Oil exploration drops 37pc in July-May

Total 27 wells spud

KARACHI: Soft oil prices are discouraging energy firms to go for an aggressive discovery of hydrocarbon reserves in the country facing depletion of oil and gas reservoirs as exploration activities dropped more than one-third in the first 11 months of the current fiscal year.

A local brokerage said a total of 27 exploration wells were spud in the July-May period of 2015/16 as compared to 44 in the corresponding period last fiscal. 

“Exploration activity in the country has significantly eased as a result of subdued oil prices,” said analyst Fatiq Bin Khursheed at Optimus Research.

Oil and Gas Development Company, the country’s biggest exploration and production company, drilled only four new wells in the period under review as against 10 in the comparable period.

A latest economic survey said the average natural gas consumption was about 3,387 million cubic feet/day (mmcfd), including 175 mmcfd volume of re-gasified liquid natural gas during July-February 2016.

Though the local gas production stands at four billion cubic feet/day, yet the demand is growing.  

The government is importing liquefied natural gas in order to bridge the energy demand-supply gap. 

The economic survey said import of crude oil is a financial burden on the exchequer as almost 17.2 percent of the import bill is due to petroleum products. During July-April 2015/16, 4.98 million metric tons of petroleum products were imported compared to 4.81 million tons of the corresponding period last year, showing a growth of 3.5 percent. The imported value was $1.95 billion as compared to $3.59 billion.

Average gas discovery size is already on the downward trend. Over the years, the average discovery size declined to 65 billion cubic feet. There is a heavy reliance on 12 hydrocarbon reservoirs, which account for 77 percent of the total discovered gas.

“The decline in average gas discovery size also points towards depleting potential of existing known hydrocarbon plays and escalating finding and development costs,” Khursheed said.

Now, all eye on Balochistan and Khyber Pakhtunkhwa.

Balochistan has largely remained unexplored because of security challenges in the restive province. However, energy firms are now taking interest in the thus-far dormant blocks, such as Kharan, Palantak and Rakhshan.

The exploration activities have so far tilted towards Potwar, middle/lower Indus basins in Sindh and Punjab.

US-based Energy Information Administration estimated 9.1 billion barrels of shale oil and 105 trillion cubic feet of shale gas reserves in the middle and lower Indus basins.

The government is evaluating discovery and development costs of shale exploration in order to offer attractive price incentives to producers.

“We believe 2012 petroleum policy offers adequate fiscal incentives for shale gas exploration given availability of required technological as well as human resources,” Khursheed said.  “The government should focus on tax breaks rather than price to attract foreign firms already extracting shale resources.”