Oil and Gas Exploration and Production Industry 03

8/2/2019 Oil and Gas Exploration and Production Industry 03

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Abstract

Current study is about Oil & Gas Exploration & Production Industry in Pakistan. The industry

had been very slow progressed since 1947. Foreign Investment is involved in major projects like

MOL and BJP.

We chose Oil & Gas Exploration & Production Industry, because in Pakistans economy it has a

climax influence on almost all other industries either direct impact or indirect impact. While

analyzing the industry current study reflects that in funds flow there should be possible favors to

those firms. New entrants threat level is low due to high risk in the exploration. Enough

rivalries are present active in the industry. They may be provided advance mobilization and

guarantees (Bank guarantee and commercial guarantee) by the government.


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Reason of choosing Oil and Gas Exploration and Production Industry:

The oil and gas sector has a considerable impact on the economy the sector attracts by far

the highest level of foreign direct investments in the country, and raises significant tax income

for the government.The oil and gas sector accounts for a significant share of governmentrevenues.The government has a major stake in the oil and gas sector, both as policy maker and

regulator, as well as owner and manager of many of the operating entities. The governments

long-term goal is to create a competitive, efficiently-run, financially-viable, and largely

privatized oil and gas sector providing supplies to a large share of the population. Substantial

progress has been made in the restructuring and reform of the oil and gas sectors, deregulation

of prices, and privatization of selected assets.Petroleum products and natural gas account for

about 80 percent of commercial energy use.Pakistans petroleum prospects attract local firms,

middle-size international oil companies as well as the large multinationals.

In the Oil and Gas Exploration and production industry the National Companies such as; Oil and

Gas Development Company Limited (OGDCL), Pakistan Petroliam Limited (PPL), Pakistan

Oilfields Limited (POL) etc are in competition with Multinational Companies and are

performing well.


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Introduction to Oil and Gas Exploration and Production Industry:

Oil and Gas sector in Pakistan has seen slow growth since the independence in 1947 when oil

quantities produced were scarce. At that time there was no gas production. Over the past half

century the petroleum industry has played a significant role in national development by makinglarge indigenous gas discoveries. These sources are supplying gas to consumption centers

through 9,843 kilometers transmission networks and 71,863 kilometers of distribution system.

Pakistan meets about 15% of its oil demand from local sources.

A. Policy Focus

Oil and Gas are major components of Pakistan's energy mix meeting over 79% of energy needs

and therefore, successive Governments since independence have attached high priority to this

sector. The Governments have adopted consistent policies aimed at promoting foreign

investment in upstream petroleum sector with the view to exploit indigenous hydrocarbon

resources in an optimal manner for the benefit of the nation while providing adequate return to

the investors. The driving force behind these policies has been the need to alleviate heavy

dependence on imported oil, the prices of which in the international market exhibit great deal of

volatility making the country prone to oil supply disruption risk as had been experienced in the

past on several occasions (Iranian Boycott 1951-53, Suez Crisis 1956, Sixdays War 1967,

Ramadan War 1973, Iranian revolution 1979, Iran/Iraq war 1980, Gulf Crisis 1991) worldwide

economic crises (2008).

Pakistan's commercially exploitable energy resources consist of natural gas, oil, coal and

hydropower. The country's current yearly energy supply is about 65.01 million tonnes of oil

equivalent. Petroleum and natural gas meet about 78% of these requirements. The balance is

derived from hydropower, coal, liquefied petroleum gas (LPG), nuclear and imported power. The

Government realizing fully well, that while a fiscal package with competitive incentives plays avital role in also attracting fresh investment, an adequate protection of the companies' investment

is an essential prerequisite for promotion of petroleum exploration in the country. This led to

enactment of foreign investment protection law of 1976 by the Parliament, under which the

Government guaranteed full safeguard to foreign investments in Pakistan. The Governments


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have been providing policy package of liberal incentives to enhance exploration activities in the

country, the latest of which was introduced in 2009.

Tracing back the history, the first exploration well in the part of British India that is now

Pakistan was sunk in 1887 near an oil seep at Kundal in district Mianwali, Punjab. This was the

time when modern petroleum industry was being developed in the wilderness of Pennsylvania,

USA. It started of with rig-based drilling activity by Captain Drakes. This was followed by a

number of other efforts, prominent of which was the drilling of thirteen wells near Khattan oil

seepage (south-east of Quetta) in Balochistan. It produced about 25,000 barrels of heavy crude

during 1885-1892. The next discovery came somewhat later in 1915 when commercial quantities

of oil were discovered at Khaur, district Attock, Punjab by the predecessor of Attock Oil

Company (AOC). As a result of the combined efforts of AOC and Burmah Oil Company (BOC),

Dhulian (1936), Joya Mair (1944) and Balkassar (1946) oil fields were discovered in t h e Potwar

area establishing the oil potential of Potwar region.

After the independence of Pakistan in 1947, the Government promulgated Regulation of Mines

and Oilfields and Mineral Development (Government Control) Act, 1948 and issued rules there

under in 1949. The aim of the act was to provide regulatory certainty for exploration and

production business that was After the promulgation of the Policy 2007, the international oil

prices showed tremendous hike and touched a maximum level of US $146 per barrel. In order to

further incentivize the Policy 2007, meetings with the stakeholders were held wherein it was

concluded that revision of gas prices and certain incentives are essential for enhancement of

exploration activities in the country, which otherwise would result in high import bill as

compared to various import options. Accordingly the Policy 2007 has been revised, and a new

policy 2009 has been announced.

B. Onshore-Recount of a Success Story

Tracing back the history, the first exploration well in the part of British India that is nowPakistan was sunk in 1887 near an oil seep at Kundal in district Mianwali, Punjab. This was the

time when modern petroleum industry was being developed in the wilderness of Pennsylvania,

USA. It started off with rig-based drilling activity by Captain Drakes. This was followed by a

number of other efforts, prominent of which was the drilling of thirteen wells near Khattan oil


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seepage (south-east of Quetta) in Balochistan. It produced about 25,000 barrels of heavy crude

during 1885-1892. The next discovery came somewhat later in 1915 when commercial quantities

of oil were discovered at Khaur, district Attock, Punjab by the predecessor of Attock Oil

Company (AOC). As a result of the combined efforts of AOC and Burmah Oil Company (BOC),

Dhulian (1936), Joya Mair (1944) and Balkassar (1946) oil fields were discovered in t h e Potwar

area establishing the oil potential of Potwar region.

After the independence of Pakistan in 1947, the Government promulgated Regulation of Mines

and Oilfields and Mineral Development (Government Control) Act, 1948 and issued rules there

under in 1949. The aim of the act was to provide regulatory certainty for exploration and

production business that was essential to encourage and accelerate petroleum exploration

activities. Thereafter BOC and AOC established local companies, Pakistan Petroleum Limited

(PPL) and Pakistan Oilfields Limited (POL) respectively and transferred exploration activities to

these companies. In 1952, a well drilled on the Sui structure (located in Balochistan Province), in

Central Indus Basin, made the maiden discovery of large reserves of natural gas in the Sui Main

Limestone of Early Eocene age. The original recoverable gas reserves were estimated to be over

10 trillion cubic feet (TCF) equivalent to about 1 billion barrels of oil.

The discovery of Sui Gas Field was the first major milestone in the search for hydrocarbons in

Pakistan. Following the natural gas discovery at Sui, several foreign oil companies took active

interest in carrying out exploration in Pakistan. The Government of Pakistan executed

agreements with Standard-Vacuum Oil Company (1954), Hunt International Oil Company

(1955), Shell Oil Company (1956), Sun Oil Company (1957) and Tidewater (1958). This led to

further exploratory drilling in prospective areas. Further discoveries of natural gas were made as

a result of these activities during 1954-59, which included Uch and Kandhkot by PPL and Mari

by Standard-Vacuum. Despite significant new gas discoveries during this period, the exploration

activities registered a downward trend because of lack of oil discoveries.

Government of Pakistan then decided to undertake the search for oil and gas and established the

state oil exploration company.

Oil & Gas Development Corporation was established in September, 1961 subsequently,

incorporated as a joint stock company with listing at local stock exchanges under the name of Oil

and Gas Development Company Limited (OGDCL). OGDCL's first success was the small gas


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discovery at Sari Singh (Sindh, 1965), which was followed by discovery of oil at Toot (Potwar,

Punjab, 1968), gas at Hundi (Sindh, 1970), Rodho (Punjab, 1972) and Kothar (Sindh, 1973) and

gas/ condensate at Dhodak (Punjab, 1975). During this period POL discovered oil at Meyal

(Potwar, Punjab, 1968) and American Oil Company (AMOCO) discovered a small gas

accumulation at Jandran (Balochistan, 1975).

The Central and Southern Indus Basins had been regarded as gas prone areas until early 1981

when BP formerly known as Union Texas (UTP), a USA Company, discovered oil at Khaskeli

(Sindh) in the Lower Goru Sandstone of Cretaceous age. Directly BP came to Pakistan after the

modification of the petroleum regulations in 1976, and the dramatic increase in crude prices in

the mid 1970s that saw several foreign companies entering Pakistan in search of new oil supply

source. In view of this success by BP, OGDCL acquired the Sanghar North and South

concessions, immediately to the north of the Badin license of BP. T BP has drilled 6 discovery

wells in Pakistan. This opened a new oil province outside the traditional oil province of the

Potwar in the north. After Sui, the discovery of oil in the Southern Indus Basin was the second

milestone in search for hydrocarbons in Pakistan. This led to a boom in exploration activity in

Southern Indus Basin, resulting in several oil discoveries in an area regarded heretofore as less

prospective for liquid hydrocarbons. This area has attained the distinction of contributing % of

the total oil production of the country.

OGDCL made very large gas discovery in Eocene Carbonates of Middle Indus Basin at Qadirpur

in 1989. In the same year, Eni (formerly known as LASMO Oil plc. of U.K.) made a gas

discovery in Lower Goru Sandstone (Cretaceous) at Kadanwari, south of Khairpur-Jacobabad

High. This discovery opened up new play fairway of Lower Goru Sandstone in which a number

of significant gas discoveries have been made, including Miano (1993) and Sawan (1998) by

OMV of Austria, Mari Deep (1999) by Mari Gas Company Ltd.(MGCL) and Rehmat (2002) by

Petronas of Malaysia. New exploration frontier was opened when Eni discovered gas at Bhit

(1998) and BHP at Zamzama (1999) in Kirthar foldbelt and foredeep. Another landmark

discovery that has been made in the recent past, is OGDCL's Chanda oil discovery (1999)

located in Kohat Plateau which proved the petroleum potential of this under explored part of the

country.


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As a matter of fact, this was first ever hydrocarbon discovery inThe discoveries of Bhit, Badhra

Sawan, Zamzama, Miano, Chanda, Manzalai and Rehmat have been developed, adding around

1.4 BCF per day of new gas into the system and enhanced recoverable gas reserves by 6.8 trillion

cubic feet.

NWFP province which was followed by another discovery namely Manzalai (2002) by MOL of

Hungary making Kohat plateau, new focus area for exploration. Lately, MOL has made yet

another gas/condensate discovery namely Makori (2005) which has reinforced the belief of many

Geologist that this region can host large hydrocarbon reserves with upside touching tens of

trillion cubic feet of natural gas. Nine blocks have been recently awarded in this province.

C. Offshore-Hosting Promising Prospectivity

Offshore area of Pakistan consists of two basins; Indus Basin and Mekran Basin, both of which

have been developed as a result of sedimentary deposition associated with Himalayan uplift. The

sedimentation is continuing at present as the Indus River system drains the Himalayan

Mountains into The Indus River is about 2,900 kms long and travels about 1,200 kms in the

plains after leaving the high mountains with the total drainage area of 966,000 sq. kms. This

river has developed the Indus basin, which is the second largest offshore basin in the world after

Bengal delta. This basin is analogous to other producing basins of the world in terms of

geological setting e.g Mississippi Delta. Gulf of Mexico, USA, Niger Delta (Nigeria), Mahakam

Delta (Indonesia), Mackenzie Delta (Canada), Gipsland Basin (Australia) etc. Exploration in the

Indus Offshore dates back to 1961 when Sun Oil Company (USA) carried out seismic surveys

and then drilled three near-shore wells, Dabbo Creek-1 (1963), Patiani Creek-1 (1964), and

Korangi Creek-1 (1964). Subsequently, Wintershall (Germany) drilled three wells, Indus Marine

A-1 (1972), Indus Marine B-1 (1972) and Indus Marine C-I (1975) which can be truly

categorized as offshore wells. Husky (USA) also drilled one well, Karachi South A-l (1978). All

these seven Indus Offshore wells, drilled till 1978, did not test movable hydrocarbons, although

gas shows were reported in most wells. Some of these wells even failed to reach target objectives

after having encountered high pressures. Noncommercial gas quantities flowed in OGDCL's

PakCan-1 well (1986) drilled with Canadian assistance. Occidental (USA), after conducting


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modern seismic in their Indus Delta Exploration Licence, drilled a well Sadaf-1 (1989); however,

the well turned out to be a dry hole.

TOTAL, French Company drilled Pak G-2 upto a depth of 4750 meters in ultra deep water

during 2004. This well targeted to test carbonate built up on a volcanic high which was

successfully penetrated. This well went dry. Subsequent to that Shell drilled Anne -1X well in

Ultra deep water at a depth of 3,250m during 2007 targeting to test Oligocene/Miocene reservoir

sequence but the said well did not encounter Hydrocarbon saturation of any significant volume

but it provided valuable information to understand the geological constraints for Indus Basin.

At present there are 17 offshore licences which are being operated by companies like BP

Exploration (Apha) Limited (BPXA), Eni (Pakistan) Limited (Eni), and Nikoresources (Pakistan)

Limited (NRPL) etc. In last couple of years intensive 2D & 3D survey has been conducted in

offshore blocks. Eni has acquired a total of 919.52 L.Kms of 2D and 1190 Sq.Kms of 3D in

Offshore Indus-M,N &C blocks and Eni has committed two exploration wells in Offshore Indus-

M & C blocks. BPXA has acquired a total of 5556 L.Kms of 2D in Offshore Indus-U,V,W and S

blocks and 1956 Sq.Kms of 3D in Offshore Indus-U & S blocks. Oil & Gas Development

Company Limited (OGDCL) has acquired 4329 L.Kms of 2D in Offshore Indus-G, R and

Eastern-A blocks and 316 Sq.Kms of 3D in Indus Delta-A Block. Petroleum Exploration

(Private) Limited PEL has acquired a total of 1622 L.Kms of 2D in Offshore Indus-O, P and J

blocks and 574 Sq.Kms of 3D in Offshore Indus J &Oblocks. NRPL has acquired a total of 2009

Sq.Kms of 3D in offshore Indus North.

In Mekran offshore, one well, JalPari 1-A was drilled by Marathon (USA) in 1976-77, after

conducting extensive seismic surveys. The well was abandoned due to un-controllable over

pressures. Subsequently, Ocean Energy (USA) drilled two more wells during 2000-01, which

also ran dry. PPL drilled an exploration well i.e.: Pasni X-2 in Mekran Offshore area to test

Hydrocarbon potential of Panjgur sandstone but it went dry due to high formation pressure.

However it provided valuable geological information to address the future problems of Mekran

Indus Basin. The data acquired in these areas is available for new exploration companies.

Offshore sedimentary basins stretch over an area of about 300,000 sq.kms. and are highly under-

explored exploration with drilling density of about 0.4 per 10,000 sq.kms. Following

introduction of first ever offshore specific production sharing incentives package in 2001,


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a number of companies have focused their attention on Offshore Indus, which hopefully will

help unlock prospectivity of this area.

Selected firms in Oil and Gas Exploration and production industry:

Oil and Gas Development

CompanyPakistan Petroleum

MOL Group
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Histories of the firms:

1. OIL AND GAS DEVELOPMENT COMPANY LIMITED (OGDCL)Vision:

To be a leading multinational Exploration and Production company

Mission:

To become the leading provider of oil and gas to the country by increasing exploration and

production both domestically and internationally, utilizing all options including strategic

alliances;

To continuously realign ourselves to meet the expectations of our stakeholders through best

management practices, the use of latest technology, and innovation for sustainable growth, while

being socially responsible.

Oil and Gas Development Company Limited (OGDCL) is a state corporation of Pakistan. It was

established in 1961 to prospect, refine and sell oil and gas in Pakistan. By 1966, OGDCL had

emerged as the dominant prospector in Pakistan with several significant discoveries in the Indus

Basin. OGDCL was converted into a public limited company in 1997. The company managed to

drill more than one third of the total wells drilled in the country during 2010. In addition to that,

OGDCL was also joint venture partner in sixteen wells drilled by other operators. As on June

2010, the Government of Pakistan holds 74.82% stake in the company.

On May 4, 2006 the government of Pakistan appointed a Citigroup-led consortium to advise the

state-run Privatization Commission on the sale of 10 to 15 per cent (or 430 to 645 million shares)

of the company. OGDCL is the second Pakistani company to have been listed at the London

Stock Exchange. The company is also listed in Pakistan at all the three exchanges of the country

namely Karachi Stock Exchange (KSE), Lahore Stock Exchange (LSE) and Islamabad Stock

Exchange (ISE).

OGDCL has been ranked amongst the "Top Twenty Five Companies" on the Karachi Stock

Exchange (KSE) for the fifth consecutive year (20042008) on the basis of dividend payout,

return on equity and compliance with listing regulations. During the leadership of Raziuddin as

MD, OGDCL performance was best ever. He not only increased the production of oil, gas and
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LPG but also increased the exploration activities to new heights. His leadership provided

OGDCL new vision and mission. No MD or Chairman had come before or has come to date

matching the performance of Raziuddin. He introduced reforms and was a change manager. The

profit achieved during his time was unprecedented. It is said that had Mr Razi been the MD,

Pakistan would have been self sufficient in oil and gas.

OGDCL won the Seventh National Forum for Environment and Health (NFEH) Environment

Excellence Award 2010. NFEH is affiliated with the United Nations Environment Program

(UNEP) and is supported by Ministries of Environment, Government of Pakistan & Sind and

Federation of Pakistan Chambers of Commerce and Industry.

2. PAKISTAN PETROLIAM LIMITED (PPL)

Vision:

To maintain PPL's position as the premier producer of hydrocarbons in the country by exploiting

conventional and unconventional oil and gas resources, resulting in value addition to

shareholders investment and the nation as a whole.

Mission:

To sustain long term growth by pursuing an aggressive hydrocarbons exploration and production

optimization program in the most efficient manner through a team of professionals utilizing the

latest developments in technology, while ensuring that quality is an integral part of all operations

and maintaining the highest standards of health, safety, environment protection and addressing

community development needs.

Pakistan Petroleum Limited (PPL) is a Pakistan based Oil Company; it was incorporated June 5,

1950, when it inherited the assets and liabilities of the Burma Oil Company Ltd. which initially

holds 70% of the share with the rest mostly held by the Government ofPakistan (GOP). As on

June 2011, GOP holds 70.66% of the shares. The company is headquartered in Karachi.

The company operates major oil and gas fields including Sui gas field and has non-operating

interests in other fields and has an interest in an exploration portfolio onshore and offshore. The

company is now planning international exploration in partnership mode.
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PPL is a signatory of the United Nation Global Compact (UNGC), a voluntary charter set up in

July 2000 by leading businesses to form platform for business models and markets' promotion.

The charter binds member companies to follow ten basic principles focusing on human rights,

working conditions for employees, environmental conservation and transparency. PPL became a

member of UNGC in April 2006.

The company sales revenue increased by 31% to PKR 78.3 billions. PPL made a profit after tax

of PKR 31.4 billion showing an increase of 35% over the previous financial year. Rising

international prices and depreciation of the rupee against US dollar coupled with the positive oil-

to-gas sales mix attributed to this profitability to rise all time high earning per share of PKR

26.21 IN 2011.

PPL is operator and shares 100% in the following two fields:

Kandhkot gas field was hit by flood in August, 2010. There were twenty five producingwells out of which fifteen were shut-in and production from the field dropped to 70 MMscfd

from the peak of 195 MMscfd of gas. Eight wells were bought into operation by September,

2010 and after necessary repairs production increased to 160 MMscfd (Million standard

cubic feet per day). Two additional wells brought into opertion by mid October, 2010 adding

30 MMscfd of gas thereby increased total available production to 190 MMscfd. In December

2010, compression station began commercial operation to maintain contractual delivery

pressure and enhance recovery ratio.

Sui gas field is under depletion phase, gas sales during the financial year 2010-2011 was170,805 MMscf against 177,574 MMscf in 2009-2010. Production commenced from two

development wells and a third well spud-in during the fiscal year 2010-2011. Drilling of well

(Sui-92U) was started in March, 2010. The well was drilled up to the depth of 2,128 meters

in the Pab reservoir and was successfully completed as a single string producer from Sui

upper limestone (SUL) in December, 2010. Drilling of well (Sui- 89M) started in January,

2011 and was completed in February, 2011. Well (Sui-93M) was drilled as a horizontal well

using under balanced drilling technology in the reservoir for the first time in the country to

optimize production form Sui gas field. Drilling of well started in March, 2011 and

completed in July, 2011.
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3. MOL GROUP

MOL Nyrt was established on 1 October 1991 through the merger of 9 companiesformer

members of the National Oil and Gas Trust. By 1995, the actual integration of companies was

completed, and the previously separated entities started to operate within one joint organization.

MOL went for a privatization strategy in order to respond to international market challenges and

also, it pioneered in the regional consolidation of the oil and gas industry.

In 2003, MOL purchased a 25% stake in Croatia's national oil company INA. In 2006, INA and

MOL launched a joint exploration project in the SlatinaZalta area designed to secure new

volumes of natural gas. The two companies are now forming a consortium in Bosnia and

Herzegovina, after winning the recapitalization tender for Energy, the leading petrol company of

country, where they got an absolute majority by holding 67% of the shares.

By 2004, MOL bought, in several steps, Slovakia's national refiner Slovnaft, and Hungary's

leading producer ofethylene and polypropylene TVK, over which MOL gained control with a

stake of 34.5% in 2001. MOL further increased its stake in TVK to 86.56% in 2006. Between

2003 and 2005 MOL completed the acquisition ofShell Romania. In 2004, MOL entered

the Austrian market by purchasing a fuel storage facility in Korneuburg, and a year later by

acquiring the Roth filling station chain. In August 2007, MOL purchased Italiana Energia eServizi S.p.A. (IES), owner of the Mantova refinery and a chain of 165 retail stations in Italy.

In November 2007, MOL reported a new regional initiative to create a joint regional gas pipeline

system called New European Transmission System (NETS). On 20 December 2007, MOL

announced a strategic cooperation with Czech power utility CEZ. The joint venture with CEZ

focuses on gas-fired power generation and related gas infrastructure in Central and Southeastern

Europe, first launching two 800 MW power plants in Hungary and Slovakia. After selling 7% of

its shares to CEZ within the scopes of a strategic partnership, MOL announced on 10 March2008 the sale of an 8% stake to the Oman Oil Company for the same reason.

In June 2007, Austrian energy company OMV made an unsolicited bid to take over MOL, which

has been rejected by the Hungarian company. On 6 March 2008, the European

Commission launched an in-depth investigation of OMV's unsolicited bid to take over MOL.
http://en.wikipedia.org/wiki/Mergerhttp://en.wikipedia.org/wiki/Horizontal_integrationhttp://en.wikipedia.org/wiki/Privatizationhttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/INA_(company)http://en.wikipedia.org/wiki/Slatina,_Croatiahttp://en.wikipedia.org/wiki/Zal%C3%A1tahttp://en.wikipedia.org/wiki/Consortiumhttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Recapitalisationhttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Refinerhttp://en.wikipedia.org/wiki/Slovnafthttp://en.wikipedia.org/wiki/Ethylenehttp://en.wikipedia.org/wiki/Polypropylenehttp://en.wikipedia.org/wiki/Takeoverhttp://en.wikipedia.org/wiki/Royal_Dutch_Shellhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Korneuburghttp://en.wikipedia.org/wiki/Filling_stationhttp://en.wikipedia.org/w/index.php?title=Italiana_Energia_e_Servizi_S.p.A.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Italiana_Energia_e_Servizi_S.p.A.&action=edit&redlink=1http://en.wikipedia.org/wiki/Mantovahttp://en.wikipedia.org/wiki/Refineryhttp://en.wikipedia.org/wiki/Chainhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/New_European_Transmission_Systemhttp://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/Power_stationhttp://en.wikipedia.org/wiki/CEZ_Grouphttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Share_(finance)http://en.wikipedia.org/wiki/Scopehttp://en.wikipedia.org/wiki/Oman_Oil_Companyhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/OMVhttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/European_Commissionhttp://en.wikipedia.org/wiki/European_Commissionhttp://en.wikipedia.org/wiki/European_Commissionhttp://en.wikipedia.org/wiki/European_Commissionhttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/OMVhttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Oman_Oil_Companyhttp://en.wikipedia.org/wiki/Scopehttp://en.wikipedia.org/wiki/Share_(finance)http://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/Joint_venturehttp://en.wikipedia.org/wiki/CEZ_Grouphttp://en.wikipedia.org/wiki/Power_stationhttp://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/New_European_Transmission_Systemhttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Chainhttp://en.wikipedia.org/wiki/Refineryhttp://en.wikipedia.org/wiki/Mantovahttp://en.wikipedia.org/w/index.php?title=Italiana_Energia_e_Servizi_S.p.A.&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Italiana_Energia_e_Servizi_S.p.A.&action=edit&redlink=1http://en.wikipedia.org/wiki/Filling_stationhttp://en.wikipedia.org/wiki/Korneuburghttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Royal_Dutch_Shellhttp://en.wikipedia.org/wiki/Takeoverhttp://en.wikipedia.org/wiki/Polypropylenehttp://en.wikipedia.org/wiki/Ethylenehttp://en.wikipedia.org/wiki/Slovnafthttp://en.wikipedia.org/wiki/Refinerhttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Recapitalisationhttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Consortiumhttp://en.wikipedia.org/wiki/Zal%C3%A1tahttp://en.wikipedia.org/wiki/Slatina,_Croatiahttp://en.wikipedia.org/wiki/INA_(company)http://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/Privatizationhttp://en.wikipedia.org/wiki/Horizontal_integrationhttp://en.wikipedia.org/wiki/Merger


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On 24 June 2008, OMV received a 'Statement of Objections' from the European Commission

regarding the company's attempted takeover of MOL. In March 2009, OMV sold its 21% stake

in MOL to Surgutneftegas. MOL called this move "unfriendly".

On 9 May 2008, MOL signed an agreement to acquire a 35% interest in a block in India operatedby the Indian ONGC.

On 24 May 2011, the second Orbn-cabinet bought the Russian Surgutneftegas's shares, thus the

Hungarian state acquired 21.2% of the shares within the company.

4. PAKISTAN OILFIELDS LIMITED (POL)

Vision

To be the leading Oil and Gas exploration and Production company of Pakistan with the highest

proven hydrocarbon reserves and production and which provides optimum valve to all

stakeholders.

Mission

We aim to discover and develop new hydrocarbon reserves and enhance production from

existing reserves through the application of the best available technologies and expertise. In

achieving our aim we will maximize the return to our shareholders, fully protect the

environment, enhance the well-being of our employees and contributes to the national

economies.

The Pakistan Oilfields Limited (POL), is a subsidiary of the Attock Group of Companies, was

incorporated on November 25, 1950. In 1978, Pakistan Oilfields took over the exploration and

production business of Attock Oil Company. Since then, Pakistan Oilfields has been investing

independently. Pakistan Oilfields is a leading oil and gas exploration and production company

listed on all the three stock exchanges of Pakistan.
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costs that encourage competitors to fill unused capacity by price cutting. The switching

cost in oil and gas industry is relatively low.

THREAT OF POTENTIAL SUBSTITUTESThreat of substitute exist in oil and gas industry because the products demand is affected

by the price change of a substitute product e.g. LNG substituting CNG. The price

elasticity of Oil and gas products like Petrol, CNG, and HSD etc is affected by the

substitute products because more substitutes are becoming available and the demand

become more elastic since customers have more alternatives such as CNG, LPG, and

LSD etc. Because of the availability of close substitute of oil and gas product the firms in

oil and gas industries raise prices. While the threat of substitutes typically impacts oil and

gas industry through price competition, there are other concerns in accessing the threats

of substitute like the substitutability of liquid oxygenated products and bio-fuels versus

gas, oil and diesel. New technologies are available and the changing structure of oil and

gas industry is contributing to competition among these substitute means of fuel

consumptions.

THE BARGINING POWER OF THE BUYERSThe major buyers for oil and gas products are ATTOCK PETROLEUM LIMITED

(APL), Pakistan State Oil Company Limited (PSO), Shell Pakistan limited, Caltex Oil

Pakistan Limited and TOTAL PARCO Pakistan limited. The bargaining power of the

buyers is weaker because they have the threat of forward integration by the producers like

OGDCL, MOL Group, POL, etc who can take over their own distribution or retailing.

Significant buyer switching cost which means buyer cannot easily switch to another

product. Buyers are fragmented which means the buyers have no particular influence on

product and producer supply critical portions of buyers input.

THE BARGINING POWER OF THE SUPPLIERSMajor suppliers of crude oil and natural gas are Saudi Arabian Oil Company

(SAUDI ARAMCO), E.N.I Pakistan Limited, Oil & Gas Development Company limited


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B.H.P Petroleum, Pakistan Petroleum limited, O.P.I (Private) Limited, O.M.V Pakistan,

and British Petroleum. As the suppliers are powerful they have an influence on producing

industry such as selling raw material at a higher price to capture some of the industry

profits. They can integrate forward. They have the information of their buyer.

THREATS OF NEW ENTERANTSOil and gas have barriers to entry which are more than the normal equilibrium

adjustments that oil and gas markets typically make i.e. when the earnings increases it is

expected that the additional firms will enter in the oil and gas

markets to take the advantage of high profit levels and when the income decreases the

some of the firms exit the market restoring the market equilibrium. On the other hand

raising prices or expectation that future prices of oil and gas will rise encourage rivals to

enter in the market. But if the firms individually keep the prices low as a strategy to

prevent potential entrants from entering the market it can be an established entry

deterring pricing barrier. Barriers to enter in oil and gas industry are arising from

following sources which are Government created

barriers (taxes, fright margin, petroleum development levy etc), patents and proprietarily

knowledge to restrict entry into an industry(ideas and knowledge that provide

competitive advantages treated as private property) , asset specificity that inhibits entry in

to an industry (asset specification to the extent to which the firms asset can be utilize to

produce a different product) and organizational internal economies of scale (cost

efficiency level of production)

SWOT Analysis of Oil and Gas Exploration and Production Industry:

STRENGTH:

Sector attracts by far the highest level of foreign direct investments and raises significanttax income for the government.


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Pakistan is among the most gas dependent economies of the world. About52 TCF of gasreserves have been discovered of which 19 TCF have already been produced.

Success rate of oil and gas exploration in Pakistan is good as compared to internationaldiscoveries.

Government sets target to drill 100 new oil wells, gas exploration wells in year 2009. OGDCL and PPL is being expanded to other countries like Yemen, Iraq, Nigeria and

Sudan

The exploration activities would be intensified in Balouchistans area ofKohlu, which isfamous for having natural resources in abundance.

Refineries almost working in the sector foreign countries interested to setup new refineryplants in the country.

WEAKNESS:

In Pakistan demand of oil and gas is higher then the supply it only meets the 18 % ofdomestic demand.

There are total 7 refineries working in Pakistan still not fulfill the local demand of oil andgas.

The on-going deforestation in the areas where supply of natural gas is technically notviable.

Only 20 % of population easily access to natural gas.

OPPORTUNITIES:

The government has demonstrated a strong political commitment and taken a number ofsteps to deregulate the oil and gas sector in keeping with the overall vision of a

liberalized economy. This will be resulting in a number of structural changes and

contributed to a somewhat competitive market and generally improved quality of service.


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Thar field is the 5th largest (185 billion tones) coal field in the world but has remainedun-exploited. The reserves could be used in the production of electricity to overcome

power shortage.

960 Appraisal wells of oil and gas estimate by ministry of petroleum in the country whichshows how much potential in the country.

Ministry has so far awarded 119 exploration licenses to public and private sector.

THREATS

Oil and gas pipeline projects with Turkmenistan should be finalized soon because energyrequirements are increasing rapidly. Rise in gas rates would put a negative impact on the

economy and make the industry uncompetitive.

Persistently high global oil prices pose a threat to Pakistans balanceof payments. Pakistan imports more than 50mn barrels of oil a year to satisfy local

demand for fuel products and record-high prices have led to widening of the trade deficit.


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Recommendation and conclusion:

In order to align the oil and gas sector with Pakistans poverty reduction strategy and macro

economic framework, the following recommendations deserve attention: Energy subsidies

(economic and budgetary) are significant. Subsidies should, in the short term, be funded throughthe national budget (so that they are transparent), and gradually phased out.

The affected parties should be notified well in advance so that they have adequate time to

prepare themselves for the new environment; Government should provide commercial

guarantees only in exceptional circumstances and if so, in a transparent manner. An inventory of

the contingent liabilities to date should be developed, together with an assessment of the

corresponding financial commitments. Wherever possible, attempts should be made to dispose of

these liabilities through negotiations; and OGDCL, PPL, and gas T&D entities should be

privatized after suitable repackaging/unbundling, targeting domestic and foreign medium-size

institutional investor consortiums (with strong operators), and after the completion of price/tariff

reforms currently underway.

A competitive, largely private owned and efficiently run oil and gas sector will deliver quality

energy supplies to the consumers at realistic prices in a sustainable environment.

Oil and Gas Exploration and Production Industry 03

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