Pakistan to Encourage Investment in Gas Production
Pakistan will provide higher price of gas and other incentives to national as well as international investors to encourage investment in developing domestic shale gas.
Sources on the sidelines of the Annual Technical Conference (ATC) of Pakistan said Pakistan’s potential shale gas reservoirs are nearly 40 trillion cubic feet.
They said that the government recently has approved a new exploration policy, with improved incentives, as compared with the 2009 policy.
Shale gas offers an alternative source of energy, which, according to rough estimates, stands at 40 trillion cubic feet. These unconventional gas reserves are in addition to the remaining conventional proven gas reserves of over 30 trillion cubic feet.
Pakistan’s current gas demand is met entirely through domestic production which at present stands at 4,000 mmcfd. The level has been stagnant for the last few years as new gas field discoveries have been scarce and the cost of exploration keeps rising rapidly owing to the added burden of security. One of the options currently being explored by the government is importing gas from Iran, which will add about 750 mmcfd to the country’s supply. However, officials warned that consumers must be prepared for its adverse impact on gas prices, as the gas would be at least three times more expensive than domestic production costs, causing overall gas prices to rise.
Pakistan Petroleum has invited fresh bids to auction licences to explore and develop several blocks in Dera Ismail Khan inKP,and Badin, Naushero Firoz and Jungshahi districts in Sindh, having huge shale and tight gas reservoirs.
“The Oil and Gas Development Company (OGDC) recently has discovered a new oil/gas reserve in District Karak of Khyber Pakhtunkhwa (KP). ‘Datta Sandstone’ has been tested and produced 3370 barrels per day of crude oil and 11 mmcfd gas through 32/64" choke at wellhead flowing pressure 3800 psi” the official said.
Giving salient features of the new policy he said: “Exploration companies will be offered 40-50 percent higher prices for the extracted gas compared with the $4.26/mmbtu price announced in Exploration and Production Policy 2009. Companies which succeed in recovering gas from tight fields within two years would get 50 percent hike over the 2009 price and, if it takes more time, they will get only 40 percent hike on the 2009 price. As an added incentive, the leases for the fields will now be for 40 years, instead of 30 in the 2009 policy”. Even with the higher prices for the tight gas offered to the exploration companies, it is estimated that Pakistan would have to pay a maximum of $6.50/Btu for the gas compared with $12.30/Btu for imported gas from Iran.
Pakistan’s entire economy is heavily depending on natural gas as feedstock for industries such as fertilizer, fibre and plastics. It is important to pursue shale gas fields’ development under reasonably tight environmental regulations to minimise risks to the ground water resources. During the last decade, demand for natural gas in the country has increased by almost 10 percent annually, reaching around 3,200m cubic feet per day (mmcfd) in 2008, against total production of 3,774 mmcfd. But, in 2009, the demand for natural gas exceeded the available supply, with production of 4,528 mmcfd gas against demand for 4,731 mmcfd, indicating a shortfall of 203 mmcfd, which at present is estimated at around 2,000 mmcfd.
According to petroleum ministry officials, the gas supply-demand gap is expected to grow every year to cripple the economy by 2025-26, when gas shortage would reach 11,092 mmcfd.
Source: Pakistan Observer