THE upstream oil and gas exploration sector in Pakistan is significantly off the radar for oil majors. Oil majors are not playing any significant role in the country despite its impressive geology and prospectivity.

In fact, over the decades, we have seen companies such as Exxon and BP selling off assets and pulling out of Pakistan.

Considering the nature of hydrocarbon exploration, and the mettle of oil and gas executives worldwide, the argument that companies are leaving Pakistan because of the security situation does not make sense, given that oil majors continue to operate in countries like Nigeria (Boko Haram), Iraq (ISIS), Mexico (drug cartels) and central Asian states.

If it were so, one also would not see oil majors making a beeline for frontier oil provinces such as Papua New Guinea and much smaller West African states. Frontier provinces, volatile security and political environments have not tended to deter oil and gas majors from pursuing hydrocarbon reservoirs and riches.

However, the bitter truth is that despite amazing geology, Pakistan has pretty much failed to market its upstream sector and is seriously short of both oil and gas while seeking imported oil, natural gas and LNG to satisfy domestic demand.

Given the current context, this article looks at the prospectivity of offshore basins.

Sedimentary basins cover 827, 000km2 including both onshore and offshore, which to date remain under-explored, especially the offshore basins. According to Pakistan Basin Study of 2009, the country has six onshore and two offshore basins; offshore basins being the Indus basin and the Makran basin.

The national oil companies will have to take the lead and a strategic stake in offshore Pakistan, before any global oil major shows interest, given the particular business dynamics of the region and the opening up of the Iranian upstream sector to the international market

Almost the entire land mass and the offshore areas can possibly have high potential hydrocarbon plays, especially the Abyssal Fan system of the Indus offshore basin.

Abyssal or submarine fan systems constitute underwater structures having huge sedimentary deposition systems over geologic time and are a result of sediment transportation and deposition from continental shelf down on to continental slopes. They are also referred to as turbidity currents and their effects can be amplified through tectonic activity. Abyssal fans are the largest systems through which organic matter, rocks, minerals gets transported from land to sea and possess huge potential for hydrocarbon and gold exploration.

Given this context, the Indus offshore basin, primarily a rift basin, is the second largest submarine fan system in the world after the Bay of Bengal and ought to contain various high probability hydrocarbon plays based on analogues.

To gain some perspective, the oil producing Mississippi fan (Gulf of Mexico), Amazon fan (offshore Brazil), Niger fan (offshore West Africa), Congo fan (offshore Angola) among others are prolific producers and analogous to offshore Pakistan being primarily Abyssal or Submarine fan systems, though much smaller in size.

The total recoverable reserves of natural gas as per brochure on Ministry of Petroleum website are given at 53.354TCF (trillion cubic feet), while remaining reserves are stated as 23.18TCF. The Economic Survey 2013-14 and Economic Survey 2014-15 state current gas reserves at 492bn cubic meters translating in to gas reserves of 17.3TCF (excluding shale).

As a contrast, the potential of submarine fan systems can be gauged from the fact that in place resource at the deepwater block in Bengal fan that contains the Dhirubhai discoveries initially stood at 25 TCF, essentially indicating that one find in the largest submarine fan in the world (Bengal) has a resource base greater than all remaining conventional gas reserves of Pakistan. This should get some bells ringing both at regulatory and commercial levels.

One can infer from these that the potential for hydrocarbon exploration and discoveries in the Indus offshore basin is huge, however, given the huge size of the basin itself, this will require intensive evaluation and commitment of capital. The 12 or so odd wells that have been drilled so far in Indus basin do not do justice to the hydrocarbon potential within this frontier basin. From a technical perspective, we should also be open to encountering high pressure, high temperature formations.

The Makran Offshore basin has a different geology than the Indus with both separated by the Murray ridge. Makran offshore is an oceanic and continental crust subduction zone with deepwater trenches and volcanic activity. The basin comprises oceanic crust and periodic emergence of temporary mud islands along the coast is strong evidence of huge hydrocarbon deposits. These temporary islands may imply improper sealing mechanisms but do ask for exploration laterally and of adjacent areas.

Makran basin is also a frontier basin with negligible exploration activity, though, a few wells have been drilled which encountered high pressure formations and a blowout in 1956. Analogs to Makran offshore include Cook Inlet, Alaska with a billion barrel oil equivalent reserve profile.

Hydrocarbon exploration has always been a high risk venture, however, given the geology that underlies offshore Pakistan, there is reason to believe in the prospectivity of the region. Based on analogous evidence, one can assume that offshore Pakistan is probably sitting on huge hydrocarbon deposits.

In view of the above discussion, and fiscal regime issues, it is imperative that Pakistani NOCs aggressively, and with an entrepreneurial spirit, start exploring for hydrocarbons in the Indus and Makran basins.

The National Oil Companies (NOCs) will have to take the lead and a strategic stake in offshore Pakistan, before any global oil major shows interest, given the particular business dynamics of the region and opening up of Iranian upstream sector to international market.

Published in Dawn, Business & Finance weekly, April 18th, 2016



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