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News Headlines for the month of
SEPTEMBER 2015

Second LNG terminal: GHPL to start process of construction

The Government Holding (Pvt) Limited (GHPL), which is primarily looking after the interest of government in the E&P sector, is to start the process of construction of 2nd LNG terminal with a capacity of 500 MMCFD at Port Qasim through open competitive bidding process, sources close to Secretary Petroleum told Business Recorder. Petroleum Ministry is working on this proposal at a time when, according to unconfirmed reports, National Accountability Bureau (NAB) has started a probe into LNG procurement and transportation. Giving details, sources said Pakistan is currently facing a severe shortage of natural gas, both for its electricity generating plants and for general use by all sectors. Domestic gas production of 4,000 MMCFD is unable to meet the country''s demand; the supply-demand gap is approximately 2,000 MMCFD and is steadily rising. This shortage of energy is not only causing hardship for the people but is also inhibiting the economic growth of the county. For import of LNG, ECC on July 2, 2013 authorised the Ministry to engage in negotiations with Qatargas on Government to Government basis for importing LNG up to 500 MMCFD on delivered ex-ship basis. Accordingly, Pakistan State Oil (PSO) and Qatargas Operating Company Limited (QOCL) were nominated by the two respective governments to negotiate the LNG Sales Purchase Agreement (LNG SPA) which is expected to be signed shortly. In the first year it is expected that Qatargas will supply 1.3 million tons of LNG which will increase to 3 million tons from second year onward. Consultation is being provided by M/s Fact Global Energy, engaged by USAID, with the terms of reference of advising PSO about the commercial aspects of the LNG procurement process. To negotiate the LNG price and other important aspects with Qatargas, ECC in its decision on August 15, 2014 approved the constitution of an LNG Price Negotiating Committee (PNC) comprising Secretary Petroleum (Chairman), representatives of Finance Division, Water and Power and Board of Investment (BoI) not below the rank of Additional Secretary, Managing Director SNGPL, Managing Director SSGCL, Managing Director PSO and Managing Director ISGCL (Secretary Committee). The price finalised by the committee would become part of the sale purchase agreement with Qatargas, the sources added. In the light of biding process and ECC as well as Cabinet''s approvals of February 28, 2014 and April 18, 2014 respectively, SSGC and Engro Elengy Terminal (Pvt) Limited (EEPTL) executed an LNG Services Agreement (LSA) on April 30, 2014 for provision of LNG receiving, storage and re-gasification services under a levelized tolling fee of $0. 66 per MMBTU. The terminal was commissioned on March 27, 2015 in a record time of 10 months and so far 8 LNG cargoes have been handled at the LNG terminal. In the first year, it is planned to inject 200 MMCFD re-gasified LNG (RLNG) into SSGC''s system for onward supply to SNGPL through swap arrangements. In the second year, it will be increase to 400 MMCFD. "To mitigate huge demand supply gap of gas, SSGCL started a bidding process for 2nd terminal in October 2014, however, one party in the bidding process ie Pakistan Gasport went to Sindh High Court (SHC) on the plea that the winning party ie Akbar Associates (Pvt) has not submitted the required legal documents. However, SHC has ordered to restart the process," the sources continued. Since the country is facing energy crises which requires immediate measures to be taken, the Ministry of Petroleum and Natural Resources is of the view that in order to address the issue a 2nd fast track LNG terminal is immediately required to be completed on a war-footing basis, the sources maintained. Keeping in view the situation and to move forward, the sources said, Petroleum Ministry has proposed that it may be mandated to start the process of construction of 2nd LNG terminal with a capacity of up to 500 MMCFD at Port Qasim under tolling arrangements through open competitive bidding process under applicable rules including PPRA rules. The selected project developed will be responsible for installation of LNG terminal/re-gasification of LNG and delivery to SSGC''s designated delivery point. M/s GHPL will hire a consultant for advising on different commercial aspects for construction of the 2nd terminal.

Copyright Business Recorder, 2015

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Coal-fired power plant: PPIB issues LoS to Siddiqsons

Private Power and Infrastructure Board (PPIB) has issued a Letter of Support (LoS) to Siddiqsons Energy Limited for establishment of a 350 MW coal-fired power project at Port Qasim, Karachi. Nepra has already approved the upfront tariff for this 350 MW coal-fired supercritical power plant being established by Siddiqsons Group. This plant will be Pakistan's first-ever coal power project of its kind at Port Qasim, Karachi. The estimated cost of the project is $600 million and financial close is expected by first quarter of 2016. Chief Executive Officer, Siddiqsons Energy Limited, A Rahim Rafi in a press statement said his company is fully cognisant of the fact that low-cost electricity is extremely crucial for the economic growth and stability of the country and coal-based energy production is the key to addressing this issue. Against the global trend where the world is producing approximately 41 percent of electricity through coal, Pakistan is producing less than 1 percent electricity through coal, despite being the cheapest source of electricity.-PR

Copyright Business Recorder, 2015

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PPL announces third gas discovery in Matiari

Pakistan Petroleum Limited, operator of the Hala Block with 65 percent working interest (WI) along with its joint venture partner Mari Petroleum Company Limited with 35 percent WI, announced another gas and condensate discovery at its exploration well Fazl X-1 located in District Matiari, Sindh. This is the third discovery in the block. Fazl X-1 was spud on May 29, 2015 and reached the final depth of 4,067 meters on August 12, 2015. Based on wire-line logs and drilling results, potential hydrocarbon bearing zones were identified in Massive Sand of Lower Goru Formation. During testing, the flow was 20.3 MMscfd gas along with 50 bbl/d condensate at 48/64 inches choke size, thus confirming the presence of commercial quantities of natural gas and condensate at Fazl X-1. The well is being flowed at different choke sizes to measure gas flow rates, following completion of which actual flow potential of the well will be determined.-PR

Copyright Business Recorder, 2015

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Kup field OGDCL expedites exploration activities

The state owned Oil and Gas Development Company Limited (OGDCL) has expedited exploration of oil/gas activities at the Kup field located in the Balochistan province, which is estimated to have 1.3 Trillion Cubic Feet gas reservoirs. "We are optimistic to find up to one Billion Cubic Feet per Day (BCFD) of gas after completion of drilling and other exploratory work, adding that it is almost 25 percent of our current national gas production of 4.2 BCFD," official sources told Business Recorder here on Wednesday. "The exploratory work in the area is quite difficult as compared to other areas but we are using latest techniques because as per 2-D and 3-D seismic surveys the region has huge gas potential. Within next two months first drilling phase will be completed and the company will be able to share exact figures with the nation," the official added. The Zin bloc in Balochiotan, which is estimated to have gas reserves of 1.3 trillion cubic feet per day, official said, "So far, OGDCL has explored four wells and two are being drilled and presently, we are appraising the gas and oil volume in the wells." Though Balochistan is a gas prone area, yet at the same time it is a risky location because of deteriorating law and order situation there, he said. He added no foreign firm is ready to invest even in the shape of joint venture and initiate exploration and production (E&P) activities in the province. To a question, he said that OGDCL has 43 blocks with 100 percent ownership, 21 in the shape of joint ventures and it is operating 64 oil and gas fields. "At present, OGDCL's oil production is around 47,000 barrels per day and gas production stands at 1.2 BCFD. In addition, the company is producing liquefied petroleum gas of 100 tons a day. This shows that the OGDCL's shares in total gas production in the country stands at 25 percent and oil production at over 50 percent. The company has also initiated exploration of shale oil/gas in the country and in the first phase two wells will be drilled while in the second phase the company will expand oil/gas exploration operations. At present the company was working with 10 companies having rigs and 8 rented rigs showing the commitment of the company to enhance the local oil/gas production.

Copyright Business Recorder, 2015

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Infrastructure and energy projects: consensus achieved with China: President

President Mamnoon Hussain on Thursday said Pakistan and China had achieved a consensus on various infrastructure and energy projects, and were determined for their effective implementation and timely completion. The President expressed these views in a meeting with China''s Executive Vice Premier and Member of Standing Committee of Political Bureau of Communist Party, Zhang Gaoli at the Diaoyutai State Guest House here. The President said forging greater regional connectivity through infrastructure development, energy and transnational trade was the key to prosperity and would bring economic progress in not just Pakistan and China but the entire region. He stressed the need to promote people-to-people contacts between Pakistan and China through comprehensive bilateral exchanges in all fields as the two countries celebrate 2015 as "Year of Friendly Exchanges". President Mamnoon appreciated President Xi''s vision of "One Belt, One Road" that includes the "Silk Road Economic Belt" and "Maritime Silk Route" and welcomed the establishment of the Silk Road Fund. He congratulated China for establishing the Asian Infrastructure Investment Bank (AIIB). Executive Vice Premier Zhang Gaoli thanked President Mamnoon for attending China''s commemorative events marking 70th anniversary of victory in Second World War. He said in this world full of severe challenges, China was ready to work with Pakistan and other countries to jointly advance peace. Zhang termed President Mamnoon as a "veteran statesman" who was committed to promoting friendly relations between Pakistan and China. He said Pakistan was China''s all-weather friend and a co-operative partner as the two countries had a history of sincere friendship and expressed satisfaction that exemplary progress had been made in Sino-Pak relationship. He said China supports counter-terrorism operation being conducted by Pakistan government for the elimination of terrorists and expressed satisfaction over the measures taken by Pakistan for the protection and safety of Chinese personnel working in Pakistan. Zhang expressed hope that the agreements reached upon during President Xi''s visit to Pakistan would be implemented for development and prosperity. He said the China Pakistan Economic Corridor (CPEC) would also help in industrial development which would create big employment opportunities in Pakistan. He said he was personally monitoring and taking interest in the implementation of projects as a priority and added that this plan would take care of short and long term needs of the two countries. Zhang said China was determined to take this initiative forward, adding that he was committed to complete the projects within due time. The President expressed satisfaction that Working Groups on energy, transport, infrastructure and Gwadar had made progress and said Pakistan needed China''s continuous support to fast track these projects. He extended an invitation to the Executive Vice Premier to visit Pakistan at his earliest convenience. Later, the Vice Premier hosted a reception in honour of President Mamnoon. Prime Minister''s Special Assistant Tariq Fatemi, Ambassador to China Masood Khalid and China''s Ambassador to Pakistan Sun Weidong were also present.

Copyright Associated Press of Pakistan, 2015

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Prime Minister approves establishment of second LNG terminal

Prime Minister Nawaz Sharif chaired a meeting to review the progress on installation of LNG power plants in the country at PM House here on Thursday. Secretary Water and Power Younas Dhaga briefed the Prime Minister about the current status of the development of LNG power plants with combined capacity of 3600 MW. The Prime Minister directed to speed up the development work so that benefit of LNG power plants could be given both to industrial and domestic sectors. The Prime Minister said that funds for South-North pipeline for LNG transmission have been approved and therefore the work on the project shall start without any delay. The Prime Minister also approved the establishment of second LNG terminal and directed to complete it by the end of 2016. Minister for Petroleum and Natural Resources Shahid Khaqan Abbassi and senior officials attended the meeting.-PR

Copyright Business Recorder, 2015

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Chinese firm signs $500 million investment in OPL

Poly-GCL Petroleum Group of China has agreed with Ocean Pakistan Limited (OPL) to invest $500 million in exploration of oil/gas sector of Pakistan. The two companies reached an agreement during a recent visit of a seven-member delegation of Poly-GCL Petroleum Group delegation led by Chairman, Barton Yu. An official of the company told Business Recorder here on Tuesday that the Chinese company would collaborate with the OPL in enhancing oil/gas production from depleting fields such as Zamama field which was once producing over 500 Million Cubic Feet per Day (mmcfd) but now its production is 150 mmcfd. According to officials, the Zamzama Block in Sindh province has potential recoverable gas reservoirs of 300 Billion Cubic Feet (BCF) and recovery of these reservoirs will save billions of dollars for the national kitty over the years. The company is fully prepared to take immediate steps to arrest fast declining gas production from the Zamzama Gas Field as soon as NOC by the Ministry of Petroleum is issued. OPL was at an advanced stage of concluding a strategic association with Poly-GCL Group of China for investment in upstream and downstream oil/gas sector inside the country as well as outside Pakistan, the official added. OPL has chalked out an ambitious plan for rehabilitation of its mature fields in Pakistan which it plans to present to its Joint Venture Partners, OGDCL, POL and AOC. In aggregate, draft plans envisage investment of over $60 million in well intervention, workovers and new production systems to increase oil and gas production to about 5,000 barrels of oil and about 50 mmcfd of gas from Dhurnal, Ratana and Bhangali. Besides, Joint Venture Partners have embarked upon state of the art three dimensional seismic acquisition of the entire field which carries great upside potential. Tri Resources Investments Inc (Hashoo Group Company) has also executed a Sales Purchase Agreement (SPA) for acquisition of entire shareholding of British E&P Company BHP. The company is waiting for the final No Objection Certificate (NOC) from the Petroleum Ministry. OPL has increased natural gas/crude oil production from Ratana and Dhurnal oil/gas fields by 20 mmcfd of gas and 500 barrels per day (BPD) of oil. The gas being produced from the filed is being sold at 0.25 cents to the Sui-Northern Gas Company. OPL in the month of July 2015 has rejuvenated Dhurnal Oil Field through workover in one of the oldest wells which resulted in additional oil production of about 500 BOPD and 1.5 mmcfd of gas. This unprecedented success has restored the confidence of scientists to try new technologies in other Dhurnal wells which are likely to produce a total of over 1,500 barrels of oil and about 5 mmcfd after similar workovers in other wells by turn of calendar.

Copyright Business Recorder, 2015

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MPCL discovers hydrocarbons in Mianwali

Mari Petroleum Company Limited (MPCL) has struck another significant crude oil, condensate and natural gas discovery in its Karak Block's Kalabagh-1A ST1 Well located in District Mianwali. Karak Joint Venture is operated by MPCL holding 60 percent working interest with MOL having 40 percent share. Kalabagh-1A ST1 discovery is the company's second success in the block in Datta, Samanasuk and Lockhart formations; after its first major Crude Oil discovery in the block made at Halini Well-1 in 2011. Kalabagh-1A ST1, spud-in on March 20, is the Company's second exploratory well in Karak Block. It has been successfully drilled down to a depth of 3,003 meters in Datta Formation. During testing, the well flowed gas and condensate in Datta Formation at a rate of 3.3 MMSCFD and 160 BBL/D respectively, with wellhead pressure of 694 Psi at 32/64" choke size. The gas discovery has an excellent heating value of 1144 BTU/SCF and its Condensate API is 52 @600F. The well has also been successfully tested in Samanasuk Formation, which also flowed gas and condensate at a rate of 4.68 MMSCFD and 180 BBL/D respectively, at a wellhead pressure of 926 Psi at 36/64" choke size with excellent gas heating value of 1128 BTU/SCF and Condensate of 58 @600F API. The testing of Lockhart Formation flowed commercial quantity of Crude Oil @500 BBL/D with wellhead flowing pressure of 155 psi of 22 API @600F at 32/64" choke size. The Kalabagh discovery becomes another source of indigenous energy supply which is expected to add significantly to the nation's hydrocarbon reserve base; thus contributing towards the saving in foreign exchange and bridging the demand and supply gap. Additionally, MPCL is drilling its third exploratory well Halini Deep-1 in the block which is currently at the depth of 5,669 meters into Chhidru Formation and is amongst the very few wells being drilled down to such lower depth. Kalabagh-1A ST1 discovery has augmented MPCL exploration well success rate, which already ranks highest in the country. MPCL presently operates two development & production leases, nine exploration licenses and has joint venture interest share in six other exploration blocks.

Copyright Business Recorder, 2015

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PSO seeks 1.735 million tonnes of oil products for November-February

Pakistan State Oil Company is seeking 1.735 million tonnes of oil products for delivery over November to February, a tender document showed on Monday. The company is seeking 10,000 tonnes of jet fuel for delivery over November 21 to December 10. It is also seeking five cargoes of 50,000 tonnes each of gasoline for delivery over December and four cargoes of 50,000 tonnes each of the motor fuel for January. PSO is seeking in the same tender, two cargoes of 60,000 tonnes each of low sulphur fuel oil (LSFO) for December and three cargoes of the fuel of 60,000 tonnes each for January to February. It is also seeking 7 cargoes of 65,000 tonnes each of high sulphur fuel oil (HSFO) for November loading and eight cargoes of 65,000 tonnes each of the fuel for December loading.

Copyright Reuters, 2015

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Shahbaz visits 1320 megawatts coal-fired power project in Sahiwal

Punjab Chief Minister Shahbaz Sharif on Tuesday paid a surprise visit to 1320MW coal power project in Qadirabad, Sahiwal and reviewed the pace of progress on this important and big project of power generation. While speaking on the occasion, the CM said that two coal-based energy projects of 660 megawatts each are being set up in Sahiwal and it is an important project of China Pakistan Economic Corridor. He said that the project will start energy generation in 2017. The CM directed that besides maintaining a high standard, due attention should also be paid to speedy completion of the project for achieving the best results. He said that Sahiwal coal power project will play an important role to eradicate loadshedding crisis with the help of China. Shahbaz said that this project comprising two power plants of 620 megawatts each is another splendid example of Pak-China friendship and will further strengthen economic and trade relations between the two countries. He said that Punjab government and the Chinese company will complete this project till 2017 through collective efforts. He said that most modern super critical power plants are being installed in Sahiwal which are environment-friendly and meet the environmental standards. Shahbaz said that he is personally monitoring this project regularly and had come to the site of project for this reason. He said that this power plant is the biggest and first-ever project of power generation with coal in Pakistan and Chinese companies have made investment in this project. He said that the journey of progress and prosperity of Pakistan started with the co-operation of China will be continued and Pakistan will achieve its goal. The CM was informed during a briefing that the machinery of coal power project has started reaching Karachi Port and steps are being taken for its speedy transportation to the site of the project.

Copyright Business Recorder, 2015

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Turkmenistan to start work on TAPI pipeline in December

Turkmenistan, keen to diversify its natural gas exports, will start building a long-delayed, $10 billion gas pipeline to Pakistan and India via Afghanistan in early December, a Turkmen government official told Reuters on Tuesday. The Central Asian country holds the world's fourth-largest natural gas reserves but remains dependent on gas exports to China after Russia cut back gas imports in the past few years. The TAPI project, supported by the United States and the Asian Development Bank, has been touted by Turkmenistan since the 1990s. But starting work on the pipeline has been delayed because of the problem of crossing Afghanistan. The pipeline will allow Turkmenistan to find new consumers in Asia and cut its dependence China, which buys 30 billion cubic meters (bcm) of gas annually. Russia, which imported more than 40 bcm of Turkmen gas in 2008, will buy no more than 4 bcm this year. Moscow says the development of gas fields elsewhere has made purchases of Turkmen gas unprofitable. Neighbouring Iran also buys small volumes of Turkmen gas. State gas monopoly Turkmengas was selected in August to lead the TAPI pipeline consortium, named after the countries which it is designed to cross. "Turkmengas plans to start building the TAPI pipeline in early December," the official said on condition of anonymity. "The Turkmen stretch of the pipeline (to the Afghan border) will be built by a (Turkmen) oil and gas pipeline construction firm." Turkmengas will be joined by international energy companies at a later stage, the official said. He gave no further details. It is expected that the construction of the pipeline will take three years, he said. The pipeline is designed to last for 30 years.

Copyright Reuters, 2015

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PSO launches tender to buy 5 LNG cargoes in October-December

Pakistan State Oil Co launched tenders on Wednesday to secure five liquefied natural gas (LNG) cargoes for delivery in October through December, it said on its website. The first tender seeks two cargoes for delivery in November and a further two cargoes in December. The exact delivery windows are November 5-7, November 15-17, December 5-7 and December 15-17, according to tender documents released on its website. In a second tender IT requires a cargo for more urgent delivery around October 6-8.

Copyright Reuters, 2015

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Russian E&P companies keen to invest in oil/gas sector

Top Russian oil/gas exploration and production (E&P) companies are mulling to invest in the upstream and downstream oil/gas sector of Pakistan, officials from the Ministry of Petroleum said on Wednesday. According to the officials, following the massive investment of Chinese oil/gas firms in Pakistan, now Russians firms are keen to explore oil and gas reservoirs in the country. "Pakistan offers most attractive return for all the E&P firms and we have just completed a study on shale oil/gas. Moreover, improved law and order situation in potentially oil/gas rich areas of Balochsitan and Khyber Pakhtunkhwa (KP) has also attracted international companies to invest in Pakistan," a senior official of Petroleum Ministry told Business Recorder. In a recent meeting with Director General Petroleum Concession (DGPC), a Russian delegation has offered Pakistan to provide latest technological services for tapping shale/gas as well as conventional gas reservoirs. Russia and Pakistan are also in final stages of talks on a government-to-government contract of a $2.5 billion, 1,100-kilometer gas pipeline from Karachi to Lahore to be used for transporting imported Liquefied Natural Gas (LNG). A leading Russian petroleum company, JGC Rosgeologia (Rosgeo), has recently signed two memorandum of understanding (MoU) with two public sector E&P companies for joint ventures. One MoU was signed with state-owned Oil and Gas Development Company (OGDCL) for E&P co-operation on broader terms within their blocks for mutual benefit in a bid to speed up exploratory activities in Pakistan and increase Russia-Pakistan co-operation. Both the companies under the MoU would cooperate on multiple factors including examining the possibility of "farm-in" and "farm-out" opportunities in existing exploration licenses and look into opportunities in development and production fields including opportunities related to the application of Enhanced Oil Recovery (EOR) techniques. The Russian company has assured of sharing expertise of processing and interpretation of 2D, 3D seismic data, formulation of strategies and providing necessary training to the OGDCL employees. The Russian company has also singed an MoU with the newly-created provincial oil/gas E7P Company of Khyber Pakhtunkhwa Oil and Gas Company Ltd (KPOGCL) for extending long-term co-operation in KP's E&P sector. The two firms would jointly bid for fresh exploration and concession blocks. The joint venture would also carry out geological surveys within Pakistan, using the modern technologies and methods. The Russian company will be responsible for the technical planning and execution, arrangement of rigs, while KPOGCL will be responsible for security, logistics and transportation, gensets, earth moving equipment, cranes, tractors, camp facilities, local support manning, communication, local clearances, permits, licences, business development, etc.

Copyright Business Recorder, 2015

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