As the need for power generation grows amid an energy crisis in Pakistan, deep gas reserves have been discovered by Pakistan Petroleum Limited (PPL) in Balochistan, which have been described as fairly decent in size. The new gas discovery may just be what Pakistan currently needs to stave off the power crisis that has plagued the country for over a decade.
However, the latest discovery may just be what Pakistan needs and may propel Pakistan into a new age of power and energy production, giving a much needed boost to the economy.
What constitutes a good-sized gas field discovery?
Explaining what constitutes a good discovery, Arif Habib Limited (AHL) Head of Research Tahir Abbas told The Express Tribune, “Our local gas production is around 3.7 bcf; so any discovery with a size of 10% of our total annual production [or more] would be a slightly big discovery.”
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Sharing details, he said that the column had around 55% of hydrocarbons and though they would have to set up a lot of plants, he was of the view that “this discovery has opened a new petroleum play in the country”.
PPL Managing Director Raza said that this was not just a single discovery but there were many other structures as well. “The hydrocarbon habitat has been confirmed,” he said, adding that once the gas discovery was made, chances of success increased. “PPL’s Margand findings are a landmark discovery. There will be a string of discoveries after this in this region.”
After Sui in Balochistan, reduction in gas field discoveries
Pakistan’s gas production has stagnated at around four billion cubic feet per day (bcfd) against an unconstrained demand for over 6 bcfd. To meet the shortfall, the government initiated LNG imports leading to a decrease in the foreign reserves. Even though natural gas is the main source of fuel and energy in the country, most of it remains untapped as gas production continues to decline.
Sharing the current situation, the AHL head of research said that Pakistan’s gas reserves as of December 2019 stood at 20,884 bcf, which means “we have just 16 years of gas reserves available”.
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Abbas said that since “we have not had any major discovery in the past 15 to 20 years, there has been a slowdown in gas production”. Tal block was the last major discovery in 2002, he added.
“We have a significantly lower reserves replacement ratio because we have not made any major discovery in the past 15 to 20 years.”
“After the discovery of Sui gas field in Balochistan, exploration activities kicked off in full swing and from 1952 to 1960, 4.9 billion barrels of oil equivalent gas had been discovered”, he added.
After 1960, the curve somewhat flattened but further exploration activities started and “we kept adding to the overall reserves”. However, with the passage of each year, the size of the discoveries made was decreasing.
“Pre-2001, the average discovery size was 400 bcf but post-2001, the average was 64 bcf,” said Raza.
“We have been working for 40-50 years in the same region.” But now since the reserves’ findings were diminishing, there was a need to move away from the traditional oil and gas area, he stressed.
Exploring frontier regions for gas discoveries
Balochistan offers great potential for the oil and gas sector owing to untapped natural reserves. Taking an unorthodox approach, PPL adopted an aggressive strategy as it moved to the frontier zones for further exploration. Frontier zones are generally the remote regions with harsh climates and difficult-to-work-in environments, where exploration for gas entails increase in costs and also increasing risk.
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“There are three criteria to diversify exploration; cost, reward, risk. The risk refers to the chances of success. In the traditional oil and gas exploration, the chance of success is 33%. But in the frontier area, the chance of success is 10%.” As the terrain becomes difficult, the cost of exploration also racks up.
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Pakistan’s exploration activities are divided into zones under the petroleum policy. Some zones, which include risky areas of Balochistan and Khyber-Pakhtunkhwa, are defined as high risk because the probability of hitting oil and gas reserves is a bit low.
Current and future obstacles to increasing gas production
A US think tank published paper suggested Pakistan should try to boost investment in domestic exploration and development of such resources, to which the PPL MD replied, “It is important to have the financial muscle available to continue this kind of activity, which is marred by the circular debt issue.”
“We have a liquidity crunch. If the capital becomes available to us right now, we can leapfrog exploration activities in this area,” he added.
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He promoted his view that if 1 tcf field is developed, it’s going to produce 300 to 400 million cubic feet of gas daily. “Pakistan is importing LNG at a very heavy cost; you subtract 400 from that, you can save significant foreign exchange.” He added that if the success of Sui could be repeated, Pakistan could make great strides as it still remains largely unexplored.
GVS News Desk with additional input by other sources