KARACHI: The government should revise its tight gas policy to nudge energy companies towards exploring natural gas that’s obtained from reservoir rocks with low permeability using advanced technology.
Addressing a seminar organised by CFA Society Pakistan on Tuesday, energy sector expert Muhammad Asim Subhani said each well that’s dug for tight gas must get a third-party certification in order to receive formal price confirmation from the government.
“There’s been a success (in finding tight gas). But companies are reluctant to invest because once they explore, produce (and) flare their gas, they still have to spend years in getting the price confirmed from the authorities,” said Mr Subhani who serves as director of new business and subsurface at Prime Pakistan Ltd, an exploration and production firm that formerly operated as Eni Pakistan.
At least one company is currently producing tight gas, even though the country is estimated to have reserves of 100 trillion cubic feet.
He suggested that the government should notify the pricing for an entire reservoir once it’s established that the permeability of reservoir rocks is less than one millidarcy, the basic unit reflecting the capability of gas to move through a formation.
“It’s is a long process that nobody wants (to undergo). It needs to be revised,” he said.
Pakistan’s gas production has been going down for years. Its reserve replenishment ratio is also less than 100 per cent, which means the country is failing to replenish its reserves at the same pace at which it’s consuming them.
In total, about 1,400 exploration wells have been drilled in Pakistan so far. Of the country’s total land measuring a little over 800,000 square kilometres, more than 75pc remain unexplored. Yet the country ranks 26th worldwide with “three to four billion cubic feet” of gas production per day. In terms of gas reserves, the country’s rank is 30th in the world. The country’s oil reserves are much smaller than gas reserves, he said.
With regard to shale gas, which is found underground in less permeable shale rock, Mr Subhani said it’s economically unfeasible to dig a new well for this purpose alone.
“We can only have the wells that have already been drilled. Big investments are required. We should first focus on tight gas instead of going straight to shale gas,” he said. Studies suggest the potential reserves of shale gas in Pakistan are also around 100 trillion cubic feet.
Mr Subhani demanded that the government should incentivise drilling by cutting back on royalties, which are payments that energy companies make to the government for exploration and production rights. He claimed these companies already pay the government up to 52pc of their revenues in the form of royalties and corporate tax.
“The government is being harsh (on exploration firms). It needs to incentivise (drilling in) declining fields to keep them economical,” he said. But the government is “adding to royalty payments,” he said, noting that its current approach may lead to vast amounts of hydrocarbons staying unexplored in those fields.
In response to a question, Mr Subhani said foreign exploration companies were exiting Pakistan mainly because of the security threats. Italian oil company Eni sold its assets to Prime Pakistan Ltd in 2021. BHP of Australia and OMV of Austria also divested their assets a few years ago.
Published in Dawn, March 22nd, 2023
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