Offshore drilling for oil & gas: Govt may set up company with $500m capital

ISLAMABAD: The federal government is making up its mind to step up its focus on offshore drilling for oil and gas exploration and to this effect, it may form a new company with the sole objective to undertake, directly or indirectly, offshore drilling.

The initial capital of the company is likely to be US$500 million, which will work under the umbrella of GHPL (government holding private limited) with contributions by all willing E&P and oil marketing companies (OMCs) in Pakistan with an effort to bring in any foreign party willing to invest. In case of failure, the government should refund 50pc of the cost to the company and in case of success, the government will acquire 15pc retained holding, at no cost in the company.

This may be decided by a 20-member committee on oil and gas sector issues, headed by Deputy Prime Minister Ishaq Dar, a senior official at the Energy Ministry told The News.

“There has been no offshore bid round conducted since 2007 and the failure of the last offshore exploratory well (Kekra well in 2019) resulted in down gradation of the prospectivity of offshore Indus basin.”

There has been a lack of interest by foreign companies due to the absence of seismic data and digital platforms to digitally showcase the targeted assets to foreign companies for licensing rounds (e.g. Egypt Upstream Gateway, digital upstream café in Indonesia). “So huge offshore exploration potential remains untapped.”

Officials said recommendation of fiscal benchmarking study, done by Wood Mac, may be implemented through amendments to the Petroleum Policy 2012 offshore package, which shall be followed in next bid round.

The government may also emphasise G2G engagements with China and other countries for offshore drilling and the offshore exploration may be run as a play based approach increasing the block size.

He also disclosed that the government is vigorously working to make an integrated energy plan and to this effect, well-reputed international and national consultants will be engaged in carrying out studies on financial sustainability modelling of the energy sector, defining the right government framework and integrated energy modelling.

According to the senior official, privy to the development, a well-reputed audit firm, KPMG will be given the task of studying financial sustainability modelling or analysis, and McKinsey, an international consultant, will be asked to define the right governance framework and Wood Mac will carry out the working on integrated energy modelling for Pakistan.

The cost of studies will be equally shared by Mari Petroleum Company Limited (MPCL), Pakistan State Oil (PSO), Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Government Holding Private Limited (GHPL), Pakistan LNG Limited (PLL), Inter State Gas System (ISGS), Sui Southern Gas Company (SSGC) and Sui Northern Gas Private Limited (SNGPL).

The government wants to avoid gas curtailment in the system by firming up an integrated energy plan. Right now the system is braving unreliable electricity demand data that leads to large variations in demand of natural gas, which results in non-offtake of RLNG by the power sector. The surplus RLNG is then diverted to consumers of indigenous gas which requires forced gas supply curtailment/suspension from indigenous gas fields.

The situation not only results in the loss of indigenous gas production but also defers the revenues of E&P companies contributing to their liquidity crunch.