Mari Petroleum to diversify portfolio towards power generation

KARACHI: Mari Petroleum Company Limited (MPCL) is looking for opportunities to diversify its business by going into power generation, utilising the low heating value gas produced at its Deharki field, Lt Gen Nadeem Ahmed (retd), MD and CEO of MPCL told The News.

“We are planning a 400MW gas-fired plant to be setup in southern Punjab and we will use our gas from Deharki Sindh.”

Ahmed said that MPCL already had fuel supply arrangement and the project would cost around $400 million. Talking about the company’s affairs, he said the most serious challenge that MPCL faced was the acute shortage of exploration blocks for the envisaged vigorous exploration programme.

“This was caused by ongoing delay by the government in offering the next bidding round for new blocks. MPCL went around this challenge by concentrating on the Mari lease area and by taking working interest in selected blocks of other companies.”

MPCL chief said they had submitted nine applications with the Directorate General of Petroleum Concessions and one application had been filed for a block in Azad Kashmir. To a question about the regulatory regime, he said Petroleum Policy 2012 was a very balanced policy offering several incentives to encourage investments.

Nadeem Ahmed said ease of doing business was considered a very important thing world over and in Pakistan this aspect needed to be improved. “The regulator must be more efficient and play an enabling role.”

Pakistan’s existing gas demand is said to be 8.0bcf/day, but this was suppressed and would surge sharply shortly. Unlike Middle East and Russia, the exploration and production (E&P) companies are at an advantage in Pakistan because of the higher demand. “There is a buyer for every drop of oil or gas derived from the ground,” he said.

Security is the issue deterring mega-growth in the E&P industry. “Sindh is reaching the point of saturation and there may be small discoveries, but chances of any major gas discovery in this province are very limited,” the MPCL official said.

In terms of oil, northern Punjab was mostly dominant, while the potential in southern Punjab was quite low, he said. “The E&P activity is gaining pace in Khyber Pakhtunkhwa, and prospects are bright.”

However, Baluchistan, the largest province of the country in terms of area, remains largely untapped because of security concerns. The province was a high prospect region and has the potential of providing mega fields, even larger than Sui, Qadirpur, and Mari fields.

“The government needs to provide security to the E&P companies so that the region can be tapped to its potential,” Ahmed said.

He suggested forming special security wings on the same pattern as the task force for China-Pakistan-Economic-Corridor (CPEC) was made. Declining oil prices have resulted in foreign exchange savings of around $10 billion. “If a fraction of these savings are invested in providing security to E&Ps in Baluchistan; this will help the country a lot in attaining energy security.”

He said there were studies conducted by US, which pointed out presence of huge reserves in Baluchistan.  “When we look at the overall situation, there are so many (positives) and a very few (negatives). I see a very bright future for Pakistan as far as energy sector is concerned.” 

Overall, Pakistan has done 17 off-shore wells and there has been no mentionable success. “Drilling an on-shore well costs $20 million while an off-shore well costs $150 million. In a price-depressed scenario, opting for off-shore ventures is not advisable.”

Talking about multi-national E&Ps winding up from Pakistan, Nadeem Ahmed negated the impression that they were leaving because of security issues. “Every E&P company opted for consolidation after the oil prices nosedived in the international market. It is this consolidation strategy that multi-national E&Ps are leaving small markets and focusing on high reward areas such as Africa and Iraq in particular.”

About the supply glut and depressed price scenario, Ahmed said cash-flows of E&Ps registered big time decline, which led to companies opting for consolidation. Explaining the mechanism, he said OPEC countries determined the commodity prices by controlling the supply. “Whenever OPEC countries cut supplies to stabilise the prices, non-OPEC countries increase the supply to capture the market share. Now, OPEC countries don’t want to lose market share and hence the supplies are not being squeezed.” The MPCL official said oil prices might surge to around $60/barrel, but this would not go back to anywhere near $100/barrel.