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Pakistan in ‘tight gas’ club

January 13, 2013

With the signing of the first-ever tight gas agreement between Sui Southern Gas Company and a joint venture of Polish Oil and Gas Company and Pakistan Petroleum Limited, Pakistan has entered the ‘tight gas’ club. It has joined ranks of the US, Western Europe and South Asian countries to explore and utilise this unconventional energy source.

Under the agreement, SSGC will get 30 mmcfd tight gas from the Kirthar block in Dadu in Sindh. The block is jointly owned by Polish Oil and Gas Company or PGNiG (70 per cent) and PPL (30 per cent).

Following a competitive tender process, SSGC has been awarded a contract of Rs235 million for construction of 8-inch and 6-inch diametre, 52-km pipeline from Rehman Gas Field which will be integrated in SSGC’s system at Naing Valve Assembly on 24-inch diametre Bhit Gas pipeline. The Polish firm has so far invested $40 million in the exploration of tight gas in the Kirthar block with a further investment of $20 million to be made in the coming days.The focus on unconventional sources such as tight gas has increased worldwide with the widening gap in demand and supply of natural gas and a declining trend towards production of conventional fossil fuels. Eyeing the present scenario with a pragmatic vision, the government formulated Tight Gas Policy 2011 to establish policies, procedures, tax and pricing regime for attracting investment for exploring and producing tight gas.

The tight gas policy will help overcome the critical energy shortage and its growing needs. For instance, as against the demand of six bcf in the country, gas supply stands at 4.2 bcf.

Tight gas is still a new concept that requires some explanation. It has been best defined as “natural gas produced from a tight formation, one that will not give up its gas readily or in large volumes”. Reservoirs may also be designated as ‘tight’ if the effective permeability is less than one millidarcy (mD). It is a gas found in sedimentary rock in pockets that is cemented together so tight that flow rates are very low.

Extracting tight gas usually requires enhanced technologies like ‘hydraulic fracturing’, high performance perforation, horizontal and multilateral wells or infill drilling or combination of these technologies where fluid is pumped into the ground to make it more permeable.

It involves huge investment with recovery period from 10 to 15 years depending upon production rates and prices of gas. This clearly explains the need to attract foreign direct investment along with rich incentives for exploration and production of tight gas.

Natural gas is fairly easy to explore; when the deposit is discovered, a well can be sunk and gas flows into the well, making it easy to pump it to the surface and to distribute it from there. This is because natural gas is normally surrounded by deposits of porous rock, with lots of small holes will gas to seep through.

Worldwide recoverable gas resources are now estimated as being equal to 250 years of current production, of which roughly half is tight gas, shale gas and coal bed methane. And many countries including the US China and Australia, are now moving to produce their tight gas resources. Europe, too, has its share of these gas deposits, but it will be some years before they are produced on any significant commercial scale.

The good news is that tight gas reserves estimate in various horizons and basins in Pakistan are in the range of 24 trillion cubic feet (TCF) to 40 TCF. The government has also realised that extracting tight gas requires the use of proven, state-of-the-art technologies for seismic acquisition and processing, drilling, reservoir stimulation and development plans entailing massive investments with longer recovery cycle.

Under ideal conditions, a single conventional well produces around 50 mmcfd gas, whereas same production of tight gas may require 10 to 50 wells giving rise to manifold increase in the production costs for the same level of output. The government has therefore, accelerated its exploration and development effort in order to increase indigenous gas production and supply.

The price of ‘tight gas’ is around $6 per mmbtu, compared to around $16-17 for LNG and $25 for LPG-Air Mix. The government must offer a level playing field for both local and international companies involved in exploration and production of tight gas. This approach will help herald a new era for unconventional energy solutions.

Meanwhile, SSGC planners, engineers and technicians are working on a fast track basis to commission the Kirthar block project by May 2013. This first tight gas project will be a litmus test for the upcoming projects.

The writer is deputy general manager, corporate communication department, Sui Southern Gas Company