Pakistan's 33 tcf tight gas potential awaits early development
Misuse of policy has to be avoided for early development of over 33 tcf of Tight Gas Reserves (TGR) estimated at
upper and middle Indus, Kirthar areas. The tight gas reserves are 120 % of Pakistan's existing reserves where
development process has to be accelerated in the face of persisting energy crisis.
Energy experts however feel that besides government's seriousness in developing untapped resources, the situation
calls for the institutional capacity of the regulator body to ensure fast decision making on TGR and avoid misuse of
the policy. However in order to minimize the chances of policy misuse, the government has introduced third-party
auditing, sources said.
The US pressure against Iran gas pipeline is likely to accelerate the pace of development of domestic gas resources
to meet the growing demand for energy in the country, sources said.
It will be interesting to note that besides the measured gas resources, the TGR potential of lower Indus, Potwar,
Kohat and offshore areas is yet to be established. It is expected that the new policy on TGR which is in the pipeline
will open a new vista of investment and reserve additions in unconventional but highly promising areas.
Active players in the exploration sector are of the view that the pricing and fiscal incentives are not exactly in
line with industry demand, notwithstanding small requisite changes in policy are recommended as introduction of new
technology/skills, which could prove challenging and may leave the field open for foreign E&P companies in the
initial stages.
If current gas production is as a guide, companies with gas production concentrated in Sindh should benefit most. On
this count, OGDC and PPL ideally placed. Miano and Sawan, two producing fields operated by OMV, reportedly carry
cumulative 400 mm cfpd gas production potential.
It may be noted that the thrust of the policy seems to be on early production from known TGR fields. Companies too
are likely to focus on existing fields for TGR potential in order tomeet the rising energy demand. As far as the
incentive offered in the policy was concerned it provides a 40 % premium over 2009 policy prices, which translates
into $ 3.4-6.2mm Btu, significantly below industry demand of 80 % of imported gas cost of $ 4.6-11.6/bbl.
The definition of TGR is generous relative to standards elsewhere and should encourage TGR development. Sources said
that the areas in the policy need improvement are gas price incentives which are only available at the appraisal
stage after audit by a third party, which minimizes incentives for active exploration for TGR.
While gas sales to a third party can only be made on prices at a maximum 50 % discount to the 2009 policy, which once
again discourages exploration in areas where gas transmission network is unavailable. Under the proposed formula, the
effective floor-ceiling on gas prices is at $ 3.4-6.2/mm Btu at $ 20-100/bbl oil prices.
The floor on gas prices based on a proposed formula of $ 3.4/mm Btu warrants attention given the high drilling and
operating costs involved.
Another area that requires revision is early production incentives. Any companies that develop a TGR field within two
years after approval will be subject to a further 10 % additional premium over 2009 policy prices (total 50 %
premium).
Unlike other polices for conventional fields, the proposed TGR policy allows Exemption from windfall levies.
Similarly, the delivery point for supply of gas is defined as the outer flung of the gas processing facility, which
effectively transfers the burden of constructing pipeline to government-nominated parties.