PPL-led consortium secures exploration deal in UAE

Published September 1, 2021
A Pakis­tan Petroleum Limited-led consortium has secured a major exploration opening — Offshore Block 5 — in Abu Dhabi. — Reuters/File
A Pakis­tan Petroleum Limited-led consortium has secured a major exploration opening — Offshore Block 5 — in Abu Dhabi. — Reuters/File

ISLAMABAD: A Pakis­tan Petroleum Limited-led consortium of four public sector exploration and production (E&P) entities has secured a major exploration opening — Offshore Block 5 — in Abu Dhabi, the United Arab Emirates, involving an investment of about $400 million.

The “consortium has be­en awarded Offshore Block 5 in Abu Dhabi’s second competitive exploration block bid round. Offshore Block 5 covers an area of 6,223 square kilometres and is located 100 kilometres north east of Abu Dhabi city”, said Karachi-based PPL that leads the consortium as operator of the block.

The consortium with 25pc shareholding each includes the country’s largest hydrocarbon producer Oil and Gas Development Company Limited (OGDCL), Mari Petroleum Company Limited (MPCL) and Government Holdings (Private) Limited (GHPL).

The exploration concession agreement was signed in Abu Dhabi on Tuesday by PPL Managing Director and Chief Executive Officer Moin Raza Khan and UAE Industry and Advanced Technology Minister Dr Sultan Ahmed Al Jaber, who is also Abu Dhabi National Oil Company (ADNOC) MD and Group CEO.

This is the Emirate’s second competitive bidding round organised by ADNOC for the exploration, development and production of oil and gas. The historic agreement builds on the deep-rooted bilateral relationship between the UAE and the Islamic Republic of Pakistan.

Under the terms of the agreement, the consortium will hold a 100pc stake in the exploration phase for exploration and appraisal drilling and to appraise oil and gas opportunities in the block. In case of a successful commercial discovery during the exploration phase, the consortium will have the right to a production concession to develop and produce commercial discoveries. ADNOC will have an option to acquire a 60pc stake during the production phase of the concession. The term of the production phase is 35 years from the commencement of the exploration phase.

“This historic exploration concession award marks a new chapter of energy cooperation in the 50-year-old UAE-Pakistan relationship. It represents an important platform upon which we can drive win-win opportunities to support Pakistan’s energy security and further strengthen the strategic and economic ties between our two countries,” the UAE minister was quoted as saying.

He said the UAE government and the ADNOC management was delighted to partner with the PPL and other members of the consortium on Offshore Block 5. The consortium was selected as part of Abu Dhabi’s block bid round, where Abu Dhabi once again reinforced its approach to strategic partnerships that contribute the right combination of market access, capital, best-in-class expertise or advanced technology.

According to the PPL, this concession award is the first opportunity for Pakistani E&P companies to explore, appraise and develop oil and gas resources in Abu Dhabi, along with establishing a strategic partnership with ADNOC.

CEO Khan said the award was not only a watershed moment for Pakistan and the Emirate of Abu Dhabi towards bilateral energy cooperation and economic links but also offers an opportunity to strengthen strategic cooperation with ADNOC to share technical knowhow and expertise. He said the consortium of the ‘big four’ national E&P were excited and fully geared to support ADNOC and the Emirate of Abu Dhabi in reinforcing its leading position in the global energy sector.

The consortium had secured the block through bidding on which the formal agreement was signed after the government formally cleared offshore investment of $400m. The ECC had on August 16 approved a summary of the “Petroleum Division regarding no objection certificate for issuance of the parent company guarantees/corporate guarantees by each of the consortium companies, on a joint and several basis, in favour of ADNOC and the Supreme Council for the Financial and Economic Affairs (SCFEA) to pursue international exploration and production opportunity in Abu Dhabi.

About two years ago, the Economic Coordination Committee of the cabinet had allowed the consortium to go for Abu Dhabi exploration with their initial investment out of their own resources. Abu Dhabi is one of the world’s richest oil and gas states with production of more than three million barrels of oil per day and around 10 billion cubic feet per day of gas.

Although the block offered by ADNOC falls within the prolific area known for its rich hydrocarbon reservoirs, in case of no discovery, the total exposure will be borne by the consortium without any liability on the Pakistan government.

The consortium expects its share of oil and gas production of about 10,000 to 14,000 barrels of oil equivalent (BOE) and result in net cash flow in foreign exchange in the range of $830 million to about $1.5bn in the next 25 years for comparative cases. The internal rate of return for the investment is expected between 15pc and 18pc.

Published in Dawn, September 1st, 2021

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