At first glance, it looks promising. In a notice sent to the Pakistan Stock Exchange on December 18, Pakistan Oilfields Ltd announced its new oil and gas discoveries.
A quick summary: on March 5, Pindori D&P, which is run by Pakistan Oilfields, tested hydrocarbons from its development well Pindori-10, which is in Rawalpindi. (Pakistan Oilfields has 35% share in Pindori D&P, while the state-owned Oil and Gas Development Company has a 50% share, and Attock Oil has a 15% share).
The actual drilling of Pindori-10 started in January 2019, and achieved target depth at 13,701 feet. At first, the initial flow was about 832 barrels of oil per day, with a maximum flow of 1,103 barrels per day (bpd), and 2.76 million cubic feet per day (mmcfd) of gas, with a maximum flow of 2.96 mmcfd.
However, by the middle of this year, production had slowed down, due to the water production in the Lockhart formation, and consequently production fell to 42 barrels of oil per day, and 0.079 mmcfd of gas.
So on September 25, 2020, a rig workover was started at the Pindori-10 well, to test shallower formations in an attempt to increase production from the field. The Chorgali formation ended up revealing 1,010 oil barrels per day, and 2.587 mmscfd of gas per day.
Not bad for Pakistan Oilfields, one of the oldest gas and exploration companies in Pakistan. A subsidiary of the Attock Oil Company Ltd, it was incorporated in November 1950. Attock Oil Company, by the way, was founded all the way back in 1913, and made its first oil discovery in 1915 at Khaur, District Attock. It is well-versed in discovering oil and gas in this region for at least a century now.
In 1978, Pakistan Oilfields took over the exploration and production business of Attock Oil. Since then, Pakistan Oilfields has been busy investing independently, and also through joint ventures, with various exploration and production companies for the search of oil and gas in Pakistan.
Some further context: Pakistan Oilfields also produces liquefied petroleum gas (LPG), solvent oil and sulphur. The LPG is marketed under its own brand named POLGAS, as well as through its subsidiary CAPGAS. Pakistan Oilfields also operates a network of pipelines for transportation of its own, as well as other companies’ crude oil to Attock Refinery Ltd. In 2005, the company acquired a 25% share in National Refinery Ltd, which is the only refining complex in the country which produces fuel products as well as lube base oils.
So all in all, a well established player in the oil and gas space. And the new reserves, on paper, should be cause for celebration.
But there is just one problem. Look at the numbers that Pakistan Oilfields has given forth. The new discoveries are absolutely tiny relative to the current production levels of the country. According to the US Energy Information Administration, Pakistan’s current oil production (in 2018, the latest numbers) stands at 195 trillion British thermal units (btu), while oil consumption stands at 1,287 trillion btu. Meanwhile, gas production stands at 1,180 trillion btu, and consumption stands at 1,451 trillion btu (a British thermal unit is a measure of the heat content of fuels or energy sources).
Or put another way, our current oil production is roughly 34.2 million barrels, and our current oil consumption is 226 million barrels of oil. Meanwhile, our current gas production stands at 1,138 billion cubic feet, while our gas production stands at 1,399 billion cubic feet.
Why is this relevant? Because it underscores the point that industry analysts say: when your new discoveries are small, you know you are basically out. You always find the biggest oil and gas reserves first, which is why Pakistan found the gas field in Sui, Balochistan first, all the way back in 1952.
It is bigger. It is easier to find. The more you have used up the big ones, the more the new ones are smaller. This is why you now have companies like Pakistan Oilfields, which have been drilling enthusiastically since at least the 1960s, now declare smaller and smaller new reserves of oil and gas.
This is through no fault of the company itself. Rather, it is indicative of the fact that Pakistan is running out of natural gas. And yet, our gas pricing system pretends like we have near-infinite domestic reserves.
Rather than complain, yet again, about the problems of how we manage our gas, Profit would like to remind our readers that we have a perfectly acceptable alternative staring at us right in the face: renewable energy. As mentioned in earlier reports, renewables are set to grow, and energy companies around the world are trying to get on board, even if they do it begrudgingly in spurts. And it is also true in Pakistan.
Consider the National Electric Power Regulatory Authority’s (NEPRA) 2020 State of the Industry report as an indicator: about 30.7% of all electricity in the country generated by hydel in fiscal year 2020 (during that year, the total electricity generation in the country was 134,746 GWh). Other renewable sources of energy remain limited: solar is a rounding error, contributing only 0.59% to the grid, while wind stood at 2.36% (that is around 2,882 GWh). Perhaps that need not be a rounding error in the future after all.