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Enhanced concession negotiation and monitoring capabilities at DGPC.

DGPC's role in promotion of oil and gas resources of Pakistan is very critical and through this paper, we want to sent a message to potential investors and oil companies that the Government of Pakistan is actually working on many fronts to encourage petroleum exploration in this country

INTRODUCTION

The Director General Petroleum Concessions, (DGPC) of the Ministry of Petroleum and Natural Resources (MP & NR) is responsible for the grant of petroleum exploration rights in accordance with the Government of Pakistan (GOP) Petroleum Exploration and production policy and is therefore the first stop in Pakistan for all foreign oil exploration companies entering into this country for acquiring petroleum exploration rights.

DGPC's Two main

Responsibilities Include

* negotiation of petroleum concession

agreement * regulation and monitoring of

concession activities.

DGPC is also Responsible for

* financial affairs in exploration and

production including collection of

licence fee, rents and royalties. * administration of joint venture

operations. * board representation on indigenous

private sector companies. * designation of blocks for exploration

promotion. * generation of reports and analysis. * periodic review of various regimes of

the concession agreement.

This paper will describe current DGPC activities, discuss the objectives of the upgrading, present the details of the adopted programme and discuss the specific technical tools and enhanced capabilities which will be provided and produced during the two years project. Details of database and hardware and software systems as well as examples of technical training exercises and special studies will be presented. Plans for staffing, new office layout, database structure, concession analysis, company reports evaluations, revenue and royalty collection and other DGPC activities will be described.

During the next two years the staffing, database analysis, concession monitoring capabilities and physical facilities at DGPC will be significantly enhanced. A major institution building programme is currently underway which will result in additions to and improvement in staff, facility space, computerization and analytical capability. With the Government emphasis on indigenous oil/gas exploration, development and production and in light of the new petroleum policy and the desire to facilitate foreign and local investment in the sector, the demands on DGPC will significantly increase. To help meet these demands USAID has provided grant to supply technical assistance and commodities necessary to upgrade the institution.

DGPC Activities and Status

DGPC currently administers 54 concessions acquired by a total number of 23 oil explorations companies including State Owned Oil and Gas Development Corporation (OGDC) operating over an area of 2,18,000 sq.kms. of the sedimentary basin.

Organization and Workload

DGPC is currently organize. All activities are directed and coordinated by the Director General and are organized through two departments; Exploration and Production.

The exploration department is primarily concerned with concession negotiations, administration and approval of work programmes. They also assist oil companies with practical matters such as liaison over work permits and customs and excise. The production department is responsible for administering production activities and collecting statistics but is also concerned with financial matters concerning joint venture activities and collection of royalties and rents etc.

The work load of DGPC can be categorized under five headings. These are summarized in Table-2 and do not directly relate to the organization. Table 2 represents a synthesis which has been compiled from discussions with DGPC personnel and personnel in oil companies and other Government bodies.

[TABULAR DATA OMITTED]

The current and future workload of DGPC is discussed in the light of the 7th Five Year Plan. This plan predicts a drilling activity of 375 wells and an increase in daily oil production of 77% from 43,000 bopd in 1987-88 to 76,000 bopd in 1992-93 and an increase in daily gas production over the same period of 66% from 1240 MMCFD to 2100 MMCFD. By all standards however the country is so far able to meet only 1/3rd of its needs through domestic production and even the current level of self-sufficiency cannot be maintained over long periods keeping in view the current recoverable reserves, depleting nature of the reservoir and average growth rate of 6-7%. The new discoveries though significant may only replace the existing production for a short span of time. Based on present estimated success ratio, proportion of oil vs gas discovery, sizes of the reservoir and a number of other parameters the Planning and Development Division has worked out a number of scenarios to establish the targets to achieve different levels of production during the 8th Five Year Plan Table 1). Even base case scenario which is based only on a 30% increase in the drilling activities as compared to the 7th Plan calls for the drilling of about 500 wells during the 8th Plan period in order to achieve a production rate of 97,400 barrels of oil and 2100 MMCF of gas per day as the annual average production. This increased activity will naturally place an increased workload on the DGPC. The number of wells drilled and the amount of hydrocarbons produced translates back to increase in concession agreements in place and fields in production. Although not explicitly stated in the plan, estimates for the number of concessions and fields have been made by extrapolating from current levels. These estimates are illustrated in Graph which shows the inferred activity each year in numbers of concessions, wells and fields. In all categories a significant increase is predicted. (55% more fields, 61% more wells and 64% more concessions). The annual increase average of 7% for fields and 10% for wells and concessions. Thus the workload of DGPC is anticipated to increase by at least 10% per year and will be over 60% greater by the end of the Five Year Plan in 1993.

[TABULAR DATA OMITTED]

Another most crucial problem for DGPC is to sustain as well as enhance the current momentum of international participation in exploration. There as still large un-explored areas in Pakistan and even the producing areas are considered to be under-explored by Western standards. A study recently carried out by the state owned Oil and Gas Development Corporation recommends that the possibility for finding the large reservoir of oil and gas lies in the new frontiers and high risk areas of the basins. These are being termed high risk only because of lack of information. One of the duties of DGPC is to make arrangements for acquiring reasonable quantities of data from these areas to identify prospective blocks to form the basis for negotiations with the interested oil exploration companies. In addition besides usual difficulties for the developing countries to attract foreign capital, Pakistan also now has to compete with the newly emerging Eastern European countries which are opening up for the Western countries for investment. This trend is very vivid and seems to be diluting availability of foreign capital for investment in petroleum exploration in Pakistan. DGPC is therefore also faced with a challenge of formulating efficient and viable strategies to continue to attract the foreign capital for petroleum exploration. DGPC's responsibilities also entail coordination with a number of other agencies in the country for the development of infrastructure bases in the areas of transportation, refining, storage and distribution of oil and gas to maintain a proper balance between the projected production, supply and utilization of the discovered resources. Another sensitive duty of DGPC is to laise and coordinate with the security agencies in the country to provide adequate protection for the oil exploration personnel to work with a sense of security in the far flung areas.

DGPC's current establishment could not handle this workload because it is: * Under staffed * Under funded * Lacks adequate access to competent

experienced personnel in key areas. * Lacks adequate facilities for technical

and financial analysis.

This situation is apt to cause delays in implementing policy, contributed to missing targets and cost the Government substantial amounts of money.

In light of the substantial expansion of both types and numbers of responsibilities which DGPC has experienced without new positions a need for major reorganization and institutional building to correct deficiencies and prepare DGPC to meet its current and future responsibilities was being strongly felt. In 1989 with the cooperation of Energy Wing of the Planning and Development Division M/s. Mathtech Inc. the general consultant to the Energy Wing were contracted to carry out a study to review existing functions and responsibility of DGPC and suggest ways and means for up-grading its capabilities.

This activity was completed in 1989 and the recommendations for upgrading of DGPC identified during the study included: * Reorganization and addition of new

positions.

Upgrading of Office, addition of space, improved communications, copying and support capability * Improve and expand database. * New computer hardware and software.

a) Administration and Accounting

b) Technical Analysis. * Access to specific technical assistance

and training in

a) Finance

b) Concessions

c) Production Monitoring and

Promotion

d) Exploration Monitoring and

Promotion

Based on this study, a project to accomplish the above entitled "Strengthening of DGPC" was designed and agreed to by the GOP and USAID and funding was committed in mid 1991. An overall project consulting group was organized and project activities were started in July of 1991.

Objective and Approach

The project objective are to enhance the capabilities of DGPC to handle its presently mandated activities and to emphasize efforts to strengthen its ability to play a leadership role in assuring intelligent development of the oil and gas resources of Pakistan. The major goals to be achieved under this project are as under:

Increasing the Staff Strength

to an Adequate Level

A revised and expanded organisation structure to prepare DGPC to meet its current and future responsibilities. This increases the professionally staff from its current level of 15 to 27. This is being done in phases with top priority being given to recruitments at Director level. The Director, Database is a particularly important position to fill in view of on-going computerisation of DGPC. It is anticipated that in all 12 new positions will be sanctioned and permanently filled by the middle of 1992.

Infrastructure Improvement

Currently there is no room for expansion to accommodate additional personnel, predicted to be needed to handle increased levels of activity in the building housing the DGPC Office. Data storage space is inadequate and Space will be needed to accommodate equipment (computers and peripherals) and supplies.

A new office adjacent to the previous address has therefore been acquired. Approximately 20,000 2ft of space on 2 floors has been obtained in the new building. The requisite furniture, space conditioning, communication, network and meeting facilities have been provided. DGPC will now have and basic facility support necessary to carry out its responsibilities and in addition to this provision the area of data storage has also been enhanced. The beginning of a national oil/gas data center have been established. This center will ultimately hold copies of: 1. Seismic Data (film sections) 2. Well log data (film sections) 3. Digital tapes (seismic and well) 4. Rock samples, well cores and cuttings 5. Exploration and production reports.

This information is currently spread among DGPC, the Oil and Gas Development Corporation (OGDC), the Geological Survey of Pakistan (GSP), the Hydrocarbon Development Institute of Pakistan (HDIP). Initially exploration and production reports and data files will be. transferred to DGPC and later seismic, and will log information be taken.

Technical Assistance

In order to assure that DGPC can rapidly take over and expand its services and efforts a major technical assistance (TA) effort is scheduled for the next two years. This TA includes 103 person months of foreign and local consultants working with DGPC professionals. To fill in temporary position gaps and to provide directions and transfer skill, and moving tasks related to short term activities, it was felt that the most beneficial way of doing this would be to have a single local company contracted to DGPC and working in their offices on a continuous basis. At present there is little or no market for local petroleum consultants. However there are many experienced Pakistani personnel in the oil/gas sector. Encouragement of local consultants during this technical assistance programme will beneficially build a consulting capability in Pakistan. The technical assistance would be extended in the field of petroleum engineering, data base development, finance, concession, geology and geophysics.

Implementation

The strengthening of DGPC described herein started in early 1989 and will continue until at least up to June, 1993. The programme included a problem definition phase which was completed in late 1989 and Phase-I of initial cataloguing, information system design and strengthening, programme definition was completed in mid 1990.

Conclusion

DGPC's role in promotion of oil and gas resources of Pakistan is very critical and through this paper, we want to send a message to potential investors and oil companies that the Government of Pakistan is actually working on many fronts to encourage petroleum exploration in this country and we also want to inform the existing and possible concessionaires that DGPC's capacity to deal with them at all stages of the concession process will soon be similar to what they encounter in the most advanced countries.
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Title Annotation:Director General Petroleum Concessions
Author:Nasim, Khalid; Khan, Atif; Westfield, James D.
Publication:Economic Review
Date:Feb 1, 1992
Words:2165
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