E&Ps: FY11 gas production to fall 1%; first decline in fifteen years

Gas production to fall 1% in FY11; first decline since FY96: PPIS production data up to May 31st suggests Pakistan’s gas production would likely contract 1% in FY11, against an average growth of 5.7% per annum during the last two decades (FY91-10). Oil production will likely rise 1.3% during FY11.

Better than average gas volumes for listed E&Ps: Two unlisted E&P operators – BP and BHP Billiton – witnessed a cumulative decline of 183mmcfd in gas production, 4.5% of FY10 gas volumes. Gas production from fields operated by BP fell by 70mmcfd whereas production from BHP operated Zamzama field fell by 113mmcfd.

FY12: Stellar outlook for oil; weak gas remains a key risk for the country’s energy mix: Recent oil heavy discoveries could jack up Pakistan’s oil production by 15-20% during FY12-13. Meanwhile gas would remain weak, dependent upon completion of development projects that have lately faced delays due to litigation. Weak gas production remains a key risk for Pakistan’s future energy mix.

Gas production to fall 1% in FY11; first decline since FY96

PPIS production data up to May 31st suggests Pakistan’s gas production would likely contract 1% in FY11, against an average growth of 5.7% per annum during the last two decades (FY91-10). FY11 would thus post the first decline in gas production since FY96. Oil production will likely rise 1.3% during FY11, after having contracted in each of the last two years.

Better than average gas volumes for listed E&Ps

Listed E&P companies were not the key contributors to the decline in gas production as each one of them witnessed growth in gas production in FY11. Two unlisted E&P operators – BP and BHP Billiton – witnessed a cumulative 183mmcfd (BP: -70mmcfd; BHP: -113mmcfd) decline in gas production, 4.5% of FY10 gas volumes and were the key reason behind dismal FY11 gas volumes. Gas production from fields operated by BP fell from 245mmcfd in FY10 to 174mmcfd in FY11, a steep 29% plunge. Although production from BP operated fields having been falling since FY07; the decline rate accelerated markedly in FY11, from FY08-10 average of 8%. Furthermore, production from BHP Billiton’s Zamzama field slipped by 22% or 113mmcfd, after peaking at 507mmcfd (annual average) in FY10. Zamzama seems to have entered declining phase as volumes having been on a consistent downtrend. The field witnessed peak weekly production at 529mmcfd in Oct-09, slipped under 500mmcfd in Feb-10, with recent weekly production at 352mmcfd.

FY12: Stellar outlook for oil; weak gas remains a key risk for the country’s energy mix

Recent oil heavy discoveries at Makori East and Domial, coupled with development upside through near term completion of development wells at Mela, Nashpa, Domial and Makori East could jack up Pakistan’s oil production by 15-20% during FY12-13. Meanwhile gas production would remain weak, as no major gas development project is currently in pipeline. Future growth in gas volumes is contingent upon timely commencement and subsequent completion of development projects at TAY & KPD (284mmcfd gas) and Uch (160mmcfd gas) – all OGDCL operated blocks. OGDCL has a bitter recent history of litigation, which has led to delays in the above mentioned projects.Natural decline in key gas assets at Sui, Qadirpur, Mari, Zamzama, and Sawan remains a strong risk for Pakistan’s future energy mix, in absence of any major gas additions.

Economic & Political News

Non-payment of dues: four IPPs threaten to stop power production

The month-long notices, given to the Ministry of Water and Power, by four independent power producers (IPPs) for clearance of their outstanding dues amounting to PKR16.43bn, expire on Monday. The notices said that in case of non-clearance of the dues they would close down their thermal power producing units. The overdue amount of these four IPPs stood at PKR16.43bn on May 13, 2011, when notices were served to the Ministry of Water and Power and Pepco. Out of the amount, PKR3.58bn dues belong to Atlas Power, PKR3.72 to Liberty Power, PKR4.63 to Nishat Chunian and PKR4.5 to Nishat Power.
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