PESHAWAR: The Khyber Pakhtunkhwa Oil and Gas Development Company Limited will invest in the Oil and Gas Development Company Limited’s two blocks, benefitting from the investment opportunities created under the 18th Constitutional Amendment.
The company’s Board of Directors, according to official circles, has approved the plan to acquire 2.5 per cent shares in the OGDCL blocks with expected oil and gas deposits.
“Khyber Pakhtunkhwa had been offered a total of five blocks contracted out to OGDCL,” said Sahibzada Saeed, the administrative secretary of the provincial energy and power department. The secretary said the province had decided to chip in money in two of the five blocks in line with the federal Petroleum Policy of 2012.
Khyber Pakhtunkhwa was required to communicate its reply to the OGDCL’s offer by March 7 before which the provincial company’s BoD decided, in its meeting on March 4, to make the investment in two blocks.
Mr Saeed told Dawn that the provincial company had communicated its willingness to the OGDCL to become partner with it in its two blocks: including Block No 3371-17 Baratai in Kohat district and Block No 3070-16 Pezu in Lakki Marwat district.
The petroleum and natural resources ministry had signed exploration licences (ELs) and the petroleum concession agreements with OGDCL in February this year after which the latter was bound, following the passage of the 18th Constitutional Amendment, to offer 2.5 per cent shares in each of the blocks to the province, where the exploration activities will be undertaken.
Before the passage of the 18th amendment to the Constitution, the federal government had a right to acquire five per cent shares in each of the new blocks leased out to the domestic or international companies.
However, after the amendment, the province of the origin of the block(s) will get half of the pie from the five per cent share previously allocated to the federal government.
According to knowledgeable circles, the KPOGDCL chief executive after due diligence on the basis of the data provided by the federal ministry under a ‘basin study’ recommended the BoD to invest in two of the five OGDCL blocks, leaving out the other three with low prospects.
“The risk factor is there: the money would be gone if at the end of the day the exploration leads to nothing,” said a source privy to the matter. He, however, sounded positive about the success chances of the investment opportunity. “It would be a jackpot if the exploration succeeds,” said the official.
Mr Saeed said OGDCL would invest $60 million on drilling wells in one of the two blocks where the provincial company had decided to be a partner with it.
\In the other block, where KPOGDCL would also be investing money, would take OGDCL to invest $33 million for the exploration activities.
He, too, sounded positive about the chances of the exploration activities. According to the official information, the provincial company would chip in 2.5 per cent of the $93 million OGDCL investment to acquire shares in the Pezu and Baratai blocks.
KPOGDCL would make the investment from the Rs500 million startup capital the Pakistan Tehreek-i-Insaf led provincial government provided to it to undertake exploration and development activities in the provincial oil and gas reserves.
“While the acquisition of 2.5 per cent share in each of the new blocks in Khyber Pakhtunkhwa is our right, we can acquire a greater percentage of shares if OGDCL decides to lower its risk,” said Mr Saeed.
This exactly appears to be the case as the KPOGDCL is ready take a bigger risk. The provincial wants to procure 5 per cent share in one of the two blocks where three wells would be drilled, according to an official, requesting anonymity.
The company’s BoD, he added, had approved the management’s plan to offer OGDCL greater investment in one of the two blocks.
According to sources, the provincial company is ready to take the calculated gamble based on the ‘basin study’ data, which is very encouraging and tempting.
The other issue that the KPOGDCL’s BoD discussed was about the company’s interest in investing money to have a rig of its own to undertake exploration activities on its own.
However, the Board, said a source, did not allow the intended move suggesting a slow progress to that end.
“KPOGDCL is too young to think about undertaking such a capital intensive adventure as it involves $20 million to $30 million investment to procure a rig,” said a source privy to the matter. “It would be a great loss for the province if it decides to buy a rig.”