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Oil exploration agreements.

Oil Exploration Agreements

Trinity Petroleum Co. of USA

The Government of Pakistan has signed an agreement with Trinity Petroleum Company of USA for Petroleum exploration at Kohlu Block. The Kohlu Block, consists of 1735 sq. kilometres, located in district Rajanpur, and tribal areas of Sulaiman Range in the Punjab and Loralai, Kohlu and Dera Bugti in Balochistan. The US company will carry out surfaced geological studies, acquisition and integration of satellite imagery with surface geology, geo-chemical, studies, seismic modelling. The Company will acquire a minimum of 250 kilometres of seismic data and drill one mandatory well and spend a minimum amount of 4.6 million US dollars during the initial three years period.

In the subsequent years, the company would drill three exploratory wells in three years time. The company according to the agreement, would have three renewals of one year each after the expiry of first three years of agreement. The Oil and Gas Development Corporation (OGDC) will also be associated in the job. The Trinity Petroleum is a wholly owned subsidiary of Anchutz Corporation of Denver, Colorado, USA and is presently engaged in petroleum exploration and development in USA, Canada, Italy Indonesia, Paraguay, and Bolivia.

Occidental of Pakistan Inc. (OXY)

An assignment agreement was signed on October 1, 1989 between the Government of Pakistan Occidental of Pakistan Inc. (OXY), Pakistan Oilfields Limited (POL), Attock Oil Company Limited (AOC) and Oil and Gas Development Corporation (OGDC) according to which Oxy has assigned 13.3 per cent and 5.7 per cent working interest to POL and AOC respectively, out of its 95 per cent working interest in the Soan block which was granted to it in June 1988.

Oxy has already made a discovery at Bhangali-1 in this connection and discovered oil at a rate of 3000 bpd with associated gas of 7 MFCD. The company plans to put this well on extended production test to obtain pressure and other data. After commercial discovery POL and AOC will have seven per cent and three per cent interest respectively.

Two oil fields and one gas field have been discovered in the last two months. These are: Kandanwari Gasfield in Khairpur District, Pasahki Oilfield near Hyderabad and Bhangali Oilfield near Rawalpindi.

Agreement with AMOCO

Two concession agreements were signed between the government of Pakistan, AMOCO Pakistan Exploration Company (AMOCO) (a subsidiary of AMOCO production company of the USA) ND Oil and Gas Development Corporation (ODGC) for petroleum exploration over Sibi (districts Katohi, Sibi and Kalat) and Kohat (Khurram Agency, North Waziristan, South Waziristan districts, Bannu, Kohat and D.I. Khan) areas covering 7250 sq. km. and 7500 sq. km. respectively.

In addition, a reconnaissance permit was also granted over an area of 254,340 sq. km. covering parts of the four provinces to AMOCO Pakistan Exploration Company under which the company would carry out reconnaissance work in the area including geological, and gravity surveys. The data acquired under this permit would be handed over to government of Pakistan, six months after the completion of the surveys.

Under the concession agreements, the companies will carry out 1200 sq. km. of seismic survey and drill two exploratory wells in Sibi and Kohat blocks. The companies would spend around US $19.5 million in these blocks and the reconnaissance area during the initial period.

AMOCO is a company of international repute and was involved in petroleum exploration in Pakistan during the period 1969 to 1981. During this period AMOCO acquired digital seismic data, drilled 10 exploratory wells and spent over US $ 90 million.

Assignment Accord Signed

An assignment agreement was signed between the Government of Pakistan, Occidental of Pakistan Inc, Pakistan Oil Fields Limited, Attock Oil Company Limited and Oil and Gas Development Corporation. According to the agreement OXY has assigned 5.7 per cent and 3.8 per cent working interest to POL and AOC respectively in the offshore Indus delta block which was granted to OXY and OGDC joint venture in 1988. OXY is currently drilling an exploration well, Sadaf-1, in this block. The well was spudded on December 22, 1989 and is currently drilling below 6,700 feet.

Lasmo Oil - U.K.

Under an agreement signed on December 26, 1990, Lasmo Oil of UK and OGDC will explore oil in block 36 covering an area of 6800 square kilometer in D.I. Khan Mianwali, Muzaffargarh and D.G. Khan. The Lasmo will carry out Seismic survey over an area of 350 kilometers and will also drill one exploratory well by spending an amount of 4.8 million dollars in this block.

Pakistan Petroleum Limited

In response to the government's bidding round of 43 blocks which were offered for exploration both locally and internationally, PPL in collaboration with foreign joint venture partners applied for six blocks and one open acreage for hydro carbo exploration. Of the six blocks that PPL had bid, five licences were granted. In block 22, 25 and 26 PPL's joint venture partners are OMV, Hardy Oil, besides OGDC and in block 25 PPL will be the operator. PPL will also be the operator in block 35 while British Gas in the operator in block 34.

Earlier in 1989, PPL signed five concession in 1989 with Burmah and Premier as joint venture partners. In Qadirpur Sindh where gas discovery has been made, OGDC the operator is preparing a development plan after which it will be implemented. In Kamdra (Sindh) PPL has so far drilled 1550 well depth. Here Premier is the operator. There was no prospective structure at Rojhan (Punjab) and therefore it was surrendered. At Bakshapur (Sindh and Balochistan) force majeur has been declared while exploratory work at Manju (Sindh) is on. At Mazarani PPL drilled two wells so far and gas reserves have been proved. PPL is 50 per cent owner here and Hunt International Petroluem Corp and Sabre Petroleum are joint venture partners. Commercial discovery has been declared here and formalities are being worked out with the government.

OMV - Austria

Block 20 covering an area of 4500 square kilometer in Sukkur and Khairpur districts of Sindh has been given to five companies. These are OMV of Austria Hardy Oil Gas Plc of UK and OGDC of Pakistan, and PPL. These companies will also carry out 1500 km. Seismic survey and drill two exploratory wells at a cost of 7.2 million dollars. Block 20, in Sindh has been granted to the four companies to explore new oil and gas reserves. It covers an area of 4500 sq. km., with river Indus flowing to its north-west, where Sukkur is situated. Rocks of eocene age are exposed in the western part, while the rest of the block is covered with alluvium. This block is surrounded by gas discoveries at Khairpur, Kandhkot (PPL), Qadirpur (OGDC), Mari (Stanvac), Kadanwari and Gorwar (Lasmo). The first discovery in the area was made by PPL in 1957 at Khairpur-2.

Lasmo's Kadanwari-I and Gorwar-I drilled during 1990 in the Tajjal block located immediately in the south of Block-20, have highlighted the prospects of this block. Both the wells showed presence of good quality reservoir sands in lower Goru (lower cretaceous). The test results have proved high quality gas.

It may be mentioned here that a discovery of oil and gas reserve was made recently at Dhamrakhi well No 1, 15 km south of Sanghar in Sindh. It is five km north of oil and gas field at Bobi. The production economics from Dhamrakhi are being improved by developing it jointly with the Bobi field. the size of the reserves in this field would be determined after drilling one or two additional wells. The OGDC was currently drilling more exploratory wells at Misa Kaswal and Turkwal in Punjab and at Nur in Sindh.

Larkana & Kutchi Block

OMV of Austria, Hardy of the USA, Pakistan Petroleum Limited (PPL) and Oil and Gas Development Corporation (OGDC) have been given the exploration licence for Larkana block with PPL as operator. Their working interest during exploration would be 35 per cent, 30 per cent, 35 per cent and 5 per cent. However, in the event of discovery OGDC would be at liberty to increase its working capital up to 50 per cent.

The same consortium has been given the exploration licence for Kutchi block in Balochistan with same working interests during exploration and development periods. OMV will be the operator for this block. It is interesting that one of the two blocks awarded by the BOI is in Balochistan. However, the award of licence follows the setting up of the National Finance Commission which is expected to take up all the issues of royalties and compensations being demanded by the provincial governments of Balochistan and Punjab. Under the terms of the licencing agreement, the venture will carry out seismic survey over 1500 kilometers of the block area and drill one exploratory well and to test each to the depth of 3000 meters, or 100 meters into Laki/Sui main limestone which ever is shallow in third year.

Under the licencing agreements being signed with foreign oil firms, in the event of discovery of oil these firms would not be required to sell to the government more than 40 per cent of their daily working interest share of crude oil, it is learnt. This means that these firms would be at liberty to export up to 60 per cent of their share of crude to any foreign buyer if they get ore remunerative prices.

A more attractive pricing arrangement has also been envisaged by the licencing agreements concluded by the Government of Pakistan recently with the consortium of foreign firms. Under this formula foreign producers of crude would receive arithmetic average of the f.o.b. spot prices during the month of delivery of all Arabian Gulf crude oils produced from the area as reported in Plants Oilfram price report plus or minus quality yield differential between the reference crude and crude being sold plus freight for marine transportation from Ras Tanura to Karachi minus cost of inland transportation from the well head to the nearest operating refinery unless such cost is borne directly by the working interest owners. Previously domestic producer of crude were getting the international price of crude minus a mutually agreed discount which usually entailed lengthy and intricate discussions.

PPL Action Plan

Pakistan Petroleum Limited (PPL) has prepared an action plan to explore new oil and gas reserves in NWFP, Balochistan and Punjab (Block-34) with an estimated cost of 12.3 million dollars. According to the plan a new land code-named Block-34 which covers an area of 5,600 sq. km and is situated west of Dera Ismail Khan. The entire area constitutes rugged mountainous terrain where the working condition would be difficult.

According to PPL, the famous Moghalkot oil seepage is present in the west of the block, which produces around 3-4 gallons of light oil per day. The quality of oil is such that it can be used directly in lanterns etc., and hence is a source of income to the landowners, and of energy to local meagre population. The sub-surface pool of oil which is leaking this oil to surface, near Moghalkot, is expected to be present in the eastern part of the block. PPL has been active in the area since long, and has drilled Domanda Well-1 (1959) within the area. the well did not reach its objective. OGDC's oil/gas discoveries at Rodha (1973) and Dhokhak (1975) are located along the south eastern border of Block-34. According to new planned programme, in Block 34 and PPL's foreign partners, which include British Gas and Tullow Oil (UK), plan to conduct 400 km of seismic and drill two wells. This exploration project would be completed within three years.

Oil Concession Accord

A petroleum concession agreement was signed by Government of Pakistan with Pakistan Petroleum Limited (PPL) and Oil and Gas Development Corporation (OGDC) for petroleum exploration over an area covering 3,600 square kms. in NWFP, districts D.I. Khan, Bannu and Kohat. Under the agreement the companies will carry out 800 kms of seismic survey and spud one exploratory well and would spend a minimum amount of US dollar 6.1 million in this block. [Tabular Data Omitted]
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Publication:Economic Review
Date:Feb 1, 1991
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