OIL AND GAS DEVELOPMENT COMPANY LIMITED Head Office Islamabad
Mumtaz Ali Saeed Ahmed Hakim Ali Ayaz Ali MBA-4th “A” SUBMITTED TO Mr. Basharat Ahmed Session 2009-2011
Quaid-i-Azam School of Management Sciences Quaid-i-Azam University Islamabad
This project is dedicated To the Almighty Allah and His Holy Prophet (P.B.U.H) May Allah Bless the Persons who guide the people for the path of Allah.
We would take this opportunity to thank Mr. Basharat Ahmed, our teacher for the course of Business Policy at the Quaid-i-Azam School of Management Science, Quaid-i-Azam University Islamabad, for his valuable support and encouragement which he has offered. His words of wisdom will always be remembered, and We are convinced that the knowledge of Business policy And Strategy that he has imparted to all of us would go a long way in making us good managers and help us all through our professional career.
This report cannot be solely attributed to our combined effort but it is indeed the joint effort of many friends and well wishers. There were times in the course of preparing this report when things were tough and the future seemed dark. It could not have been possible to write it, without the immense help of a few individuals to whom we would like to offer my gratitude.
In particular we would like to thank Mr. Abdual Raziq Khatak (Personnel Officer HR Policy Department), of OGDCL for his immense contribution towards this report. Without his corporation and the amount of time he gave us, this report would not have existed.
Thanks a lot! Mumtaz Ali Saeed Ahmed 4
Ayaz Ali Hakim Ali
OGDCL not only carries out exploration and development activities on its own but has also entered into joint ventures for oil and gas exploration. In 1952. OGDCL is 100% owner in two concessions. i. (PPL) and Pakistan Oilfields Ltd. OGDCL now holds the largest shares of oil and gas reserves in the country. In addition. PPL discovered a giant gas field at Sui in Balochistan. OGDCL has grown into a technically and commercially viable organization
For preparing an effective business plan of OGDCL we visited Head office Located at Islamabad and met Abdul Raziq Khattak (Personnel Officer. 155 exploratory wells have been drilled by OGDCL in the country since its inception leading to 49 discoveries. OGDCL is one of the principal explorers and producers of oil and gas in the country. (POL).Executive Summary
OGDCL is one of the leading Exploration and Production Company in the Oil and Gas Industry of Pakistan. Today. Prior to OGDCL's emergence. Historically. Since it development. Presently. 6
. 33 of which were of oil and 16 gases.e. 48% of total oil and 37% of total gas reserves. and have included all the essential information which is the main requirement of preparing Business Plan. We have prepared eight chapters in our Business Plan of OGDCL. Its percentage share of the total oil and gas production in Pakistan is 34% and 28% respectively. exploration activities in the country were carried out by Pakistan Petroleum Ltd. HR Policy) for collection of required information we observed the working activities held at the Head office. it is the operator as well as a working interest owner in 16 concessions and partner in another 19 concessions operated by other oil companies.
PPL discovered a giant gas field at Sui in Balochistan. Company History 1. In the initial stages
. During the 1950s. Private Companies whose main objective was to earn profit were not interested in developing the gas discoveries especially when infrastructure and demand for gas was non-existent. declined in the late fifties. exploration activity after having reached its peak in mid-1950s. The day to day management was however. Pursuant to the Agreement. vested in a five-member Board of Directors appointed by the Government. exploration activities in the country were carried out by Pakistan Petroleum Ltd. (POL). OGDC was created under an Ordinance dated 20th September 1961.Chapter No: 1 Introduction
1. whereby Pakistan received 27 million Rubles to finance equipment and services of Soviet experts for exploration. a few small gas fields were discovered. these companies carried out extensive geological and geophysical surveys and drilled 47 exploratory wells. (PPL) and Pakistan Oilfields Ltd. Prior to OGDCL
Prior to OGDCL's emergence. This discovery generated immense interest in exploration and five major foreign oil companies entered into concession agreements with the Government. The Corporation was charged with responsibility to undertake a well thought out and systematic exploratory program and to plan and promote Pakistan's oil and gas prospects.1. As an instrument of policy in the oil and gas sector. With exploration activity at its lowest ebb several foreign exploration contracting companies terminated their operation and either reduced or relinquished land holdings in 1961. Establishment of OGDC
To revive exploration in the energy sector the Government of Pakistan signed a long-term loan Agreement on 04 March 1961 with the USSR. Despite these gas discoveries. the Corporation followed the Government instructions in matters of exploration and development.
1. In 1952.2. As a result.
the financial resources were arranged by the GOP as the OGDC lacked the ways and means to raise the risk capital. the Company reformed the strategy for updating its equipment base and undertook a very aggressive work programme. This resulted in discovery of a number of oil and gas fields in the Eighties. Canadian International Development Agency (CIDA) and the Asian Development Bank provided the impetus through assistance for major development projects in the form of loans and grants. The obvious initial target during the first year of self-financing was to generate sufficient resources to maintain the momentum of exploration and development at a pace envisaged in the Public Sector Development Programme (PSDP) as well as to meet its debt servicing obligations. Bobi. The financial year 198990. These include the Thora. thus giving the Company a measure of financial independence. Uch. off-loaded the Company from the Federal Budget and allowed it to manage its activities with self generated funds.
1. Lashari. Toot oil field was discovered in 1968 which paved the way for further exploratory work in the North. It was a great challenge for OGDC. the Government in July 1989. Sono.
1. The first 10 to 15 years were devoted to development of manpower and building of infrastructure to undertake much larger exploration program. was OGDC's first year of self-financing. Transition to a self financing entity
Noting the Company's success.3. Tando Alam & Dhodak oil/condensate fields and Pirkoh. OGDC not only generated enough internal funds to
. Nandpur and Panjpir gas fields which are commercial discoveries that testify to the professional capabilities of the Corporation. due to major oil and gas discoveries in the eighties.4. OGDC's concerted efforts were very successful as they resulted in a number of major oil and gas discoveries between 1968 and 1982. Loti. During the period 1970-75. Initial Successes
A number of donor agencies such as the World Bank.
5. 23 October 1997 and is now known as OGDCL (Oil & Gas Development Company Ltd. Since it development. besides seeking opportunities abroad. which are operated by it besides having working interest ownership in 28 non-operated Mining and Development & Production Leases.f.
With a balanced.). OGDCL now holds the largest shares of oil and gas reserves in the country. Its percentage share of the total oil and gas production in Pakistan is 34% and 28% respectively. Services of the Company’s highly qualified and skilled expertise in the fields of geology and geophysics are frequently availed by the local and foreign oil companies. OGDCL has an extensive database.6. In addition OGDCL has 35 mining and Development & Production Leases. i.e. OGDCL explores and exploits indigenous resources for optimum production of oil and gas. It also leases out its drilling rigs to the private sector and carries out seismic surveys and data processing on contract for these companies on extremely competitive rates.
1. efficient and competitive structure. Conversion into Public Limited Company
Prior to 23 October 1997. OGDCL has grown into a technically and commercially viable organization. It has been incorporated as a Public Limited Company w. OGDCL has the largest acreage position in Pakistan and currently operates 17 exploration concessions and holds non –operated working interest in another 7 exploration concessions. and was known as OGDC (Oil & Gas Development Corporation). 48% of total oil and 37% of total gas reserves.meet its debt obligations but also invested enough resources in exploration and development to increase the country's reserves and production.e. OGDCL was a statutory Corporation.
1. 33 of which were of oil and 16 gases. Qadirpur. Kunner and Bobi. Chanda. Tandoalam.2. OGDCL is 100% owner in two concessions. Dhodak.3. Today. Crude Oil
Crude oil is the mixture of petroleum liquids and gases (including impurities such as sulphur) that is pumped out of the ground by oil wells.2.
. Presently. Sadkal. Bobi. The major gas fields of the company are Dakhni.1. Dhodak. Main production Oilfields of the company are Dakhni. used principally as a feedstock for the chemical industry. Dhodak.
2. 155 exploratory wells have been drilled by OGDCL in the country since its inception leading to 49 discoveries. Product Lines
The main product lines of the company are as under:
2.2. home heating fuel. Liquefied Petroleum Gas (LPG)
A mixture of hydrocarbons found in natural gas and produced from crude oil. it is the operator as well as a working interest owner in 16 concessions and partner in another 19 concessions operated by other oil companies.
2.Chapter No: 2 Products and Services 2. and motor vehicle fuel. Toot & Rajian. OGDCL not only carries out exploration and development activities on its own but has also entered into joint ventures for oil and gas exploration. In addition.2. Panjpir. Exploration Production
Historically. OGDCL is one of the principal explorers and producers of oil and gas in the country. GAS
A mixture of hydrocarbon compounds and small quantities of various nonhydrocarbons existing in the gaseous phase or in solution with crude oil in natural underground reservoirs.2. Nandpur. The major fields of the company having LPG production facilities are Dakhni. Pirkoh and Uch.
The sulphur is produced at the Dakhni oil & Gas field near Jand.
. This product is extracted from various oil fields of the company.
2.2. Kerosene Oil
Kerosene oil has been distilled from petroleum.
2.7.5. It is also used in solvent applications. and various other products.2. Sulphur
A yellow mineral extracted from petroleum for making fertilizers. Naphtha is the residual product of the company and is extracted from various oil / gas fields. Solvent Oil
A simple or complex liquid mixture of hydrocarbons that can be refined to yield gasoline.6.8. kerosene.2. extracted from various oil fields of the company.2. and generally used as a fuel for lighting etc.2. This residual product is extracted from various oil fields of the company.
Naphtha is a group of various volatile flammable liquid hydrocarbon mixtures used primarily as feedstock in refineries and petrochemical industry. diesel fuel. High Speed Diesel Oil
It is the hydrocarbon Oil suitable for use as fuel in Compression Ignition Engines. pharmaceuticals and other products.
which consists of 01 Chairman. responsible for policy related issues. divisions are made in the head office structure that are inter connected with the field structure. Supervising each other work is easy and cooperation among the members is increased due to group performance.e. Emphasis is on Professional Competence and getting things done. OGDCL can broadly be divided in to following three companies: Corporate Exploration & Production (E& P) Technical Services
OGDCL has a traditional type of structure i. and Quetta for operational activities. On the basis of functions. all of whom are nominated by the Ministry of Petroleum and Natural Resources. Organizational Structure 3. Main Offices
OGDCL Head Office is situated at Jinnah Avenue. 10 Directors and 01 Managing Director (MD). functional structure having a CEO at the top followed by the BOD. Besides this OGDCL has its Liaison Offices in Hyderabad. The OGDCL has been re-organized during the last few years. The general direction. MD is responsible for operational and other activities. It helps getting in depth knowledge and skill development. All policy related issues are dealt by the board of Directors that is headed by a nonexecutive Chairman and a full time Managing director.
. A Board of Directors comprising twelve Directors. In functional structure provision of economies of scale is present with in the functional department. Blue Area Islamabad and Regional Offices are located in Karachi and Multan. it now operates much purely as Oil Company does.1. policies and affairs of the Company vests in a Board of Directors.Chapter No: 3 ORGANIZATION 3. Sukkur.
Sukkur 7. Islamabad 9. Karachi 8. Zuberi
Mr. Rawalpindi & Karachi 14. OGDCL Regional Office. 2.3. OGDCL Base Store. OGDCL Base Store. Shafi Chamber. OGDCL Head Office. OGDCL West Wharf Office. 3. Islamabad 15. OGDCL Base Store. Islamabad. Korangi 11. Wasim A. The main offices located throughout Pakistan
1. OGDCL Liaison Office.3. Mohammad Naeem Malik
Mr. Pirkoh Gas Company Private Limited. Kaiser Bengali
. Karachi 10. Islamabad. OGDCL Liaison Office. Kot Sarang 13. Board of Directors
Mr. Tariq Faruque
Syed Amir Ali Shah
Mr. Imtiaz Kazi
Mr. Medical Centers. OGDCL Base Store. Oil & Gas Training Institute. OGDCL Regional Office. Jinnah Avenue Islamabad.2. Islamabad. Quetta 6. OGDCL Workshops. Karachi 4. OGDCL Base Store. Multan 5. Kot Addu 12. Khadiji. Fahd Shaikh
3. Environment Protection & Safety
3. Human Resource Department Corporate Affairs 3. Process
. Exploration Studies & Research 3. Administration Medical 2. Career Planning Cell 11. Legal OGTI 6.4. Security System Support 5.4.2. Production 5. Exploration Prospect Generation 2. Communication G & R Lab 7.4. Personnel Aviation 4. Exploitation 4. Supply Chain Management Secretariat 8. CORPORATE DEPARTMENT
1. Material Management Internal Audit 9.Mr. Ahmed Bakhsh Lehri
Senator Mir Wali Muhammad Badini
3.1. E&P DEPARTMENTS
1. Finance & Accounts 10.
TECHNICAL SERVICES DEPARTMENT
1. Wire line Logging 8. Engineering/Workshops 3. Geological /Geophysical
10. Cementation 6.3. Geological Well Supervision 7.3. Seismic Data Processing
11. Stimulation 9. Data Logging
. Drilling 2. Well Services Department 5. Logistic 12.4. Mud Engineering 4.
Sawan and Tal fields.1.1. with Group sales of EUR 15. while its non-operated portfolio includes interests in the Qadirpur.226 employees in 2005.Chapter No: 4 Market Analysis 4.536 employees including 640 management staff and 1. In Pakistan. PPL’s head office is located in Karachi. OMV is active in Refining and Marketing (R&M) in 13 countries and in Exploration and Production (E&P) OMV is active in 18 countries on five continents. the Privatization Commission (PC) is proceeding with a strategic sale of 51% shareholding in PPL along with transfer of management control. OMV Pakistan
OMV (Pakistan) is a 100% subsidiary of OMV Aktiengesellschaft which is Austria’s largest listed industrial company. Pakistan’s oldest and largest gas field discovered and operated by PPL. As the leading oil and gas group in Central Europe.
4. OMV has been active as an operator and partner since 1990. The Company’s holds operatorship of major oil and gas fields including Sui.
. On behalf of the Government of Pakistan (GoP).1. Adhi and Mazarani. Miano.6 billion and a workforce of 5.896 non-management staff. PPL was incorporated in June 1950 with the Burmah Oil Company (renamed Burmah Castrol) and GoP as its principal shareholders. Major Competitors 4. contributing 25% of Pakistan’s gas production.2. EUR 18 billion. as well as market capitalization of approx. Kandhkot.1. Pakistan Petroleum Limited (PPL)
Pakistan Petroleum Limited (PPL) is one of the pioneer exploration and production (E&P) companies in Pakistan oil and gas sector. After more than 50 years of successful operations PPL continues to be a prominent E&P player in Pakistan with: Sui. The company’s total staff strength is about 2.
currently ENI. In 2005. the exploration group has acquired extensive seismic data. and Oil & Gas Development Company Limited (OGDCL). OMV is. Besides these activities carried out in OMV Pakistan’s core area. Hardy Oil & Gas (now ENI group). OMV was able to sell its raw gas by July 2003. consisting of OMV Pakistan as the Operator. OMV is pursuing new projects in other parts of Pakistan.e. Pakistan Petroleum Limited (PPL). including a mega-3D seismic survey covering more than 1000 sq. also actively expanding its exploration operations. In the years to date OMV (Pakistan) has established itself as the largest international gas producer in Pakistan with an operated volume of more than 110.000 barrels of oil equivalent per day from Kadanwari-Miano and Sawan fields. To further meet raw gas requirements development drilling was continued successfully for both fields. This represents about 16% of the total gas produced in Pakistan.
. again in the same area of Sindh. In a record nineteen months from the ground-breaking ceremony in January 2002 of the Sawan Gas Plant. The second major breakthrough came five years later i. from the field named Sawan. Sawan was and still is one of the largest discoveries of gas reserves in Pakistan.The company was incepted as part of a Joint Venture. just three years after OMV came to Pakistan.Km area in and around our Gambat and Latif blocks. The first significant achievement was the discovery of the Miano gas reservoir in the Thar Desert of Sindh province. Parallel to the Sawan development OMV also took over the operator-ship of the Kadanwari Gas Processing Plant on 1stJanuary 2003 from Lasmo. in 1998. OMV remained quite aggressive on new developments and Kadanwari plant gas processing capacity was enhanced to 232 MMscfd while Sawan plant capacity has been enhanced to 400 MMscfd. It came about by the end of 1993.
The principal importers will be China. to date Pakistan has only discovered 15% of its total oil reserves and in turn has become major importer of oil and petroleum products.
4. Strategically located at the foot of Central Asia. because demand growth is outstripping the pace of supply expansion.42mn barrels per day (b/d) in 2001 is set to reach a forecast 30. The Government of Pakistan has issued over 100 licences for exploration of around 28. This is forecast to reach 21. By 2014 the only net exporter will be Malaysia. This is thanks to many Asian gas producers being major exporters. Pakistan’s share of gas consumption in 2010 is
. production should reach 522bcm in 2014. India and South Korea.32mn b/d by 2014. Japan. Supply and demand
Oil & gas. standards and most importantly. of which 21 are multinational. OMV has strong commitment to reduce emissions to the environment. achieved very high level of growth in a few years.2. Regional oil use of 21.07mn b/d. the local laws. In 2001 the region was importing an average of 13. Pakistan offers great opportunity for them and has an estimated resource potential of 200 trillion cubic feet of natural gas and over40 million barrels of oil. Our Health.89mn b/d by 2014.35mn b/d in 2001 and is forecast to average slightly to 8. one of the vibrant sectors. To achieve the same an “Emission Reduction” project has been initiated for Kadanwari Plant. However. preliminary study is being initiated. OMV is very conscious of its adherence to its outlined policies. In terms of natural gas. Oil imports are growing rapidly. Safety and Environmental standards are parallel to the highest international level and second to none in the local perspective. are presently exploiting reserves in the country. The latest Pakistan Oil & Gas Report from BMI forecasts that the country will account for 1.21mn b/d by 2014.77% of its supply.51% of Asia Pacific regional oil demand by 2014. Regional oil production was around 8. while providing 0.As a Multinational company. which implies net imports rising from around 81bcm to 104bcm.000 square kilometres. Pakistan's potential as a big business opportunity is highlighted by the fact that over 25 oil companies. For Sawan plant.
while its share of production is put at 9.16%. By 2014.
. its share of gas consumption is forecast to be 6.66%.7. with the country accounting for 8.05% of supply.95%.
Chapter No 5: Business Strategies and Implementation
5.4.4. while being a responsible corporate citizen”
5.1. Corporate Goals
5. best management practices and technology and maximizing returns to all stakeholders by capturing high value business opportunities within the country and abroad. Corporate Vision
“To be a leading. rapidly enhancing our reserves through world class workforce. Corporate Mission
“Our mission is to become a competitive. regional Pakistani E & P Company.1. Financial
Build strategic reserves for future growth/expansion Growth and superior returns to all stakeholders 21
. dynamic and growing E & P Company.3.2. partnerships and performance”
5. recognized for its people. Corporate core values
Merit Integrity Team Work Safety Dedication Innovation
2. and enhance their technical.
Attain full autonomy in financial and decision making matters.3. Emphasize organizational learning and research through effective use of
knowledge management systems. Make investment decisions by ranking projects on the basis of best economic
Maximize profits by investing surplus funds in profitable avenues
Reduce cost and time overruns to improve performance results. 5.4.
5.4. Double the value of the company in the next five years.
Fill the competency gap within the organization by attracting and retaining
best professionals. Customer
Continuously improve quality of service and responsiveness to maintain a
satisfied customer base
Improve reliability and efficiency of supply to the customer
Be a responsible corporate citizen 5.
Acquire. managerial and
business skills through modern HR practices. development and commercialization Be transparent in all business transactions Synergize through effective business practices and teamwork Have well-defined SOP’s with specific ownerships and accountabilities 22
.4. learn and apply state-of-the-art technology.4. Internal processing goals
Evolve consensus through consultative process inter-linking activities of all
Excel in exploration. Learning and Growth
Motivate our work force.
5. During the fiscal year 200809 target of drilling is 52 wells. Within Pakistan. Exploit Exploration Opportunities: by building the Company’s future reserves portfolio through its large onshore exploration acreage.5. In order to achieve this goal.
Figure: Business and Functional Strategies Accelerate Production Growth: by continuing to accelerate production growth through utilizing cutting edge technologies. Improve internal business decision making and strategic planning through
state-of-the-art MIS Improve internal controls Periodic business process reengineering. Maintain Low Cost Operations: OGDCL’s operating environment. OGDCL’s primary objective is to enhance its reserves and production profile and ultimately maximize value for shareholders. will be a major factor in allowing it to control its low cost structure. namely the geographic concentration of its reserves base within Pakistan. the Company seeks to execute the following strategies. the Company’s
. Business strategy
As the leading exploration and Production Company in Pakistan. allowing the Company to utilize its significant reserves base and capitalize on the strong economic growth and accelerating energy demand in Pakistan.
located in Islamabad. The employees in OGDCL were not very much computer literate but as information systems were planned to be installed.
5. The distribution strategy of OGDCL is focused to specific distributors which are on there panels for different schemes.6. Functional Strategies 5.2. the Company intends to grow and diversify its portfolio through selective international expansion in the medium to long-term. Basic objective of OGDCL is development and profit making. OGDCL has its separate HR division which include different department for compliance of HR strategies in organization. Young and fresh professionals are being hired in order to help organization revamp its strategic path effectively. Pursue Selective International Expansion: while domestic expansion remains OGDCL’s core focus. Currently the contingent workforce trend is increasing in OGDCL. Human Resource Strategy
Currently OGDCL has low skilled employees who receive low pay. therefore the training of the employees became necessary. Marketing Strategy
OGDCL use market development strategy in order to capture the larger share of its existing market for current products through market saturation and penetration.6.
. Keeping in view the competition it also some times goes for product development where new products are developed for the existing market. It has its own training and development institution under the label of Oil and Gas Training Institute (OGTI).6.leading position also enables it to access economies of scale across its significant reserves base and operations. Work team are lacking however the diversity in terms of geographic and age is present which is also need of its operations. perform repetitive jobs and follow a hierarchal structure for promotion.
Now.5% of equity was offered to the general public.5.
5. the OGDCL being Public Company follow same trend of generating funds through issuing of shares in the public. The said Offer received an overwhelming response from the general public and was recorded as a landmark transaction in the history of Pakistan’s capital markets.6.6. Initially 2.5% of the equity with an additional green-shoe option (A green shoe option can provide additional price stability to a security issue because the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges) up to 2. Research and Development Strategy
OGDCL has a research and planning division under which operates research and planning department. So OGDCL not only generate enough
.6. At the first the OGDCL was fully funded by the
Government of Pakistan.4.5. All OGDCL offices have been centrally connected to the head office data center located in Islamabad. Financial Strategy
Oil and Gas Company limited (OGDCL) is a specialized exploration and production of oil and gas areas of the country. The early warning system of the dynamic MIS provides number of reports to the authorized users of head office.3.
5. Later on Government of Pakistan disinvested part of its shareholding in the company in 2003. This department also keeps track of developments in global as well as domestic public policy relevant to OGDCL’s business environment including the practices and role of competitors and the necessary dissemination of this information within OGDCL and the external/agencies. On the other hand it undertakes research on subjects that facilitates/promotes business and economic planning. Information Technology Function
With the passage of time the Management Information System (MIS) became an integral part of the organizations therefore OGDCL also has to incorporate an appropriate information system to improve its efficiency. Besides that Exploration study and Research department of OGDCL also operates under task force Exploration and Production division that facilitates the new technological advancement in Oil and Gas sector to be practically incorporated in field.
.internal funds to meet its debt obligations but also invested enough resources in exploration and development to increase the country's reserves and production.
check the accuracy and reliability of its accounting data. Business Risks and Challenges
Being an exploration and production company. promote operational efficiency. The Management and the Board of Directors are well aware of their responsibilities in this regard and ensue that an appropriate system exists in the Company for the identification and management of the business risks. JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Oil and Gas Development Company Limited (OGDCL) at ‘AAA/A-1+’ (Triple A/A One Plus). Internal Audit function also exists in the Company serving as an effective appraisal of internal controls which are meant to have methods and measures in place to safe guard the assets. The strong financial profile of the company can be established from the fact that despite significant capital expenditure requirement in the E&P sector. there has been no gearing on books. strong production base and largest exploration acreage spread over all four provinces and off-shore. monitoring compliance with the best practices of Corporate Governance. The Management of the Company also understands its role and responsibilities as leading national E&P Company with largest oil and gas reserves. effective and comply with applicable laws and regulations and professional best practices. Credit Rating
OGDCL has shown sustainable growth in business volume over the years. Audit Committee of the Board in accordance with its terms of reference also ascertain that the internal control system including financial & operational controls and accounting system are adequate. and encourage adherence to prescribed managerial policies.1.Chapter No 6: Financial analysis 6. OGDCL is exposed to operational and non operational risks associated with E&P business which may unfavourably affect its operations and financial performance.2. Outlook on the medium to longterm rating is ‘Stable’.
delineation of drillable prospects and their drilling are all important aspects in hydrocarbon exploration. Exchange Rate Risk
Rs/US$ parity decline has a positive impact on OGDCL’s earnings as crude revenue is tied to US$ based pricing mechanism based on international crude prices with suitable yield differential and number of gas fields have wellhead pricing in US$ terms.1. gas prices of certain fields are capped at fixed crude oil / HSFO prices and are affected only in case the international crude oil price falls below the capped price. acquisition of geological and geophysical data.
6.2. Exploration and Drilling Risks
The different sedimentary basins in Pakistan represent very complex tectonics and deformation styles. Key operational and non-operational risks which can influence the operations of the Company are as follows:
6.2. Rs/US$ parity decline has a negative impact on the Company’s earnings since most of the material including drilling material. the gas sales which amount around 50% of Company’s revenue are less prone to this risk.2. sound equipment base and sound financial position. plant & equipment used in oil and gas industry are imported to meet operational requirements. Decline in prices of crude oil have a negative impact on the Company’s earning performance. The in-depth knowledge of petroleum systems present in these basins is imperative. Change in international oil prices is largely uncontrollable and OGDCL is vulnerable to increase/decrease in such prices. Crude Oil Price
Crude oil pricing in Pakistan is based on a basket of Arabian crude adjusted for yield differential and freight adjustment.2. The selection of potential exploration blocks.
6. To maintain a good success ratio is also a vital element which can only be achieved with efficient professional
. However. In addition.3.Management is committed to cope with the given challenges within its ambit of controls with its strong core of trained and experienced professionals.
regulations. the compliance
. fire and other safety hazards. taxation. acquisition and processing of seismic data etc. the drilling operations are also facing many challenges such as deep wells. heavy rains. fishing.teams and systematic working. Though this risk is reduced in case of development fields.
6. Environmental Risks
OGDCL is vulnerable to environmental changes including earth quakes. The Company is also exposed to variety of hazards during the drilling process including well blow out. As easy-to-drill structures are vanishing. planning and executing Company’s exploration and development plans. Changes in legislation. These generally offer incentives to local & foreign E&P companies to increase exploration efforts. These risks are addressed by the Management while making the investment decisions.2. interpretation of seismic data and selection of exploratory well site.
OGDCL’s revenues are subject to change in Petroleum Policies. Risk of un-successful drilling has an adverse affect on Company’s earnings and growth. The Management is well aware of these risks and is taking into consideration these facts while planning and executing the exploration and drilling targets. Petroleum Policy in effect at the time of a particular discovery determines the underlying revenues from such field. floods etc. Safety and Environment (HSE) practices. that may materially impact production at various fields resulting into adverse impact on company’ revenues and profitability. which are usually promulgated after every five years.2. inaccuracies in acquisition.4. lateral wells and drilling in complex geological settings. As the Company is committed to adhere to the best Health. royalty and pricing mechanism may affect the Company’s operational and financial performance.5. There is always a risk of success / failure in drilling exploratory wells. Exploration risks include selection of incorrect exploration acreage. processing. expertise in reservoir engineering is in place to manage pertinent risks. The Company is also utilizing experienced professionals and latest technologies in selection of acreage.
So seems there is increase in the profitability position of the company rather then decrease.
. in FY 2009 it was Rs 55.to changes in environmental regulations relating to HSE could result into higher cost to the Company. It follows the trend of increasing profitability since last financial years as in FY 2008 the profitability was Rs 44. the OGDCL’s main source of funding has been funds generated by itself through its production of oil and gas products.
6.18.34. If we put glance over the profitability of the OGDCL from its financial statements then we will come to know that the Company possesses strong profitability position.54 and FY 2010 it is Rs 59. Profitability
Over the years.3.
Petroleum policy of oil and gas industry in Pakistan is designed with a focus on promoting private sector investment in oil and gas sector. The demand for natural gas is exceeding supply due to increased usage in the domestic.Chapter No: 7 Industry analysis 7. The balance amount is imported at a staggering cost of US$2. OMV has also pointed out medium term growth potential in Pakistan’s reserves. industrial and power generation sectors.000 barrels of oil per day which only meets approximately one sixth of the country’s current oil requirement. Apart from this. Pakistan oil and gas industry is going through a process of transition as it is experiencing a new wave of privatization. Instance of gas and condensate discovery in oil and gas development limited company (OGDCL) in Exploratory Pakhro WELL No. Aware of rich oil and gas reserves. The Government of Pakistan has announced its intention of privatizing 37% 0f its 75% stake in Qadirpur gas field and also transferring management responsibility to private companies. Pakistan Oil and Gas Industry
Pakistan’s produces about 60. Reports of oil and gas industry of Pakistan revels this Country’s current average daily oil and production is about 3800 net barrels and natural gas of 73 net million
. The Privatisation of the units in the oil and gas sector will not only increase the operational efficiency of these units but also contribute towards new injection of investment. oil and gas industry of Pakistan is putting in steady efferts to make best utilization of resources and build a strong production base. 01 is a major achievement of this sector. Pakistan does not have the necessary infrastructure to cope with the increasing volumes of imported oil and requires substantial investment to support this infrastructure. In view of the increasing demand and the current decline in production this cost is going to increase substantially over the next couple of years.5 Billion. Austria’s OMV is credited with discovery of Taijal 1 exploratory well.1.
The Policy focuses on mobilization of greater resources and promotion of private sector investment in the oil and gas sector.cubic feet. reduction in import dependence. The Policy. In addition. Policy
The Petroleum Policy of 1994 assisted in the development of the upstream sector. could not arouse sufficient interest to attract interest in the downstream sectors. development of an efficient and transparent management.
7.2. including a package based on production sharing arrangements for offshore areas. A separate Holding Company. a number of far-reaching measures have been taken which include attracting private foreign investment. deregulation of downstream petroleum marketing sector and rationalization of prices and LPG allocation. petroleum ministry of Pakistan reported high trade deficit due to major gap between import and export value. A new package for offshore exploration has been prepared for attracting exploration investment in off-shore areas which has so far remained relatively limited. The 1997 Petroleum Policy is based on a review of the 1994 Policy and offers major incentives in the upstream and downstream petroleum sector. Gas Regulatory Authority and Petroleum Regulatory Board are planned to be established for privatization. These efforts are directed at achieving cost effectiveness. Pakistan government aims at formulating policies to reduce import dependence and promote self reliance by triggering exploitation. off shore areas and the Baluchistan Basin. however. creating a qualitatively improved infrastructure in oil and gas industry. storage and infrastructure on the basis of commercial
. The privatization of SNGPL and SSGCL is under process. Efforts are being made to exploit the existing energy resources to build a strong indigenous exploration and production base. Despite such a huge potential. The import of LPG has been liberalized to promote investment in import of LPG. promotion of self-reliance through accelerated exploitation of energy resources and minimum environmental degradation.
It possesses dynamic and strong financial position due to waste experience in the field.2.opportunities and risk. It possesses large number of fields of oil and gas along with quality process and procedures. This would facilitate those areas of the country. which are not yet connected with pipeline network.
7. There is slow promotion of employees which decreases performance In the OGDCL there is lack of check and balance
. It has long experienced and technical staff involving number of geologist.
In OGDCL Lack of marketing expertise It possesses government influence in the functions such as hiring or firing of management. SWOT Analysis Strengths:
OGDCl is the largest Oil and Gas Exploration and Production Company of the Pakistan.
taxation. It can increase its sales and production by increasing and explorating number of oil and gas fields in the potential regions of the Pakistan.
OGDCL is vulnerable to environmental changes including earth quakes. that may materially impact production at various fields resulting into adverse impact on company’ revenues and profitability. OGDCL can generate huge amount of funds being Blue Chip Company and
having huge investment potential by attracting number of national and international potential investors. heavy rains. royalty and pricing mechanism may affect the Company’s operational and financial performance.
. regulations. Changes in legislation. floods etc. Petroleum Policy in effect at the time of a particular discovery determines the underlying revenues from such field.
Chapter No: 8 Future out look. Mauritania. OGDCL must look beyond geographical boundaries for E & P opportunity. With a formidable presence in the length and breadth of the country. Egypt. With technical prowess in on-shore exploration and production it must change focus to a more challenging area i.2. OGDCL must also look at seamless development of new discoveries in shortest possible time which will add substantially to the production base to the Company. OGDCL is also trying hard to recover its circular debt of billions of rupees so that these can be invested in further exploration and production purpose. Operational future outlooks
OGDCL has a strong vision and passion to contribute to the E & P sector to help enhance energy security of Pakistan. OGDCL needs to enhance its reserves and to focus on. Efforts should be continuing towards formulation of joint ventures with leading E & P companies both within the country and abroad. which in turn will ensure continuous reserves additions. and strengthen core business (E & P) functions by incorporating international best practices and innovative thinking in Company culture. Turkey and Yemen. Keeping in mind the given objectives.
8. Future financial out look
Following the good governance policy of the government. The main source of funds available to OGDCL is retain earning and through the investor’s investrnent.e. It should also plan to actively pursue overseas joint ventures with companies in Algeria. Recommendation and Conclusion 8. Oman. the Board of Directors and the management has been entrusted the full autonomy to achieve corporate objectives of the company.1. Mozambique. China. The Company must plan to optimize its concessions portfolio to support aggressive exploration activities. Review and improvement of internal policies and processes should be also on the agenda in addition to further enhancing corporate goodwill through focused CSR activities for the benefit of the communities that OGDCL interacts with. Mali.
. Libya. offshore exploration.
It also estimated that the number of new fields will be will be searched out in different parts of the country having large amount of oil and gas in order to boost up the sales and revenue.000 .000 .4 24 2.0 2.177.9 57 1.539.0 00 0 2 016 20 5 1 2 014 20 13 2012 20 11 2010 20 09
S lesR a evenue
Note: The figures for the year 2009 and 2010 are actual.60 1 0 .641 billion last year. Products sales revenue during the FY2010 was Rs 142.193 33 . The cash flow position of the OGDCL
. whereas the figures till 2016 are estimated at factor 9% in relation to year 2010.6 93.000 1. In the year 2010 the bank earns an after tax net profit of Rs. Similarly these trends are expected to continue with an estimated 9% percent factor highlighted in the below chart.55 3.36.4 9 06 2.79 0 1.461 billion.0 11.30 4.
8. A number of new programs are planed to attract the potential investors.000 2.000 2. Depicting an increase of 9% in FY2010 the OGDCl has target to grow its sales revenue in up coming year Rs 155.425 .794 billion) is inclusive of favorable financial impact of Rs 5. Financial Viability
OGDCL being blue chip is the largest oil and gas production and exploration company of the Pakistan.3.500 .000 1.000 .534 billion and in FY2009 was Rs 130. 59.125 billion compared to Rs 55. Values are in billion (000)
3.8321.500 .3 0.000 5 00.845 . The OGDCL has posted higher revenue in the last few years.4301.It is estimated that the number of investors who will get benefits from investing there their investment will increase in the next five years.
000 21.533.73 1.354.191.300.13 0.000 55.122.928.634.73 1.251188748 87.445.48 0.928.
Current Assets Non Current Assets Current Liabilities Non Current Liabilities Share Equity Total Assets Growth in Assets Sales Growth in Sales Gross Profit Net Profit No.000
69.000 126. The financial forecasting for the next five years is shown in the below chart.000 45.863.172.000 4.177.70 0.52 0.856.568.71 0.125.400 21.000 0.608.000 150.300.965. As OGDCL is explorating new fields in the different parts of the country.000 0.530.000 49.579.840.00 0.42
.651.000 0.78 1.000 129.400 2009-2010 120.300.829.is stable and effectively managed.42 2009-2010 0.00 1.000 177.429.07% 12. the same would result in higher cash flows and returns. of Shares Average
Historic Financial Statements
2006-2007 68.000 109.47 0.42 Average 0.000 0.819.851.49 0.000 2007-2008 78.498.000 19.14 0.14 0.674.157.000 36.52 0.71 1.201.70 0.800.12 0.855.00 0.400 Assets Growth Sales Growth
Current Assets Non Current Assets Current Liabilities Non Current Liabilities Share Equity Total Assets Sales Gross Profit Net Profit 2006-2007 0.00 1.04291822 91.089.47 0.46 2007-2008 0.371.400
100.867.164145006 125.70 0.000 100.300.000 60.00 1.834.000 30.622.758.12 0.598.964.298.314.00 0.17 0.254.182136566 130.992.69 1.000 228.000 59.089293905 100.000 91.171.09 0.392.231.828.414.000 17.00 1.593.540.641.287.629.338.928.000 4.000 0.70 0.15 0.53 0.00 0.396.53 0.00 0.843.000 108.433.000 11.539.425.000 157.616.396.000 72.511.000 21.00 1.387.51 0.433.48 0.798.665.613.935. The strong financial position represents sound management policies by the Company’s management.40 2008-2009 0.477.652.000 34.15 0.261.000 4.322.500.78% 2008-2009 86.16 0.518.000 0.928.486.000 4.28582825 142.
Table of Next five years forecast
Operational future out look 8.
. effective training and development programs are planed. Health. at the right time with the right pay and the working environment to enhance creativity and productivity in the workplace.4. Human Resource Planning
OGDCL with human strength of over 10.4. fair and consistent manner through the development and implementation of appropriate policies. procedures and programmes.8. HR function is committed to implement a corporate human resource strategy which supports the Company’s Business Plan by effectively and efficiently serving the needs and interests of the Company’s line departments in a transparent. The ultimate objective is to have the right people in the right place. This will provide sustainable and more vigilant human man power and is a milestone for achieving objectives of the company. The objective of continuous training and development of these professionals is achieved through Oil and Gas Training Institute (OGTI). Information Technology and Petroleum Management. As to meet the goals and objectives of OGDCL in next five years.2.000 employees is involved in translating its strength into tangible results. As result substantial growth in the oil and gas demand is estimated this would contribute to a major portion in the GDP of the country.
Induction of the young graduates for running the business operations of the company is in an important phase of modernization.4. The workforce is spread all across the Country and playing crucial role to achieve its targets. Business Development and Marketing Strategy
In the next five years the OGDCL is planning to increase the number of oil and gas fields in other parts of the country and also establishing value for the investors. The establishment of an effective appraisal and employee evaluation system is also a major milestone yet to be achieved in the next five years
8.1. These programmes included courses on technical subjects. Safety & Environment. OGTI works closely with various departments of OGDCL and other E & P companies to help meet their training requirements.
8. regions and the head office must connect with each other through effective and efficient computer system. It has very attractive opportunities as its name is very well established in field being the blue chip. There should be a proper program for this purpose keeping the less skilled workers. Operational and management targets
• OGDCL has to improve its recovery system in order to meet the future fund requirements.As the OGDCL is considered pioneer in the exploration and production of oil and gas in the country. As the major business operation of the OGDCL is exploration and production so its smooth operations depend on timely recovery. • • The fields. To enhance the operations and capturing market it has reformulated its strategic path and redefined its mission and vision. Although it is shifting to centralized data base system but this process must be catalyst.4.
8. It can increase its market share as there is unmet demand of oil and gas present but this can be only possible if its strategies are successfully implemented. • • As OGDCL is also political influenced.5. Following the Financial and HR functional strategy it can over come its problems. it has also planned to increase the use of technology in the exploration and production of products. It also need a cultural and structural change which cant be bring about in one day but is possible gradually and slowly. Working system at OGDCL is still manual more over the record and book keeping is still in registers.
OGDCL is blue chip Company being largest oil and gas Production and Exploration Company of the country. To reduce the circular debts OGDCL has to close the chapter of the political influence. OGDCL should take steps in order to motivate the workers for using the latest technology in order to increase the oil and gas production and exploration.