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Analysis of Pakistan Industries
Mr. Afaq Ali Khan
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LETTER OF TRANSMITTAL
20 Nov 2009 Mr. AFAQ ALI KHAN ANALYSIS OF PAKISTANI INDUSTRY MAJU Respected Sir, As you requested 5-10-2009, here is our report on OIL and GAS industry of Pakistan. . This report includes the details of the world issues and the complete data of the most scare resource of the world that is oil and gas ,and also having 50 year history of Pakistan and current volumes of oil and gas sector both in comparison with power sector and their consumption and production difference, there backward and forward linkages and industries depend on this sector, SWOT analysis and remedies of this sector. We are certain that the report will be of immense help to enable you to evaluate the situation finally and to encourage the Student’s Morale .It was great experience which is accomplished by the hilarious work behind it . Please let me know if we can be of further assistance. Yours Sincerely Muhammad Danish Mohsin Hassan
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This report is a case Oil and Gas Industry which has been prepared as a part of the course requirement for Analysis of Pakistani Industry .The material compiled and presented in this report is a result of comprehensive work. This report has proved to be a great experience. For this, I would like to thank our course instructor “Mr. Afaq Ali Khan” for providing us with the opportunity, as well as his guidance in the light of his vast experience. THANKS
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REASONS OF SELECTING OIL AND GAS INDUSTRY
There are three major forms of fossil fuels: 1:OIL 2:NATURAL GAS 3:COAL
o Non renewable resources of the world. Pakistan has a great potential of Oil and Gas reserves many foreign countries interested to invest in this sector. Almost 5000 different products are in the forward linkage use for the consumption of domestic and industrial purposes.
Pakistan has the 5th largest coal field in “Thar desert” a substitute for
energy formation. In Automobile gasoline, petroleum, diesel, cng, and lpg are used, on the other hand aero planes need jet fuel. Gas is needed in our Domestic and industrial purposes
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How Was Oil Formed? Oil was formed from the remains of animals and plants that lived millions of years ago in a marine (water) environment before the dinosaurs. Over the years, the remains were covered by layers of mud. Heat and pressure from these layers helped the remains turn into what we today call crude oil . The word "petroleum" means "rock oil" or "oil from the earth."
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Where Do We Get Our Oil? Crude oil is a smelly, yellow-to-black liquid and is usually found in underground areas called reservoirs. Scientists and engineers explore a chosen area by studying rock samples from the earth. Measurements are taken, and, if the site seems promising, drilling begins. Above the hole, a structure called a 'derrick' is built to house the tools and pipes going into the well. When finished, the drilled well will bring a steady flow of oil to the surface.
An Economy depend on crude Oil if we see the history .We analyze crude
oil is the basic issue of global conflicts.
America world’s 5 % population uses 25 % world’s crude oil .In future 25
years reserves of America are gone. 80 % of future reserves of (oil, gas & coal) are in Eurasia (Iran, Iraq, Saudi Arabia and countries near khaleej etc).. Only Iraq has 10 % of world’s future reserves out of 80 %.
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• • • • The Chinese were the first to discover underground oil deposits. The Chinese recognized early the importance and potential use of oil and gas around 500 B.C. Oil and gas are made up of a mixture of different hydrocarbons. These are large molecules made up of hydrogen atoms attached to a backbone of carbon.
CRUDE OIL RESERVES TILL 9TH FEB,2009. (sOURCE:ENERGY INFORMATION ADMINISTRATION)
COMPARISION BETWEEN PAKISTAN AND WORLD YEAR PAKISTAN(BBL) Billion Barrels 1980 1981 1982 1983 1984 1985 0.200 0.197 0.240 0.196 0.083 0.082 WORLD(BBL) Billion Barrels 644.934 651.930 670.350 668.262 668.988 699.813
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1986 1987 1988
0.109 0.096 0.096
700.557 699.779 889.334
PAKISTAN(BBL) Billion Barrels
WORLD(BBL) Billion Barrels 907.768 1,002.213 999.190 989.443 996.105 998.336 999.261 1,007.368 1,018.515 1,020.075 1,032.753
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
0.170 0.119 0.162 0.162 0.412 0.203 0.203 0.203 0.208 0.208 0.208
PAKISTAN (BBL) Billion Barrels
WORLD (BBL) Billion Barrels 1,016.772
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2001 2002 2003 2004 2005 2006 2007 2008 2009
0.208 O.298 0.310 0.289 0.289 0.289 0.289 0.289 0.339
1,028.132 1,031.954 1,213.112 1,265.026 1,277.228 1,292.936 1,316.662 1,332.043 1,342.207
ONE BARREL OF CRUDE OIL CONTAINS
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GASOLINE= 19.5 GALLONS 19.5(3.8) = 74.1 LITERS
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THE INDUSTRY’S CONTRIBUTION TO THE GDP OF THE COUNTRY
The total contribution of gas distribution in GDP during 2001-02 was 3.6 per cent including electricity. Separately oil and gas are not indicated in the official documents but their contribution is estimated at around 1 per cent. The indirect contribution of oil and gas, however, is enormous. Investment on electricity and gas is Rs. 48 billion, constituting 10 per cent of the total. In the oil and gas sector, an investment of Rs. 16 billion or over 3 per cent of the total is estimated. It accounts for over 80% of total energy supplies with an average growth rate of 6% a year. Oil and gas as a priority sector (beside other three sectors e.g. agriculture, small and medium industry and information technology), primarily motivated by the reduction in import of oil. Over the last couple of years, substantial progress was made in the sector like commissioning of PARCO, White Oil Pipeline (from Karachi to Mahmoodkot), oil and gas prospecting and consequently policy measures such as deregulation were undertaken. Between 1990-91 and 200001, the crude oil imports rose from 28,178,000 barrels to 52,505,000 barrels or by 6.4 per cent a year. Compared to this, the increase in import of petroleum products was 8.8 per cent, from 4.3 million tones to 10 million tones, over the same period. In value term, the import doubled from $1.7 billion to $3.4 billion or by an annual 7.2 per cent. In total imports, the share soared from 22 percent to 32 percent. During 2001-02 oil imports fell 17 per cent to $2.8 billion due to both decline in prices and in quantity, primarily because of world slump following 9/11 event as well as the recessionary trend in Pakistan as the growth rate was restrained to only 3.6 per cent below the target of 4 per cent. Nonetheless, the import of crude continued to surge from 6.85 million tones to 7.1 million tones or by over 4 per cent during 2001-02 over the preceding year, but below the average of 6.4 per cent over the period 1990-91 to 2000-01. While the import of refined oil has remained stagnant t at 10 million tones over the last few years, that of crude has continued to surge mainly because of commissioning of PARCO during 2000-01. During 2001-02, the price of crude has averaged $172.4 per tone ($22.99/barrel), which is unlikely to persist during the current fiscal year 2002-03 as in the first quarter (July-September 2003) the average price of crude went up to $194 per tone ($25.87/barrel), 12.5 per cent higher than the average of last year. During the first quarter of 2002-03, the share of oil was 25.5 per cent of total imports compared to 29.1 percent in 2001-02. By the end of February 2003, the price of oil has jumped to $40 per barrel, 55 per cent higher than the first quarter. The value of oil import during the year, estimated at $3 billion (on
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the basis of $250 million a month during July-January 2003) will be higher than the last year, even if the prices remain constant at the present level. In the case of war with Iraq, the prices are going to skyrocket and thus pushing up our import bill l beyond $3.4 billion of 2000-01. Unfortunately the domestic production meets only 15 per cent of oil requirements. During 2001-02, the production was 23 million US barrels, up from 21 million US barrels during the preceding year, thanks to the strenuous exploration efforts of oil companies. With oil reserves at 184 million US barrels (according to Economic Survey 2001-02), they are just for few years and hence, the reliance on imports will continue to grow. The heavy oil bill is stoked by the emergence of power projects dependent upon imported furnace oil and more recently by decline in hydroelectricity generation as a result of drought prompting further reliance on thermal power generation. One of the reasons of recent stagnation in refined oil import is the commissioning in February 2001 of PakArab Refinery Company (PARCO) with a capacity of 4.5 million tones a year which increased the country's refining capacity by 40 per cent to 11per cent.
TOTAL EMPLOYMENT OF THE SECTOR
Average Daily employment in numbers=11790 Employment Cost (Million Rs.)=1921
Average Daily employment in numbers=20854 Employment Cost (Million Rs.)=4142
Total trading statistics of the sector.
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Crude oil (000) Year Barrels Import and export
Natural gas MMCFT Import and export
1996-97 21270 697762
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Crude oil and refined products are significant imports. Their value varies with internal demand and changes in the world oil price. In FY 1982, oil products accounted for around 30 percent of Pakistan's imports, falling to an annual average of 15 percent in FY 1987 to FY 1990, rising to over 21 percent in FY 1991, but dropping back to 15 percent in FY 1992.
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PROVED RESERVED PRODUCTION CONSUMPTION EXPORT IMPORT
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STATE OF OIL AND GAS INDUSTRY AFTER INDEPENDENCE
Pakistan's first oil field was discovered in the late 1952 in Balochistan near a giant gas field at Sui in Balochistan. It is 122.67 sq. km. In area and covers the sandy Datta Formation in Pakistan. Pakistan Petroleum Ltd. (PPL) and Pakistan Oilfields Ltd. explored and began drilling these field with Soviet help in 1961 and activity began in Toot during 1964. Since the late 1980s, Pakistan has not experienced many new oil fields coming online. As a result, oil production has remained fairly flat, at around 60,000 barrels per day (bbl/d). The Toot area is one of the oldest oil producing regions in Pakistan with the first oil well was drilled in 1964. It is located in the Potwar region, Punjab Province, which is near the capital city of Islamabad. It has grown steadily since then, producing both oil and, to a lesser degree, natural gas
Gas Pakistan's first gas field was discovered in the late 1952 near a giant gas field at Sui in Balochistan. The Toot oil and gas field was discovered in the early 1960's the Islamabad in the Punjab. Some promising natural gas fields have also been found near the Punjab Toot oilfield, in Sindh province and off the coastline of Pakistan; but contain smaller reserves.
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CHRONOLOGY OF PAKISTAN
TIME WISE EVENTS HAPPEN IN THE HISTORY OF PAKISTAN
1948 - 49:
Establishment of Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL) for exploration and production was occurred.
1952 Discovery of Pakistan's Largest Gas Reserves at Sui by PPL.
The Government of Pakistan executed agreements with StandardVacuum Oil Company.
Hunt International oil Company.
Shell oil Company.
Sun oil Company.
Further discoveries of natural gas were made as a result of these activities during 1954-59, which included , Discovery at Kandhkot by PPL. Discovery at Mari by Standard-Vacuum. Despite Significant new gas discoveries during this period, the exploration activities registered a downward trend because of lack of oil discoveries.
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Government of Pakistan then decided to undertake the search for oil and gas directly and established the state oil exploration company.
Oil and gas Development Company Limited (OGDCL) in September 1961.
OGDCL's first success was the small gas discovery at Sari Singh (Sindh).
POL discovered oil at Meyal (Potwar, Punjab). OGDCL discovered oil at Toot (Potwar, Punjab) .
1970 - Gas at Hundi (Sindh). 1972 - Rodho (Punjab).
On 2nd January,1972.Zulfiqar Ali Bhutto, after the fall of East Pakistan, announced the nationalization of all major industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities.
1973 Kothar (Sindh).
American oil Company (AMOCO) discovered a small gas accumulation at Jandran (Balochistan). 1975 - Gas / condensate at Dhodak (Punjab).
BP came to Pakistan after the modification of the petroleum regulations in 1976 .
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Government of Pakistan amalgamated three “Oil Marketing Companies” Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum as part of its “Nationalization Plan” formation of Pakistan State Oil (PSO).
1978 PPL Crude Oil discovery at Adhi field.
When BP (formerly known as Union Texas Petroleum (UTP), a USA Company), discovered oil at Khaskeli (Sindh) in the Lower Goru Sandstone.
The US-based Occidental Petroleum who discovered a major oil field at Dhurnal in 1984.
1987 Start of Commercial Production From Kandhkot Gas Field.
OGDCL made very large gas discovery at Middle Indus Basin (Qadirpur). Eni (formerly known as LASMO (U.K.) made a gas discovery at Kadanwari, south of Khairpur-Jacobabad.
1993 - OMV of Austria at Miano.
In may 1995 formation of Pakistan Petroleum Exploration and Production Companies Association (PPEPCA).
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OGDLC converted into public limited company.
1998 - ENI discovered gas at Bhit . 1998 - OMV of Austria at Sawan.
1999 - BHP at Zamzama (Kirthar foldbelt and foredeep). 1999 - OGDCL at Chanda oil located in Kohat. 1999 -MARI GAS COMPANY at Mari Deep. 2002 - PETRONAS of Malaysia at Rehmat. 2002 - OGDLC at gurguri (N.W.F.P). 2002 - 28th March Oil and Gas Regulatory Authority (OGRA) has been set up.
3 discoveries; 1 oil and gas discovery at Mela-1 well (Nashpa Block). 2 gas discoveries Latif-1 (Latif Block) and Tajjal-1 (Gambat Block).
PETROLEUM POLICY 2009
Mar 20, 2009
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The Government of Pakistan (GOP) is committed to accelerate an exploration and development programme in order to reverse the decline in crude oil production, to increase the domestic gas production and supply and to reduce the burden of imported energy which otherwise will have adverse effect on the balance of payments & trade. The principal objectives of this Policy are: 1. To accelerate E&P activities in Pakistan with a view to achieve maximum self sufficiency in energy by increasing oil and gas production. 2. To promote direct foreign investment in Pakistan by increasing the competitiveness of its terms of investment in the upstream sector. 3. To promote the involvement of Pakistani oil and gas companies in the country’s upstream investment opportunities. 4. To train the Pakistani professionals in E& P sector to international standards and create favourable conditions for their retaining within the country. 5. To promote increased E&P activity in the onshore frontier areas by providing globally competitive incentives. 6. To enable a more proactive management of resources through establishment of a strengthened Directorate General of Petroleum Concessions (DGPC) and providing the necessary control and procedures to enhance the effective management of Pakistan’s petroleum reserves. 7. To undertake exploitation of oil and gas resources in a socially, economically and environmentally sustainable and responsible manner.
E&P companies could be offered $4.08 per mmbtu Friday, April 03, 2009 By our correspondent ISLAMABAD: The Exploration and Production (E&P) companies would be offered $4.08 per mmbtu in as per 2009 petroleum policy, which was $3.65 per mmbtu in 2007 and $2.99 per mmbtu in 2001 petroleum policy, Dr Asim Hussain unveiled this while formally announcing the Petroleum Policy 2009, here on Thursday.
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“The policy is aimed at ensuring higher rate of returns to Exploration and Production (E&P) companies.” Hussain said lucrative incentives have been offered in the Petroleum Policy 2009 to attract maximum foreign investments. He said: “The last petroleum policy was drafted in 2007 by a foreign consultant but the industry had strong objections to this policy which is why no exploration license had been granted for more than 2 years in the past. About the new policy Adviser to the PM on Petroleum Dr Asim Hussain said that it would meet the future challenges of the energy demand and encouraged foreign investment. “The government will take benefit from the expertise of local and foreign oil and gas exploration companies to meet the growing energy demand in the country.” He said the government has set a target of drilling 100 new oil and gas exploratory wells during the year 2009 to meet the country’s growing energy demand. He said presently about 45 rigs are producing and supplying oil and gas across the country. The E&P companies would pay 12.5 per cent royalty and 40 per cent income tax to the government. The disputed biddable Gas Price Gradient (GPG) factor had been eliminated in the new policy, he added. The discount during Extended Well Test (EWT) phase had been reduced from 15 per cent to 10 per cent to encourage the companies for early production. To fulfill the Corporate Social Responsibility (CSR) for local population of the area, several steps had been taken. 50 per cent job quota would be ensured for local population from where discovery had been made. The amount of social welfare obligation in the exploration phase had been razed from $25,000 to $30,000 in each zone. He claimed that the new Petroleum Policy 2009 would attract more foreign investment in the sector despite having law and order problem. He said the government has set a target of drilling 100 new oil and gas exploratory wells during the year 2009 to meet country’s growing
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energy demand. Giving a brief account of oil and gas production he said presently about 45 rigs are producing and supplying oil and gas across the country. He informed that the work in 25 blocks of Balochistan was held up for want of security clearance but with hectic efforts the government succeeded and obtained clearance in 16 blocks. He said the seismic survey of Dhaddar Block in Balochistan was completed in 2004 but the law and order situation the well could not be drilled. Now after taking the stakeholders in to confidence, the well had been spud on March 29 2009. The adviser informed that Pakistan Petroleum Ltd (PPL) had entered into joint venture with a Yemeni company for undertaking exploration work in Yemen. Further a MoU had been executed with ENI, Italian company, to further boost exploration and production activities particularly in offshore. About downstream oil sector, the adviser said when the oil prices peaked, the ex-refinery pricing formula was revised to stabilize the prices and bring relief to the customer. Now when the prices have dropped, resultantly the refineries were financially unmanageable to run. In this regard he said a revised formula had been agreed protecting the overall interest of all the stakeholders. This formula was now being processed for approval of the ECC. On the LNG import he informed that the Letter of Support needed for the LNG project by 4 gas, which was pending since long was approved by ECC and issued. Resultantly, the company was in an advance stage of negotiating the LNG supplies which entails a fixed terminal at Port Qasim of 3.5 million tons capacity. About IPI gas pipeline project, Dr Asim stated that the ECC had approved the project in principle and details would be given separately, after a final decision had been taken by the cabinet very shortly. The work on TAPI was also in progress, he maintained.
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Giving details about oil and gas sector, the adviser said so far 728 exploratory wells have been drilled across the country, out of which a total 219 remained successful. The adviser said the success rate in oil and gas exploration was ‘very high’ in Pakistan as compared to other discoveries at the international level. He said the ministry has so far awarded 119 exploration licences to public and private sectors, while 100 new licences with more incentives would be awarded under the new petroleum policy to local and foreign investors. Commenting on oil and gas production of the country, he said the gas production was 3.9 billion cubic feet per day (bcfd) and the oil production is 66,000 barrels per day (bpd) against the demand of 9 to 10 bcfd of gas and 77,000 bpd of oil.
OIL AND GAS REGULATORY AUTHORITY (OGRA)
MISSION STATEMENT Safeguard public interest through efficient and effective regulation in the midstream and downstream petroleum sector.
INTRODUCTION • Oil and Gas Regulatory Authority (OGRA) has been set up under the Oil and Gas Regulatory Authority ordinance to foster competition, increase private investment and ownership in the midstream and downstream petroleum industry, protect the public interest while respecting individual rights and provide effective and efficient regulations The Federal Government has now assigned functions for the regulation of activities relating to LPG (Liquefied Petroleum Gas) and CNG (Compressed Natural Gas) sectors in the country to the Oil and Gas Regulatory Authority and has designated the OGRA as an Authority in place of the Director General (Gas) of the Ministry of Petroleum and Natural Resources.
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FOLLOWING ARE SOME OF THE MAJOR LAWS • All properties and works done by the Natural Gas Regulatory Authority (NGRA) were transferred to and protected under the OGRA Ordinance.
In exercising its functions the Authority shall, as far as practicable, look after the interests of the consumers and the licensees along with the nation as a whole. A license may be restricted by the category of regulated activity, area of operation, period of authorization and such other terms as the Authority may determine.
No licensee shall charge for any regulated activity any fixed or variable amount in excess of the relevant tariff the Authority may, from time to time, approve and publicized by the licensee in the print and electronic media or provide service on terms and conditions other than those approved by the Authority from time to time in accordance with the Natural Gas Regulatory Authority (Tariff) Rules, 2002.
No person or corporation shall, without first obtaining a license from the Authority, undertake, or cause to be undertaken under any agreement, the operation or construction of works connected with compression of natural gas for the purpose of storing, filling or distribution of CNG. No company shall, without first obtaining a license for the purpose from the Authority, undertake or cause to be undertaken under any agreement, the construction and operation of any works.
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Pakistan Petroleum Exploration and Production Companies Association (PPEPCA).
In the eighties the rising curve of activities and the unprecedented surge in the E&P activities necessitated frequent coordination among those engaged in this sector and the need to exchange ideas on a variety of subjects of common interest. After consultation between the concerned organizations a need was felt to establish an umbrella organization which, while playing an advisory role, could safeguard the interest of its member companies. The few E&P companies operating in Pakistan at that time undertook to form the umbrella organization. In 1988 it was originally conceived under the name and style of Pakistan Exploration and Production Companies Advisory Committee (PEPCAC) as a representative body of local and foreign companies engaged in exploration and production of petroleum. Its establishment was an important Landmark in the history of petroleum industry of Pakistan. It was culmination of Endeavour's, spread over a long period, of five private sector companies namely; Mari Gas, Oxy, POL, PPL, UTP and OGDCL a public sector company. In May 1995, the organization was converted into a company, limited by guarantee, without any share capital, through the blessing of Ministry of Petroleum & NR under the new title of 'Pakistan Petroleum Exploration and Production Companies Association (PPEPCA).
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PROFILE OF PAKISTAN PETROLEUM LIMITED
Mission Statement Our mission is to optimize hydrocarbon production and pursue an aggressive exploration programme in the most efficient manner on the local as well as international horizons through a team of professionals utilizing the latest developments in the exploration and production technology and maintaining the highest standards of health, safety and environment.
The pioneer of the natural gas industry in the country, Pakistan Petroleum Limited (PPL) has been a key player in the energy sector since the 1950s.The company has managed to sustain its positioning due to its robust business programme and persistent efforts to optimize production from existing fields and new discoveries, currently contributing about 25 percent of the country’s total natural gas supplies in addition to crude oil, Natural Gas Liquid and Liquefied Petroleum Gas. PPL’s history can be traced back to the establishment of a public limited company in June 1950, the majority shares of which were held by Burmah Oil Company (BOC) of the United Kingdom. In September 1997, BOC disinvested from the E&P sector worldwide and sold its equity in PPL to the Government of Pakistan. In July 2004, the government, in turn, sold 15 percent of its holding in PPL to the general public through an Initial Public Offer, reducing its share to 78.4 percent. The remaining equity is divided between International Finance Corporation and private investors, holding 1.3 percent and 20.3 percent respectively. The company operates five producing fields across the country at Sui (Pakistan’s largest gas field), Adhi, Kandkhot, Chachar and Mazarani and holds working interest in seven partner-operated producing fields. These are Qadirpur, the second largest gas field, Miano, Sawan, Block 22 (Hasan, Sadiq and Khanpur) and Tal Block (Manzalai).
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As a major stakeholder in securing a safe energy future for the country, PPL pursues a dynamic exploration agenda aimed at enhancing hydrocarbon reserves. In Pakistan, the company’s exploration portfolio comprises 22 exploration blocks. Of these, PPL operates seven through joint ventures with other Exploration and Production (E&P) companies and has working interest in 15 more exploration areas, including three off-shore blocks, as nonoperating partner. PPL is also among the first local E&P companies to extend its operations beyond national borders and has an interest in an exploration licence in Yemen in a joint venture with OMV. Over the years, PPL has developed a reliable foundation and infrastructure for providing clean, safe energy through sustainable exploitation of indigenous natural resources while adhering to the highest standards of health and safety and constraining the ecological footprint of its operations. As a result, Monitoring and Inspection and Design & Construction departments, Mazarani and Kandhkot gas fields, Adhi field, Sui Field Gas Compressor Station, Sui Production, Sui Field Engineering and Purification Plant were certified for ISO 9001:2000 Quality Management System. As such, the company believes in value addition for all its stakeholders and remains committed to a transparent financial and corporate regime. This factor has been recognized by the prestigious Management Association of Pakistan that selected PPL as the recipient of its 25th and 26th Corporate Excellence Awards. At PPL, the health and safety of employees and sustainable use of natural resources are key requirements of operational excellence. Every effort is made to enhance Health, Safety and Environment awareness among staff and other stakeholders. This commitment is evident from the landmark certification of Mazarani Gas Field, Sui Production, Sui Field Gas Compressor Station and Adhi Field for ISO 14001 and OHSAS 18001 certification. Besides, PPL was also awarded the Annual Environmental Excellence Award in 2006, 2008 and 2009 by the National Forum for Environment and Health. PPL has played a significant role as a responsible corporate citizen since the inception of its commercial activities in Sui by establishing Model School Sui in 1957 for children of workers and local communities. Over time, the outreach of PPL’s Corporate Social Responsibility (CSR) portfolio has gone well beyond obligatory requirements. In 2001, PPL Welfare Trust was founded to provide geographical and thematic diversity within its CSR initiatives, which include education, health, infrastructure development and socio-economic uplift of disadvantaged communities, particularly those living
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in and around its operating areas. In recognition of these efforts, PPL has won the Corporate Philanthropy Award for four consecutive years from 2004 to 2007 for its commitment to social development.
A c h i e v e m e n t s o f P P L
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Year 1952 1955 1959 1976 1978 1980 1982 1986 1987 1990
Event Discovery of Pakistan's Largest Gas Reserves at Sui. Commencement of pipeline quality Natural Gas supply to Karachi for industrial and domestic use within record time of three years of discovery at Sui. Discovery at Kandhkot Gas Field. Discovery of Gas at Mazarani Field. Commercial Production of Barytes by Bolan Mining Enterprises. Crude Oil discovery at Adhi field. Commercial Production of Crude Oil from Adhi field. Execution of Sui Gas Well Head Price Agreement (1982 GPA) stipulating cost-plus fixed return Gas Pricing Formula. Commissioning of Sui Field Gas Compression Project (Phase 1) in Sui Main Limestone (SML) formation. Start of Commercial Production From Kandhkot Gas Field. Installation of Liquefied Petroleum Gas (LPG) and Natural Gas Liquid (NGL)
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Plan and Commencement of LPG, NGL and gas production from Adhi. 1995 1997 2000 2001 2002 Commencement of gas production from Qadirpur Gas Field (operated by a Joint Venture Partner). Completion of Phase II Extension of Sui Field Gas Compression Project at SML and three Turbo Compressor Trains in Sui Upper Limestone Reservoir. Commencement of Extended Well Test (EWT) Production from Block-22, Shikarpur. Supply of gas from Miano Gas Field (Operated by a Joint Venture Partner). - Dismantling of 1982 GPA and execution of new market based Sui and Kandhkot Gas Price Agreement linking the Sui and Kandhkot gas price with international oil prices.- Acquisition of Sui gas Purification Plant jointly owned by SSGCL and SNGPL - Commencement of gas supply from Mazarani Gas Field. - Commissioning of Gas Processing Facilities (Phase 1) and supply of gas from Sawan Gas Field. (Operated by a Joint Venture Partner). - Discovery of Pipeline Quality Gas Reserves in Tal Exploration block, NWFP (operated by a Joint Venture Partner) - Country's first ever supply of 100,000 tonnes of indigenous iron ore from Dilband, District Mastung, Balochistan, to Pakistan Steel, Karachi. Discovery of significant quantities of oil and gas/ condensate from the second exploratory well Makori-1 drilled within Tal Block. - Completion of Extended Well Testing of Manzalai-1, first discovery well in Tal Block. - Commencement of production from Early Production Facility at Makori-1 well site in Tal Block. - Three discoveries; one oil and gas discovery at Mela-1 well (Nashpa Block) and two gas discoveries Latif-1 (Latif Block) and Tajjal-1 (Gambat Block) were made. - Completion of the first exploratory well Mela-1 at Nashpa Block as oil and gas producer and commencement of Extended Well Test production. -For the first time in the Company’s history, two horizontal development wells were drilled and successfully completed as producers at Kandhkot field. -Exploration well Memikhel-1 at Tal Block was successfully competed as gas/ condensate discovery. -Appraisal well Mela-2 at Nashpa Block was successfully completed as producer and tied in with EWT facilities.
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OIL COMPANIES ADVISORY COMMITTE (OCAC)
The Downstream Oil Sector (Refining, Marketing, Distribution) plays a very significant role in Pakistan’s economic development, ensuring uninterrupted supply of petroleum product to the country in order to keep the wheels of the economy moving. With an annual sales of Rs. 1 trillion, direct employment of over 100,000 people, indirect employment (transport sector) of another 24,000 persons, capital investment of over 30 billion Pak Rupees over last 5 years, annual generation of taxes around Rs. 200 Billion, a world class IT infrastructure, skill sets ranging from Technical, IT, Finance, Sales, Marketing & HR, and plans initiated for provision of better product and better service, the Downstream Oil Sector is a significant contributor to the national well-being. The members of OCAC currently comprise of the country’s five Refineries (PakArab Refinery Limited PARCO, National Refinery Limited NRL, Pakistan Refinery Limited PRL, Attock Refinery Limited ARL and Bosicor Pakistan Limited BPL), Ten Oil Marketing Companies (Pakistan State Oil Co. Limited PSO, Shell Pakistan Limited SPL, Chevron Pakistan Limited CPL, Attock Petroleum Limited APL, Total Parco Pakistan Limited TPPL, Admore Gas (Pvt) Limited AGPL, Hascombe Storage Limited HSL, Askar Oil Services (Pvt) Limited ASOPL, Overseas Oil Trading Co. (Pvt) Limited OOTCL, Bakri Trading Company Pakistan (Pvt) Limited BTCPL) and one Pipeline Transportation Company (PakArab Pipeline Co. Limited PAPCO). New entrants in the refining sector are coming in the country and the number of member companies is likely to increase. The significant objectives of the Committee are as under:
• • •
To represent the downstream oil industry at various forums in matters of common interest affecting their operations in Pakistan To establish short/long range demand/supply balances for various oil products and advise the Government and Member Companies in this respect To pro-actively plan any Infrastructure Upgrades De-bottlenecking needed as per medium/long term petroleum product availability projections To collect, prepare and circulate various trade statistics and other relevant information to member companies as well as the Government To comment on and convey collective views of various members on matters concerning the oil industry’s well being such as proposed legislation relating to taxation and other fiscal measures
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Develop plans/suggestions to help Government to streamline the oil and gas sector
The oil industry has seen considerable change over the last 30 years. From an era of nationalization and governmental controls in the 1970s, the Industry is being gradually deregulated. Pakistan is deficit in crude oil, diesel and fuel oil. The Government has given permission to bulk consumers and traders to import fuel oil while bulk consumers have also been given permission to import diesel. In order to coordinate all activities, OCAC plays a pivotal role in rationalizing these imports in such a manner that supply/demand is balanced. It is also a focal body for the Government and other agencies to interact with the oil industry. Health Safety and Environment (HSE) is a very important aspect within the oil industry. There is also a growing awareness within the public that had hitherto not been present. To coordinate implementation of HSE standards within the oil industry, OCAC has set up a separate sub-committee for this purpose. This provides a forum to member companies who, even whilst competing in the market place, cooperate in HSE matters. This provides an opportunity to the members in sharing information and expertise, which in turn helps them in safe operations. The OCAC is governed by a Main Committee comprising of the Chief Executives of each of the member companies. A Chairman who is nominated from among the member companies for a working term of one calendar year, heads the Main Committee. OCAC’s overall functioning is the responsibility of the Secretary General who is assisted by two Secretaries. The Secretaries are responsible for various sub-committees, which form the focus groups from within the industry that deliberate upon various issues and come up with the recommendations. Some of the areas of OCAC work and areas of focus are:
• • • • •
Effective petroleum product supply logistics management Plan to overcome any port constraints Identifying the right energy wise for Pakistan Petroleum product improvement plans: better, more environment friendly product for the Pakistani consumer Follow-up with the Ministries of Petroleum and Finance to ensure the continued viability of the Downstream Oil Sector.
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• Licensing and Supply Sub-Committee • Distribution Sub-Committee • Rules Sub-Committee • Refining and Technical Sub-Committee • Finance Sub-Committee • Trade Estimates Sub-Committee • CNG Sub-Committee • HSSE Sub-Committee
CAPITALIZATION (In terms of Pakistani rupees and US dollars)
The Oil and gas sector, due to major reforms introduced during the last two and half years, has so far benefited the economy to the tune of Rs.25 Billion and in US$420.88 millions. 2001-02 Export of Crude Oil Export of Petroleum Product Total Exports 578,452 Value in million US$ Value in million PKR 7,121,152,500 9,946,072,500 12,624,171,000 21,987,294,000 114.95 635,175 160.55 865,969 203.78 996,353 354.92 339,846 394,731 755,969 955,754 238,606 2002-03 240,444 2003-04 110,000 2004-05 40,599
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NUMBER OF INSTALLED FACTORIES.
The total number of installed factories of oil in Pakistan = 83 The total number of installed factories of gas in Pakistan=82
DIMENSSION AND INDIVISUAL STATISTICS OIL:
S# Company Total Wells (Province wise) Sindh 1 Oil & Gas Development Co. 21 11 Punjab 10 Balochistan Production (BOPD) 20430.25
Orient Petroleum Inc.,
Pakistan Oilfields Ltd.
Pakistan Petroleum Ltd.
BP Pakistan E & P
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Lasmo Oil Company Ltd.
S# Company Total Wells (Province wise) Sindh 1 2 3 4 5 6 7 8 9 10 11 Oil & Gas Development Co. BP Pakistan E & P Pakistan Oilfields Ltd. Pakistan Petroleum Ltd. Orient Petroleum Inc., OMV Pakistan Inc. BHP billiton Eni Pakistan Ltd Mari Gas Company Ltd. Tullow Pakistan Ltd. Petroleum Exploration Ltd. 13 46 6 4 4 2 1 2 1 2 1 5 46 2 1 1 1 2 1 1 1 Punjab 6 6 1 3 1 1 Balochistan 2 1 Production (MMCFD) 687.36 234.67 42.41 772.93 18.76 531.6 247.93 367.1 446.13 16.53 11.15
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TOTAL EMPLOYMENT OF THE SECTOR
Average Daily employment in numbers=11790 Employment Cost (Million Rs.)=1921
Average Daily employment in numbers=20854 Employment Cost (Million Rs.)=4142
Total trading statistics of the sector.
Crude oil (000) Year Barrels Import and export
Natural gas MMCFT Import and export
1996-97 21270 697762
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Crude oil and refined products are significant imports. Their value varies with internal demand and changes in the world oil price. In FY 1982, oil products accounted for around 30 percent of Pakistan's imports, falling to an annual average of 15 percent in FY 1987 to FY 1990, rising to over 21 percent in FY 1991, but dropping back to 15 percent in FY 1992.
THOUSAND BARRELS PER DAY CRUDE OIL PRODUCTION AND CONSUMPTION OF PAKISTAN
1985 1986 1987 1988 1989 1990 1991 1992
35 42 42 45 48 62 62 61.35
159.67 165.75 180.43 194.2 205.63 220.05 221.06 227.21
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1993 1994 1995 1996 1997 1998 1999
60.36 55 57.1 55 57 54.91 53
256.42 282.17 298.09 326.9 333.04 346.84 368.5
PRODUCTION 54.42 59.87 64.27 60 62 65.63 65.67 67.43 70.16
CONSUMPTION 365.01 360.12 355.89 336.6 326.85 336.19 359 390 383
2000 2001 2002 2003 2004 2005 2006 2007 2008
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PROVINCE WISE OIL PRODUCTION SHARE
PROVINCE SINDH PUNJAB NWFP BALOUCHISTAN PAKISTAN
SHARE % 56.36 % 31.91 % 11.619 % 0.1 % 100 %
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2006 – 2007 = 42 wells drilled. 2007 – 2008 = 52 wells drilled. Public sector= 14 wells. Private sector = 38 wells. Total investment of US $ 836 million in 2007-2008.
PAKISTAN’S PRIMARY ENERGY SUPPLIES FOR THE YEAR 2007-2008.
OIL GAS LPG COAL
30.5% 47.5% 0.7 % 9.2% 10.9 % 1.3 %
HYDRO ELECTRICITY NUCLEAR IMPORTED ELECTRICITY
Pakistan’s Primary energy supplies for the year 2007-08 amount to 63 million tones.
SOURCE:MINISTRY OF PETROLEUM AND NATURAL RESOURCES
CONSUMPTION OF PETROLEUM PRODUCTS 2007-2008.
HOUSE HOLD 0.6 %
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INDUSTRY AGRICULTURE TRANSPORTATION POWER OTHER GOVERNMENT
6.5 % 0.7 % 51.1 % 39.4 % 1.8 %
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STEPS OF OIL PRODUCTION
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OIL AND GAS PROCESSES
Gases are used for welding and cutting in the construction of an oil platform and for maintenance on the rig. When oil and gas arrive on the platform, specialty gases are utilized as reference in determining the composition and value of the oil and gas. Specialty gases are also used in monitoring the environment with respect to leakages of hazardous, inflammable gases .
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PRODUCTION CHART OF PETROLIUM PRODUCTS
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Quantity M. Tons
POLYPROPYLENE POLYETHYLENE POLYVINYL CHLORIDE POLYSTYRENE MONOETHYLENE GLYCOL SYNTHETIC FIBRES PURE TEREPHTHALIC ACID Total
15,000 200,000 90,000 30,000 400,000 730,000 400,000 2,000,000
FACTOR AFFECTING OIL AND GAS PRICES
Following are some critical factors that affect the pricing. • • • Petroleum development levy. Rate of inland freight margin including maximum ex-depot. Rate of dealer’s commission including prescribed price.
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• • •
Rate of distributor’s margin of oil marketing company. General sales tax. Maximum ex-depot sales sales prices.
Pricing also depends upon the type of consumer according to demand and consumption such as,
For domestic consumers, including residential colonies, mosques, churches, temples, madrassas, other religious places and hostels attached thereto, Government and semi-Government offices and hospitals, Government guest houses, Armed Forces messes, langars, universities, colleges, schools and Private Educational Institutions, orphanages and other charitable institutions.
All establishments registered as commercial units with local authorities or dealing in consumer items for direct commercial sale like cafes, bakeries, milk-shops, tea stalls, canteens, barber shops, laundries, tandours, places of entertainment like cinemas, clubs, theaters and private offices, clinics, maternity homes, etc.
All establishments registered as commercial units with local authorities or dealing in consumer items for direct commercial sale like cafes, bakeries, milk-shops, tea
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stalls, canteens, barber shops, laundries, tandours, places of entertainment like cinemas, clubs, theaters and private offices, clinics, maternity homes, etc.
MAJOR ELEMENTS OF COST
Following are the major elements of cost determination: • • • • • • • • • • • Exploration cost of oil and gas. Research and development cost. Raw material cost. Refining cost. Production cost. Machinery cost Maintenance cost. Over head costs. Transportation and distribution cost. Labor cost. Government taxes.
The oil and gas sector has a considerable impact on the economy – the sector attracts by far the highest level of foreign direct investments in the country, and raises significant tax income for the government. At the same time, high imports of crude oil and petroleum products affect the balance of payments adversely. In addition, the annual economic cost of guarantees and subsidies in the sector is significant as it is estimated at about Rs. 33 billion (in the form of direct and implicit subsidies, and foregone taxes). Substantial progress has been made in the restructuring and reform of the oil and gas sectors, deregulation of prices, and privatization of selected assets. The reforms have enhanced transparency, making decision makers aware of the various aspects of the business.
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POTER’S FIVE FORCES MODEL ANALYSIS
Michael Porter developed a technique for analyzing industrial structure and its competitive forces known as Porter’s five forces model. This model describes an enterprise in relation to its economic environment. The competitive position of an industrial enterprise depends on five competitive forces.
1. 2. 3. 4. 5.
Industrial rivalry. Potential substitutes. Bargaining power of buyers. Bargaining power of suppliers. Threats of new entrants.
All five forces together provide a good overview of the attractiveness of the oil and gas industry, and can help to estimate its further profit potential.
This describes the intensity of competition between existing firms in an industry. In case of oil and gas industry the major competing companies are National refinery limited (NRL), Pak-Arab refinery limited (PARCO) and Pakistan refinery limited (PRL). They are competing with each other on the basis of their products and pricing making it heard for any new rivals to enter. The major competing products of National refinery limited are motor gasoline (Rs22.61), kerosene (Rs28.75), JP1 (Rs27.27), JP4 (Rs24.66), High speed diesel (Rs29.99) Light diesel oil (Rs27.44) Furnace oil (17576 RS / MT) LPG (17000 RS / MT) Naphtha (for export). Pak-Arab refinery limited maintaining the products such as furnace oil (35795 Rs/ton), LPG (45,878.10 Rs/ton), Sulpher (12,157.80 Rs\ton). In Pakistan refinery limited the products are motor spirit (48.55 Rs\liter), kerosene (31.60 Rs\liter), JP1 (58.53 Rs/liter), JP8 (61.30 Rs\liter), HSD (64.43 Rs\liter), furnace oil (36165 RS / MT), LPG (39809 RS / MT). The rivalry is intense
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because there are many small or equally sized competitors. Oil and gas industry have high fixed costs that encourage competitors to fill unused capacity by price cutting. The switching cost in oil and gas industry is relatively low.
THREAT OF POTENTIAL SUBSTITUTES
Threat of substitute exist in oil and gas industry because the product’s demand is affected by the price change of a substitute product e.g. LNG substituting CNG. The price elasticity of Oil and gas products like Petrol, CNG, and HSD etc is affected by the substitute products because more substitutes are becoming available and the demand become more elastic since customers have more alternatives such as CNG, LPG, and LSD etc. Because of the availability of close substitute of oil and gas product the firms in oil and gas industries raise prices. While the threat of substitutes typically impacts oil and gas industry through price competition, there are other concerns in accessing the threats of substitute like the substitutability of liquid oxygenated products and bio-fuels versus gas, oil and diesel. New technologies are available and the changing structure of oil and gas industry is contributing to competition among these substitute means of fuel consumptions.
THE BARGINING POWER OF THE BUYERS
The major buyers for oil and gas products are ATTOCK PETROLEUM LIMITED (APL), PAKISTAN STATE OIL COMPANY LTD, SHELL PAKISTAN LTD, CALTEX OIL PAKISTAN LTD and TOTAL PARCO PAKISTAN LTD. The bargaining power of the buyers is weaker because they have the threat of forward integration by the producers like SAUDI ARABIAN OIL COMPANY (SAUDI ARAMCO), British petroleum, etc who can take over their own distribution or retailing. Significant buyer switching cost which means buyer cannot easily switch to another product. Buyers are fragmented which means the buyers have no particular influence on product and producer supply critical portions of buyers input.
THE BARGINING POWER OF THE SUPPLIERS
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Major suppliers of crude oil and natural gas are SAUDI ARABIAN OIL COMPANY (SAUDI ARAMCO), E.N.I PAKISTAN LTD, OIL & GAS DEVELOPMENT COMPANY LTD, B.H.P PETROLEUM, PAKISTAN PETROLEUM LTD, PAKISTAN PETROLEUM LTD, O.P.I (PVT) LTD, O.M.V PAKISTAN, and BRITISH PETROLEUM. As the suppliers are powerful they have an influence on producing industry such as selling raw material at a higher price to capture some of the industry profits. They can integrate forward. They have the information of their buyer.
THREATS OF NEW ENTERANTS
Oil and gas have barriers to entry which are more than the normal equilibrium adjustments that oil and gas markets typically make i.e. when the earnings increases it is expected that the additional firms will enter in the oil and gas markets to take the advantage of high profit levels and when the income decreases the some of the firms exit the market restoring the market equilibrium. On the other hand raising prices or expectation that future prices of oil and gas will rise encourage rivals to enter in the market. But if the firms individually keep the prices low as a strategy to prevent potential entrants from entering the market it can be an established entry deterring pricing barrier. Barriers to enter in oil and gas industry are arising from following sources which are Government created barriers (taxes, fright margin, petroleum development levy etc), patents and proprietarily knowledge to restrict entry into an industry(ideas and knowledge that provide competitive advantages treated as private property) , asset specificity that inhibits entry in to an industry (asset specification to the extent to which the firm’s asset can be utilize to produce a different product) and organizational internal economies of scale (cost efficiency level of production).
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Pakistan State Oil (PSO)
Pakistan Petroleum Limited (PPL)
Oil and Gas Development Company Limited (OGDCL)
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MAJOR OIL AND GAS FIELDS : Chanda, Tando Alam, Thora, Sono, Bobi, Pasakhi, Lashari, Toot, Chak Nurang, Fimkasar, Dakhni, Sadkal, Rajian, Missa Kiswal, Kal, Dhodak, Missan, Loti, Qadirpur, Nandpur, Uch, Daru, Kunnar, Palli and Pirkoh.
(OGDCL)Highlights HY 2008 -2009.
o NET CRUDE OIL PRODUCTION o NET GAS PRODUCTION o NET LPG PRODUCTION o NET SULPHUR PRODUCTION
41,573 bbl per day. 964 mmcf per day. 229 tons per day. 66 tons per day.
o Net profit after tax stood at Rs.31,782 million resulting in earning per share 7.39 as Rs.24,093 million and earning per share 5.60 respectively during last year.
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EXPLORATION AND PRODUCTION COMPANIES WORKING IN PAKISTAN
Hycarbex Inc.(USA) PAIGE Limited (PAIGE).(USA) BP Pakistan Exploration & Production.(USA) Premier Oil Pakistan.(UK) Tullow Pakistan (Developments) Ltd.(UK) NATIVUS Resources Limited.(UK) Rally Energy Pakistan Ltd.(CANADA) BHP billiton.(AUSTRALIA) Eni Pakistan Ltd.(ITALY) MOL Oil & Gas Company B.V. (HUNGARY) OMV Pakistan Inc.(AUSTRALIA) Petronas Carigali (Pakistan) Ltd.(MALAYSIA) Polish Oil & Gas Company.(POLAND)
Saif Energy Limited.(PAKISTAN)
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RDC International (Pvt) Ltd.(PAKISTAN) Pakistan Petroleum Ltd.(PAKISTAN) Orient Petroleum Inc.(PAKISTAN) Petroleum Exploration (Pvt) Ltd.(PAKISTAN) Oil & Gas Development Company Ltd.(PAKISTAN) Mari Gas Company Ltd.(PAKISTAN) Pakistan Oilfields Ltd.(PAKISTAN)
EXPLORATION OF OIL & GAS
First exploration well First oil discovery
1866 1915 716 213 1 : 3.4 827,268 Sq. km.
Total exploratory wells drilled Total discoveries Success rate Sedimentary basin area
SOURCE:MINISTRY OF PETROLEUM
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PAK-ARAB REFINERY (PARCO). NATIONAL REFINERY LIMITED (NRL). ATTOCK REFINERY LIMITED (ARL). BOSICOR PAKISTAN LIMITED (BPL). DHODAK REFINEY LIMITED (DRL). PAKISTAN REFINERY LIMITED (PRL). INDUS OIL REFINERY LIMITED(IRL).
Khalifa Coastal refinery (KCR) near the coastal area of balouchistan completed in half quarter of 2011 have the capacity of producing 35 to 45 million barrels per year of HSD.
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MARKETING AND DISTIBUTION
PAKISTAN STATE OIL CO.LTD.(PSO) SHELL PAKISTAN LTD.(SPL) CHEVRON PAKISTAN LTD.(CALTEX)(COPL) TOTAL PARCO PAKISTAN LTD.(TPPL) ATTOCK PETROLEUM LTD.(APL) PARC0-PEARL ADMORE GAS (PVT)LTD
64.2% 19.9% 7.3% 4.00% 2.6% 1.3% 0.7%
NEW ENTERENED IN THE MARKET
ASKAR OIL SERVICES(PVT)LTD HASCOMBE STORAGE(PVT) LTD. OVERSEAS OIL TRADING CO.(PVT)LTD. BAKRI TRADING COMPANY PAKISTAN(PVT)LTD. BOSICOR PAKISTAN LTD.
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PROVINCE WISE OIL COMPANIES SALES ENERGY PRODUCT 2007 – 2008.
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GAS TRANSMISSION AND DISTIBUTION
SUI NORTHERN GAS PIPELINE LIMITED(SNGPL) SUI SOUTHERN GAS COMPANY LIMITED(SSGCL) PAK-ARAB PIPELINE CO. LTD.
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Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas company serving more than 3 million consumers in North Central Pakistan through an extensive network in Punjab and NWFP. The Company has over 45 years of experience in operation and maintenance of high-pressure gas transmission and distribution systems. It has also expanded its activities to undertake the planning, designing and construction of pipelines, both for itself and other organizations. SNGPL operates in a region of the nation that has a rapidly growing demand for natural gas and power generation due to significant industrial development. SNGPL was incorporated as a private limited Company in 1963 and converted into a public limited company in January 1964 under the Companies Act 1913, now Companies Ordinance 1984, and is listed on all the three Stock Exchanges of the Country. SNGPL transmission system extends from Sui in Balochistan to Peshawar in North West Frontier Province (NWFP) comprising over 7,016 KM (as on June 2008) of Transmission System (Main lines & Loop lines). The distribution activities covering 1224 main towns along with adjoining villages in Punjab & NWFP are organized through 8 regional offices. Distribution system consists of 59,951 KM (as on June 2008) of pipeline. SNGPL has 3,190,181 consumers comprising Commercial, Domestic, General Industry, Fertilizer, and Power & Cement Sectors. Sales to these consumers were 598,270* MMCF worth Rs. 123,460* million during Jul 07 - Jun 08. Annual gas sale for year 2006-2007 was 576,658 MMCF worth Rs. 112,577 million.
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March 2007- July 2008 Extension of gas network:
• • • •
Rs.1552 million on transmission project. Rs.3357 million on distribution project. Rs.487 million on other projects. 2008-2009 is Rs.13,514 million investment on transmission ,distribution and other project.
INDUSTRIAL CONSUMER = 5126 COMMERCIAL CONSUMER = 48,048 DOMESTIC CONSUMER = 3,068,068 TOTAL CONSUMER = 3,121,273
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Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas Company. The company is engaged in the business of transmission and distribution of natural gas besides construction of high pressure transmission and low pressure distribution systems. SSGCL transmission system extends from Sui in Balochistan to Karachi in Sindh comprising over 3,200 KM of high pressure pipeline ranging from 12 - 24" in diameter. The distribution activities covering over 1200 towns in the Sindh and Balochistan are organized through its regional offices. An average of about 357,129 million cubic feet (MMCFD) gas was sold in 2006-2007 to over 1.9 million industrial, commercial and domestic consumers in these regions through a distribution network of over 29,832 Km. The company also owns and operates the only gas meter manufacturing plant in the country, having an annual production capacity of over 550,150 meters. The Company has an authorized capital of Rs. 10 billion of which Rs 6.7 billion is issued and fully paid up. The Government owns the majority of the shares which is presently over 70%. The Company is managed by an autonomous Board of Directors for policy guidelines and overall control. Presently, SSGC's Board comprises of 14 members. The Managing Director/Chief Executive is nominee of GOP and has been delegated with such powers by the Board of Directors as are necessary to effective conduct the business of the company.
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March 2007- July 2008 Extension of gas network: • • • • • INDUSTRIAL CONSUMER = 3,448 COMMERCIAL CONSUMER = 22,792 DOMESTIC CONSUMER = 1,985,466 TOTAL CONSUMER = 2,011,106 Rs.435 million on transmission project. Rs.2,230 million on distribution project. Rs.25 million on other projects. 2008-2009 is Rs.7,500 million investment on transmission ,distribution and other project.
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GOVERNMENT SHARE HOLDING
The Organization of the Petroleum Exporting Countries (OPEC)
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The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization, created at the Baghdad Conference on September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The five Founding Members were later joined by nine other Members: Qatar (1961); Indonesia (1962) – suspended its membership from January 2009; Socialist People Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973) – suspended its membership from December 1992-October 2007; Angola (2007) and Gabon (1975–1994). OPEC had its headquarters in Geneva, Switzerland, in the first five years of its existence. This was moved to Vienna, Austria, on September 1, 1965.
1st OPEC Conference, Baghdad, September 10–14, 1960
OPEC Board of Governors, Geneva, September 3, 1962
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The 1960s These were OPEC’s formative years, with the Organization, which had started life as a group of five oil-producing, developing countries, seeking to assert its Member Countries’ legitimate rights in an international oil market dominated by the ‘Seven Sisters’ multinational companies. Activities were generally of a lowprofile nature, as OPEC set out its objectives, established its Secretariat, which moved from Geneva to Vienna in 1965, adopted resolutions and engaged in negotiations with the companies. Membership grew to ten during the decade.
7th OPEC Conference, Jakarta, November 23–28, 1964
The 1970s OPEC rose to international prominence during this decade, as its Member Countries took control of their domestic petroleum industries and acquired a major say in the pricing of crude oil on world markets. There were two oil pricing crises, triggered by the Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in 1979, but fed by fundamental imbalances in the market; both resulted in oil prices rising steeply. The first Summit of OPEC Sovereigns and Heads of State was held in Algiers in March 1975. OPEC acquired its 11th Member, Nigeria, in 1971.
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32nd (Extraordinary) OPEC Conference, Vienna, March 16–17, 1973
The 1980s Prices peaked at the beginning of the decade, before beginning a dramatic decline, which culminated in a collapse in 1986 — the third oil pricing crisis. Prices rallied in the final years of the decade, without approaching the high levels of the early-1980s, as awareness grew of the need for joint action among oil producers if market stability with reasonable prices was to be achieved in the future. Environmental issues began to appear on the international agenda.
Venezuelan President Luis Herrera Campaigns' visits OPEC Headquarters, February 14, 1980
The 1990s A fourth pricing crisis was averted at the beginning of the decade, on the outbreak of hostilities in the Middle East, when a sudden steep rise in prices on panic-stricken markets was moderated by output increases from OPEC Members. Prices then remained relatively stable until 1998, when there was a collapse, in the wake of the economic downturn in South-East Asia. Collective action by OPEC and some leading non-OPEC producers brought about a recovery. As the decade ended, there was a spate of mega-mergers among the major international oil companies in an industry that was experiencing major
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technological advances. For most of the 1990s, the ongoing international climate change negotiations threatened heavy decreases in future oil demand.
107th OPEC Conference, Vienna, March 23, 1999
ORIGINIZATION OF ECONOMIC CO- OPERATION AND DEVELOPMENT The forerunner of OECD was the Organization for European Economic Cooperation (OEEC). OEEC was formed in 1947 to administer American and Canadian aid under the Marshall Plan for the reconstruction of Europe after World War II. Its headquarters were established at the Château de la Muette in Paris in 1949. OECD took over from OEEC in 1961. Since then, its mission has been to help its member countries to achieve sustainable economic growth and employment and to raise the standard of living in member countries while maintaining financial stability – all this in order to contribute to the development of the world economy. Its founding Convention also calls on it to assist sound economic expansion in other countries and to contribute to growth in world trade on a multilateral, nondiscriminatory basis. OECD's 30 members The 30 member countries of OECD are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France,
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Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States. Twenty of these countries became members on 14 December 1960, when the Convention establishing the organization was signed. The others have joined over the years. In a Supplementary Protocol to the OECD Convention, the signatory states decided that the Commission of the European Community “shall participate in the work” of the Organization. This participation goes well beyond that of a mere observer, and in fact gives the Commission quasi-Member status.
In May 2007, OECD countries agreed to invite Chile, Estonia, Israel, Russia and Slovenia to open discussions for membership of the Organization and offered enhanced engagement, with a view to possible membership, to Brazil, China, India, Indonesia and South Africa. The approval of so-called "road maps" in last December marks the start of accession talks with Chile, Estonia, Israel, Russia and Slovenia.
In contrast to many other international organizations, becoming a member of OECD is not something that is automatically open to applicant countries. The member countries of the Organization, meeting in its governing body (the Council), decide whether a country should be invited to join OECD and on what conditions. This decision is taken at the end of what might be called the accession process.
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Beside of so many advantages by this very scare resource of the world is impacting a lot ot the natural physic. Like som any chronologist think that the uses of the oil and gas the emission of the gas and oil is destroying the oozing layer as many magazines point out this fact…like THE ECONOMIST PRINT and SCIENCETAGE.COM.
Oct 8th 2009 From The Economist print edition Crude World: The Violent Twilight of Oil. By Peter Maass. Knopf; 288 pages; $27. Allen Lane; £20. Buy from Amazon.com, Amazon.co.uk THE story of oil has many villains: greedy oil-company executives, rapacious dictators, shady middlemen and the like. And it has many victims: a warming atmosphere, sullied soils and water, and fragile societies. It is tempting to draw a straight line from one to the other—the bad guys cause the damage. It is a selling point of “Crude World”, a new book by Peter Maass, an American journalist, that it avoids this easy connecting of the dots.
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It sometimes seems as if God played a cruel trick on humanity by putting so much of a precious resource in such rough places. But it was the oil that helped many of those places to become what they are by strengthening their currencies and making the rest of their economies uncompetitive. Oil weakens the bonds between governments and people by flooding public coffers with money, removing the need for wise spending. And it rends societies, making them vulnerable to civil war.
So the villain of the piece is neither oilman nor despot but oil itself. The stuff oozes out of Mr Maass’s portraits of countries afflicted, never blessed, with the presence of oil. It fills the streams in Ecuador where Chevron, an oil concessionaire, is accused of dumping its wastewater during a long period of drilling. Natural gas flares give the sky a hellish glow in Mr Maass’s dispatch from Nigeria, in which he canoes around with the “king” of a band of Niger Delta locals fighting Shell, the biggest oil company in the region. The recurring tragedy of oil is that it produces wealth but not what is needed most in poor countries: jobs. Once wells or refineries are built, they take few men to run them. So the money just pours out of the ground, much of it hauled off by foreign companies, and the rest sucked up by greedy regimes. Equatorial Guinea’s tiny population and recent oil discovery should make it one of the richer countries in the world. Its capital, Malabo, has a direct flight to Houston. Yet most of its people remain miserably poor while its cartoonish and bloodthirsty ruler gives himself a presidential Boeing 737 with goldplated bathroom fixtures. Mr Maass’s strength is not economic analysis. In his opening chapter he uncritically endorses “peak oil”, the notion that the world’s crude production will soon begin to decline, lightly dismissing the view of the many experts who believe the peak to be a long way off. But this does not detract from his main point: oil has damaged the countries it comes from. Oil companies are not particularly greedy; after all, as Mr Maass notes, Apple does not exactly give away its iPods, but sells them at the highest price it can. He admires the cunning and devotion of the oilmen he meets. But, from his perspective, few businesses are as unrewarding, in the sense of providing jobs or useful infrastructure, as the oily one.
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The damage oil does: Oozing trouble
Thu, 10/08/2009 - 10:47 — sciencestaff
For many poor countries oil is the villainCrude World: The Violent Twilight of Oil. By Peter Maass. Knopf; 288 pages; $27. Allen Lane; GBP20. Buy from Amazon.com, Amazon.co.uk THE story of oil has many villains: greedy oil-company executives, rapacious dictators, shady middlemen and the like. And it has many victims: a warming atmosphere, sullied soils and water, and fragile societies. It is tempting to draw a straight line from one to the other—the bad guys cause the damage. It is a selling point of “Crude World”, a new book by Peter Maass, an American journalist, that it avoids this easy connecting of the dots. ...
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Natural gas obtained from soil ,alone or along with petroleum it have low molecular weight.
COMPOSITION OF NATURAL GAS:
Methane Ethane - Propane
70-90 % 0-20 % 0-8 % 0.02 % 0-5 % 0-5 %
Butane - carbon dioxide
o 60-90% less smoke - producing pollutants. o Less expensive than gasoline . o o o Power generation. Automobiles. Residential use.
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Production of fertilizers .(urea) Uses in manufacturing of fabrics, glass, steel, plastics, paint etc.
CNG (Compressed Natural Gas)
The Government is promoting the use of Compressed Natural Gas (CNG) to reduce pollution caused by vehicles using motor gasoline and to improve the ambient air quality. Pakistan has become the largest CNG consuming country among Natural Gas Vehicle (NGV) countries. There are about 2,068 established CNG stations in the country and approximately 1.7 million vehicles are using CNG. A large number of vehicles auto ,cars and buses) have been and are still being converted to CNG. The provincial governments are working on this policy to encourage the use of CNG, which will ultimately cut down the cost of diesel oil import. The Govt. has made program to convert vehicles on to CNG which are commonly used by general public (it includes buses, mini-buses and wagons) in Karachi ,Hyderabad, Lahore, Faisalabad, Peshawar, Quetta and Islamabad/Rawalpindi. This program will have a major impact on air quality of urban areas and will improve health standards as well.
LPG (Liquefied Petroleum Gas )
Its contribution is about 0.7% of country’s total energy supply mix.
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The use of LPG as a domestic fuel is being encouraged to slow the ongoing deforestation in the areas where supply of natural gas is technically not viable. LPG supplies have been increasing at annual rate of 12.6 percent during the last few years with supply of 648,572 Metric Ton in 2006-07. The LPG marketing companies have imported around 23,362 MT during July 2007-08.
LNG (Liquefied Natural Gas)
The government is encouraging LNG import by the Private sector and announced its first-ever LNG policy in 2006. The PGPL (Philips Gas Pipe line Company) has signed an Implementation Agreement with Port Qasim Authority for establishment of an off-shore LNG Import Terminal at Port Qasim, Karachi having a capacity of 3 million tones/annum (400 mmcfd). Production 2007-2008 is 285 metric tons which is decrease by 8% by previous year. Sulphur production 71 metric tons per day which is increase by 9 % by the previous year.
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PROVED RESERVED PRODUCTION CONSUMPTION EXPORT
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PROVINCE WISE ANNUAL GAS PRODUCTION SHARE
PROVINCE SINDH PUNJAB NWFP BALOUCHISTAN PAKISTAN
% 70.7 % 4.52 % 1.84 % 22.5 % 100 %
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ANNUAL ENERGY CONSUMPTION:
The consumption of petroleum products, gas, electricity and coal during the first nine months (July-March 2007-08) of the current fiscal year increased by 10.1 percent, 2.8 percent, 5.7 percent and 11.9 percent, respectively over the corresponding period of last year.
During the first nine months of the outgoing fiscal year 2007-08, the consumption of petroleum products increased by 10.1 percent. The consumption of petroleum products declined by 29.7 percent in industry, but registered an increase in household, agriculture, transport, and power sector by 2.5 percent, 29.9 percent, 19 percent and 10.4 percent, respectively (See Table-15.2). Overall, the consumption of petroleum products has been declining in the household sector
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for two decades, mainly due to accessibility of alternative. cheaper fuels such as coal, natural gas and LPG as
well as surge in their prices. On the other hand ,consumption in the agriculture sector shows a massive increase due to higher demand in this sector and less availability of electricity in the last two years in particular. Similarly, consumption in the power sector increased due to non-availability of alternative sources of energy. The annual growth in the consumption of petroleum products by major sectors and their relative shares during 1997-98 to 2007-08.
The transport sector is the largest user of petroleum products accounting for 51.1 percent of consumption, on average, followed by power sector (39.4 percent), industry (6.5 percent), agriculture (0.7 percent) and household (0.6percent).
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Natural gas has been gaining immense substance around the world due to its quality of being a cleaner fuel compared to coal and oil. Pakistan depends heavily on its natural gas reserves for different sectors of the economy. Because of its importance as an alternative and relatively cheaper fuel, the share of gas in total energy is on the rise. Table 15.4 depicts the annual change in the consumption of gas by various users during 1997- 98 to 2007 08. During July-March 2007-08, the consumption of gas in transport sector increased by 27.8 percent, while household consumption grew by 11.6 percent followed by fertilizer (3.5 percent). However, the consumption of gas declined in commercial sector (-7.1 percent), cement (-5.1 percent) and power sectors (-1.2 percent).
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The relative share of gas consumption by end users during the last ten years is documented in Table 15.5. At present, the power sector is the largest user of gas accounting for 33.5 percent share followed by the industrial sector (23.8 percent), household (18.1 percent), fertilizer (15.6 percent), transport (5.4 percent) and cement (0.9 percent).
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SHARE OF CONSUMPTION OF ELECTRICITY BY END USER:
COMPOSITION OF ENERGY SUPPLIES:
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The supply of primary energy has increased by 49.5 percent in the last 10 years. The primary commercial energy supplies increased by 4.3 percent during 200607 to 60.4 million tones of oil equivalent (MTOE) from 57.9 MTOE in 2005-06. The slower growth during 2006-07 can be attributed to (i) lower consumption of oil. (HOBC, Kerosene, LDO and Furnace Oil) (ii) negative growth (-2 percent and -21.3 percent) in the import of High Speed Diesel (HSD) and Low Sulphur Furnace Oil, respectively, a marginal increase (0.7 percent) in the import of High Sulphur Furnace Oil. The per capita availability of energy grew by 2.61 percent in 2006-07. The supply of energy however, grew strongly by 10.03 percent in the first nine months (July-March) of the current fiscal year and consequently, the per capita availability registered an increase of 7.7 percent -- the highest in the last ten years. The annual trends of primary energy supplies and their per capita availability; measured in TOE from 1997-98 to 2007-08.
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The balance recoverable reserves of crude oil in the country as on January 1st 2008 have been estimated at 339 million barrels. The average crude oil production during July- March 2007-08 was 70,166 barrels per day as against 66,485 barrels per day during the corresponding period of last year, showing an increase of 5.54 percent. During the period under review, 31,378 (44.72 percent) barrels per day were produced in Northern region and 38,787 (55.28 percent) barrels per day in Southern region, as against 28,507 (42.87 percent) barrels and 37,978 (57.12 percent) barrels produced per day, respectively in the same period last year. During July-March 2007-08, production of crude oil has increased by 10.1 percent from Northern region whereas production increased in Southern region by 2.1 percent, in comparison to the production in the same period of last year, resulting in an increase of 5.54 percent oil production in the country. The company wise details of production of crude oil during July- March 2007-08 and corresponding period of the last fiscal year is given in Table 15.10.
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During July-March 2007-08, a total of 52 wells have been drilled, including 14 wells in the public sector and 38 in the private sector as against 45 in the same period last year, registering an increase of 15.6 percent. Total investment of US$ 836 million has been made in the outgoing fiscal year in the upstream sector. Table 15.11 provide the details of drilling activities of the public and private sector, engaged in the exploration and development of wells, with achievements during July-March 200708 and 2006-07.
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Natural gas is a clean, safe, efficient and environment-friendly fuel. The Energy Security Action Plan of the Planning Commission estimated that Pakistan will be facing a shortfall in gas supplies rising from 1.4 Billion Cubic Feet (BCF) per day in 2012 to 2.7 BCF in 2015 and escalating to 10.3 BCF per day by the year 2025 (Figure15.6). This forecast is based on expected annual GDP growth rate of 6.5 percent and average annual gas price delivered to the consumers at US$ 4 Million British Thermal Units (MMBtu). In order to bridge the demand-supply gap, the government is working on many fronts, which includes Iran- Pakistan-India (IPI) gas pipeline project which has reached at fairly advanced stage.
As on January 1st 2008, the balance recoverable natural gas reserves have been estimated at 31.266 trillion cubic feet. Consumption of natural gas from July 2007- March 2008 is anticipated to increase from 3,352 million cubic feet per day
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(mmcfd) (2006-07) to 3,474 mmcfd, while the average production of natural gas during July- March 2007-08 was 3,965.9 mmcfd as against 3,876.4 mmcfd during the corresponding period of last year, showing an increase of 2.31 percent. Natural gas is used in general industry to prepare consumer items, produce cement, fertilizer and generate electricity. Additionally, it is used in the transport sector in the form of CNG. Currently 27 private and public sector companies are engaged in oil and gas exploration & production activities. The company wise position reveals that the production of gas increased by 15.79 percent by BHP followed by 9 percent increase by OGDCL(See Table 15.12).
Physical performance of SNGPL and SSGPL:
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NATURAL GAS SECTORAL CONSUMPTION DURING 2007 -2008
FERTILIZER CEMENT INDUSTRY GENERAL INDUSTRY DOMESTIC (HOUSE HOLDS)
33.5 % 15.6 % 0.9 % 23.8 % 18.1 %
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COMMERCIAL TRANSPORT (CNG)
2.7 % 5.4 %
SOURCE:MINISTRY OF PETROLEUM AND NATURAL RESOURCES HYDRO CARBON DEVELOPMENT INSTITUDE OF PAKISTAN
USES OF OIL AND GAS IN OUR LIFE:
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PRODUCTS AND LINKAGES:
Motor oil Gasoline (petrol) Kerosene oil Jet fuel High speed diesel (HSD) Furnace oil (virgin) Naphtha for petrol Lubrications (Adhesives) Liquid petroleum gas (LPG) Liquefied natural gas (LNG) Compressed natural gas (CNG) Sulphur diesel Hi-octane Fertilizers Grease Turpentine Paraffin wax (candles) Mineral oil (Nylon,Rayon,PVC,Vinyl)
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Chemical industry Ink industry Plastic industry Paint industry Automobile industry Tar (Raw material for making roads) Sprits (Perfumes,Body sprays) Gas welding (Oxyethyne torch uses for welding) Artificial ripening of green fruits (ethene)
IMPACT OF WORLD TRADE ORGANIZATION ON OIL AND GAS INDUSTRY
As a part of an integrated investment promotion strategy under WTO, the government undertook a comprehensive program of economic reforms, including liberalization, privatization and deregulation of oil and gas services and infrastructure were opened to foreign investment.
Under the argument of privatization by WTO, in FY07 the government plans to privatize 26 companies including Sui Northern Gas Company (Pakistan’s largest gas company); Sui Southern Gas Company; Pakistan State Oil (PSO), Pakistan's largest gasoline retailer; and Pakistan Petroleum, Ltd. The government also plans to offer the global depository receipts of the oil and gas Development Company (Pakistan’s largest energy exploration company) in the international securities markets.
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In 2000, Pakistan enacted a patent law that protected both process patents and product patents in accordance with its WTO obligations. Under this law, both the patent owner and licensees can file suit against those who infringe.
The government does not invite private tenders for the transportation of crude oil and requires all crude oil to be transported by the state-owned Pakistan National Shipping Corporation. Though a member of the WTO, Pakistan has yet to agree to the WTO Government Procurement agreement.
Sector attracts by far the highest level of foreign direct investments and raises significant tax income for the government. Pakistan is among the most gas dependent economies of the world. About 52 TCF of gas reserves have been discovered of which 19 TCF have already been produced. Success rate of oil and gas exploration in Pakistan is good as compared to international discoveries. In Pakistan 3-4 wells 1 find and internationally 8-10. Government sets target to drill 100 new oil, gas exploration wells in year 2009. OGDCL and PPL is being expanded to other countries like Yemen, Iraq, Nigeria and Sudan.
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The exploration activities would be intensified in Balouchistan’s area of Kohlu, which is famous for having natural resources in abundance. 7 refineries almost working in the sector foreign countries interested to set up new refinery plants in the country. Two gas distribution companies (SNGPL) and (SSGPL) investing over 200 million US $ a year to increase the capacity of existing distribution network of 80,000 kilometers.
In Pakistan demand of oil and gas is higher then the supply it only meets the 18 % of domestic demand. There are total 7 refineries working in Pakistan still not fulfill the local demand of oil and gas. The on-going deforestation in the areas where supply of natural gas is technically not viable. Only 20 % of population easily access to natural gas.
The government has demonstrated a strong political commitment and taken a number of steps to deregulate the oil and gas sector in keeping with the overall vision of a liberalized economy. This will be resulting in a number of structural changes and contributed to a somewhat competitive market and generally improved quality of service. Thar field is the 5th largest (185 billion tones) coal field in the world but has remained un-exploited. The reserves could be used in the production of electricity to overcome power shortage. 960 Appraisal wells of oil and gas estimate by ministry of petroleum in the country which shows how much potential in the country. Ministry has so far awarded 119 exploration licenses to public and private sector.
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Oil and gas pipeline projects with Turkmenistan should be finalized soon because energy requirements are increasing rapidly. Rise in gas rates would put a negative impact on the economy and make the industry uncompetitive. Persistently high global oil prices pose a threat to Pakistan’s balance of payments. Pakistan imports more than 50mn barrels of oil a year to satisfy local demand for fuel products and record-high prices have led to widening of the trade deficit.
Resources of gas and coal should be properly utilized for power generation to reduce the dependence of imported crude oil, and to reduce heavy burden on foreign exchange. Government takes steps to improve Hydel power, solar power & Wind power generation. It supplies the power at cheaper rate to both industrial and residential sector. It shows high reduction on import of crude oil. We have ingenuous reserves of natural gas in the country government should need to encourage the transport sector to switch to CNG. Conversion of HSD (high speed diesel) to CNG to reduce the import bills.
The government should continued to provide a conducive and congenial
business environment for the existing investors in the oil & gas sector, as they are the best ambassadors for attracting new investment in the country.
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Government policies should be targeted to attract reputable companies
with required resources in both the upstream and downstream sectors of the oil & gas industry to avoid fly-by-night operators. Government should need to plan such polices to promote the quality of local transport in the big cities to over come the excess consumption of oil and gas. It Over come the problem of Traffic Jams in cities. Government take plan to Developed the Infra Structure of Signal Free Zone. It helps to reduce Time & Less Consumption of Oil & Gas. Government take plan to introduce research centre to find a new way of resource, this help to reduce the dependence of Oil & Gas Resources.
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