore-pakistan/

Pakistan-based Oil and Gas Development Company Ltd. (Ogdcl) announced Monday a natural gas find in the country's onshore Nim block, Kallanish Energy learns.

The license is a joint venture between operator Ogdcl, which owns 95% of the project, and Government Holding Private Ltd., with a 5% carried interest. It is located in the Tando Muhammad Khan district in southeastern Sindh Province.

The Mangrio well reached 8,779 feet in depth and tested at 10.44 million cubic feet per day (Mmcfd) of natural gas and 120 barrels per day (Bpd) of condensate.

“The discovery of Mangrio Well # 01, is the result of an aggressive exploration strategy adopted by the company,” Ogdcl said, in a release. “It has opened a new avenue and would add to the hydrocarbon reserves base of the Ogdcl and the country,” it added.

Riaz Haq said...

Gas shortage to increase by 157pc next fiscal year
Khaleeq Kiani Updated April 27, 2019 Facebook Count

With an addition of 700,000 consumers last year, Pakistan’s gas shortfall is estimated to jump by 157 per cent to 3.7 billion cubic feet per day (bcfd) in fiscal year 2019-20 — almost equal to total gas supplies at present.

The estimates have been made by the Oil and Gas Regulatory Authority (Ogra) that put the gas shortfall increasing almost continuously every year to 6.6bcfd by FY2028.

In its flagship “State of the Industry Report 2017-18”, the authority noted that the (natural gas) demand-supply gap during FY2017-18 was 1,447mmcfd and that this gap was expected to rise to 3,720mmcfd by FY2019-20. The regulator put the total gas demand at about 6.9bcfd in fiscal year 2019-20 compared to total supplies of about 3.2bcfd.

It said the demand would increase to 7.7bcfd by 2024 but domestic supplies would fall substantially to 2.3bcfd, leaving a shortfall at 5.5bcfd. The shortfall would practically be about 3.6bcfd in FY2024 as the gap would be partially met by about 1.9bcfd of imported LNG.

The domestic gas production would continue to decline from about 3.3bcfd at present to less than1.6bcfd by 2028 while the gas dem­and would keep going up to reach 8.3bcfd by that year. Ogra estimated that despite the induction of all the import options, including LNG, Turkmen­istan-Afgha­n­is­tan-Pakistan-India (TAPI) and Iran-Pakistan (IP) pipelines, the total supplies would decline to 3.7bcfd by 2028, creating a net shortfall of about 4.6bcfd, more than total supplies at present.

The regulator said the gap was rising because of higher consumption in almost all the major sectors particularly power, domestic, fertiliser, captive power and industry as the supplies were not keeping pace with higher demand.

Both the gas utility companies added around 0.7 million domestic, commercial and industrial consumers, in their respective systems, during fiscal year 2017-18. Consumer addition is incre­asing the gap between dem­a­nd and supplies, day by day. Especially in winter, the gas demand further increased and as a result the government is being forced to curtail supplies to various sectors.

Despite this, the natural gas is a major contributing fuel in the country’s energy mix. Its share in the primary energy mix is around 48pc.

There is a significant rise in demand and consumption of gas by residential and domestic consumers owing to price differential vis-a-vis other competing fuels, i.e. liquefied petroleum gas (LPG), fire wood and coal. The LPG presently accounts for about 1.3pc of the total primary energy supply in the country.

The current size of LPG market is around 1.3 million tonnes per year. The LPG consumption has increased by 5.88pc in 2017-18 compared to the previous year.

LPG consumption during FY2017-18, stood at around 3,508 tons per day. Local production catered for around 58pc, the rest was imported.

The share of re-gasified LNG in the overall gas supply increased to 23pc in FY 2017-18. The total gas consumers were more than 9.2m by the end of FY2017-18, including 6.3m in the SNGPL network and 2.9m in the SSGCL network.

The power sector was the main consumer of natural gas during FY 2017-18, consuming 37pc, followed by domestic sector 20pc, fertiliser 17pc, captive power 10pc, industrial sector 9pc, transport 5pc, and commercial sector having 2pc share.

Punjab had the highest 50pc consumption, followed by Sindh 39pc, Khyber Pakhtunkhwa 9pc and Balochistan 2pc. Natural gas supplies during the year stood at 4.357bcfd, of which Sindh supplied 50pc, whereas Khyber Pakhtun­khwa, Balochistan and Punjab supplied 12, 11 and 4pc respectively. The remaining 23pc of gas was imported in the form LNG.

The report said the consumption of petroleum products during FY 2017-18 decreased to 24.6 million tonnes (including energy and non-energy) as compared to 26m tonnes of the previous year showing a decline of 5.3pc.

During FY2017-18, the consumption of high speed diesel remained steady with negligible growth of 0.4pc.