CAPITAL: ISLAMABAD
MONETARY UNIT: RUPEE
REFINING CAPACITY: 238,500 B/CD
OIL PRODUCTION: 54,600 B/D
OIL RESERVES: 208 MILLION BBL
GAS RESERVES: 21.6 TCF

Pakistan planned to sell part of its stake in Oil & Gas Development Co. Ltd. (ODGC).

The state company, with assets of $320 million and gas sales of $91 million/year, would be sold in parts under the government's $4 billion privatization drive.

The government had said that 90% of the funds it raised through privatization of some 49 entities would be used to retire foreign debt.

The government said it would give full autonomy to eight state oil and gas firms operating under the Ministry of Petroleum and Natural Resources. These were Pakistan Petroleum Ltd., OGCD, Sui Southern Gas Co. Ltd. (SSGC), Sui Northern Gas Pipelines Ltd., Pakistan State Oil, National Refinery Ltd., Pak Arab Refinery Co., and Attock Refinery Ltd.

The Privatization Commission also said it would sell government interests in nine oil and gas fields.

Net production to the government's interests in the nine licenses was 5,000 b/d of oil and 200 MMcfd of gas.

Exploration changes

The Pakistani government approved a package of offshore exploration and development incentives.

The incentives would apply to new and existing licenses for 5 years.

Exploration periods were increased to 5 years from 3 years, with two optional renewals of 2 years each, with maximum retention of 10 years allowed on a case-by-case basis.

Import duties and taxes for exploration equipment would be waived. After the first commercial discovery, the duties and taxes would be 3%.

In addition, corporate income tax would be reduced to 40% from 50%.

Investors would recover the costs of E&P projects, up to 85%, and thereafter share revenues with the government. A sliding scale royalty would be introduced, with a payment holiday of 4 years. Previously there was a flat 12.5% royalty.

Pakistan divided its offshore areas into three zones: shallow, less than 200 m of water; deep, 200-1,000 m; and ultradeep, more than 1,000 m.

The government's share of the profits would depend on cumulative production. From shallow areas, it would be 10-80%, from the deep areas 5-70%, and from the ultradeep 5-60%.

A windfall price levy beyond $24/bbl of oil and $2.50/MMbtu of gas would apply.

The government also approved a production-sharing agreement to use as a model. It approved a policy to allow holders of concessions to opt to convert to production-sharing agreements.

To convert, the company must have completed its work obligations for the initial term of the exploration license. It must execute the PSA within 90 days of government approval.

Gas supply

SSGC said Pakistan's recoverable reserves of 19.124 tcf of gas would last 22 years if the country produced at the 2000 rate.

The estimate included reserves of 12.858 tcf in fields connected to a pipeline system, 5.638 tcf in independent fields, and 628 bcf in fields under development or dormant.

It projected that fields connected with a pipeline system would be exhausted in 19 years if they produced at 2000 rates of 694 bcf/year, and independent fields in 31 years if they continue producing at 2000 rates of 183 bcf/year.

SSGC had a program to increase its transmission capacity to 900 MMcfd from 600 MMcfd within 3 years. The project was expected to cost $69 million, inclusive of a foreign exchange component of $32 million.

The main components of the project included relocation of a compressor at Hyderabad, rehabilitation of the Indus left bank pipeline, integration of new field Zamzama at Dadu, integration of another new field, Bhit, augmentation of Attock Cement Pipeline Ltd., and augmentation of the Bin Qasim supply system.

The SSGC transmission network consisted of 2,764 km of pipeline with a flow rate of 850 MMcfd, developed at a cost of $457 million.

SSGC, which supplied Sindh and Baluchistan provinces, sold its LPG business for 369 million rupees and planned to sell a meter-manufacturing plant.

The Pakistani government planned to sell more of its ownership in the company, reducing its share from 70% to 60%.

Bhit field

Pakistan and the consortium exploring Bhit gas field in Sindh province agreed on principles for development.

Bhit partners were operator Lasmo PLC 40%, Kirther Pakistan BV 40%, and Oil & Gas Development Co. Ltd. 20%. Sui Southern Gas Co. Ltd. would buy the gas.

Lasmo found the 1-tcf Bhit field in 1997. The field was due on stream by September 2002 at 260 MMcfd. Bhit partners would spend $256 million for three development wells and a gas processing plant.

SSGC signed a gas purchase agreement and a preliminary gas purchase agreement. It also received a memorandum of interest for the supply of gas to the Guddu thermal power station in Sindh province.

SSGC also signed a deal with the Southwest Miano joint venture, led by Austrian oil and gas company OMV AG, to buy gas from Sawan field in Sindh province.

The JV was to invest $160 million in 2001-02 to bring on stream 170 MMcfd of sales gas.

The joint venture planned to increase gas deliveries from Sawan by 100 MMcfd as soon as more gas transmission capacity became available.

OMV opened Sawan gas field in January 1998. OMV (Pakistan) had estimated reserves at 1.5 tcf.

First gas deliveries to SSGC via its existing Kadanwari transmission line were anticipated late in 2002.

A deal also was signed to buy 120 MMcfd of gas from Zamzama field, 200 km northeast of Karachi. Operator was BHP Petroleum Pty. Ltd.

Pipelines

Pakistani ruler Gen. Pervez Musharraf urged India to cooperate in the development of a proposed Iran-Pakistan-India gas pipeline route.

The controversial route would require India's gas supplies from Iran to pass through Pakistan.

Pakistan's Ministry of Petroleum and Natural Resources signed a memorandum of understanding with Crescent Petroleum Co. International Ltd. of Sharjah, UAE, for a long-planned gas pipeline from Qatar to Pakistan.

The company would finance, construct, and operate the proposed gas pipeline, which would deliver 1.6 bcfd of Qatari gas to Pakistan. The pipeline route would be mainly offshore in Iranian waters. It would extend from Ras Laffan through Hamriyah, then Dibba on the Gulf of Oman, terminating at Gadani, Pakistan. The section between Hamriyah and Dibba would be onshore.

The project, first proposed in 1991, faced competition from the $8-10 Dolphin project, which would move gas from supergiant North field off Qatar to Dubai, Abu Dhabi, Oman, and ultimately across the Gulf of Oman to Pakistan.

Downstream

Shell Pakistan Ltd. spent $143 million for a 26% share in Pak Arab Refinery Co. Ltd.'s (Parco) proposed product pipeline between Karachi and Mehmood Kot, near Multan, Punjab province.

Parco was building a 100,000 b/d refinery at Mehmood Kot.

Parco was to have a 51% stake in the line, Pakistan State Oil 12%, and Caltex Pakistan 11%.

Shell was investing $20 million in 2000 to expand its Pakistani marketing network. Since 1996 Shell invested $100 million in Pakistan on its marketing network, establishing 440 service stations.

Steenkolen Handels Verccniging (SHV), based in The Netherlands, had planned an initial investment of $100 million in Pakistan's liquefied petroleum gas market.

In 2000 it spent $25 million to acquire a local LPG company, land, and filling plant equipment. SHV acquired 112 tonnes/day of LPG from Parco. The company was to market Parco gas under the brand name Pearl Gas.