Shale Gas Revolution or Iran-Pakistan Gas Pipeline?

US natural gas prices have fallen below $2 per million BTU (approx 1000 cubic feet), about one-sixth of the price Pakistan has agreed to pay for Iranian gas. With over 50 trillion cubic feet of known shale gas reserves in Sindh alone, Pakistanis can also enjoy the benefits of cheap and abundant source of energy for decades via the shale gas revolution already sweeping America.



Increased production of gas from shale rock in the US has created a huge new supply, pushing down gas prices from $13/BTU (million British thermal units) four years ago to just $2/BTU today, even as the price of oil has more than doubled. By contrast, the Iran pipeline gas formula links the gas price to oil prices. It means that Pakistan will have to pay $12.30/BTU at oil price of $100/barrel, and a whopping $20/BTU for gas if oil returns to its 2008 peak of $150/barrel.

To encourage investment in developing domestic shale gas, Pakistan has approved a new exploration policy with improved incentives as compared with its 2009 policy, a petroleum ministry official said recently. Pakistan Petroleum is now inviting fresh bids to auction licenses to explore and develop several blocks in Dera Ismail Khan (KPK), Badin (Sind), Naushero Firoz (Sind) and Jungshahi (Sind), according to Oil Voice.



In addition to the fact that the Iran gas is extremely expensive, the entire Iran-Pakistan gas pipeline project raises other serious issues as well.

Iran-Pakistan Pipeline Issues:

1. Chinese investors and contractors have pulled out of the project for fear of being hit by US sanctions on their banks and other companies.

2. Russia's Gazrom is reportedly interested but only if it gets the deal at whatever price it decides to charge without any competitive bidding.

3. Pakistani companies and financial institutions are also under threat of US sanctions if they participate in the project.

4. If the pipeline does eventually get built, it will still be several years before gas starts to flow to Pakistan.

5. If Iran is still under US sanctions when the Iranian gas imports finally begin, Pakistan will have difficulty paying for the gas using international banking system. Iran has already been suspended by SWIFT, the Society for Worldwide Interbank Financial Telecommunication, which is the main mechanism used for international bank transactions.

6. The largest chunk of Pakistan's trade deficit is accounted for by energy imports. Iranian gas bill will only worsen this deficit, contributing to yet another balance of payments crisis sending Pakistan back to IMF.



Advantages of Domestic Shale Gas Development:

1. Cheap domestic gas can start flowing from Pakistani shale in a couple of years if Pakistan can make a deal with US (and American pioneers of shale gas like George Mitchel's Devon Energy) to invest and execute on an accelerated schedule in exchange for dropping Iran pipeline.

2. Pakistan will dramatically reduce its dependence on foreign sources and save a lot of foreign exchange spent on hydrocarbon imports.

3. Gas burns a lot cleaner than coal which is also a option given vast amounts of it in Thar desert. World Bank and other International financial institutions are more amenable to financing shale gas development than coal.

4. Abundant and cheap domestic gas supplies can help reduce electricity load-shedding which is caused mainly by under-utilization of installed generating capacity for lack of affordable fuel.

Shale gas revolution began a few years ago when an American named George P. Mitchell defied the skeptics and fought his opponents to extract natural gas from shale rock. The method he and his team used to release the trapped gas, called fracking, has paid off dramatically. In 2000, shale gas represented just 1 percent of American natural gas supplies. Today, it is over 30 percent and rising.



Among the potential downsides of shale gas development is the possibility of groundwater contamination reported in some places in the United States. Such risks can be minimized by following accepted practices to protect the aquifers which are found at levels well above the deep shale rock fractured for extracting natural gas.

Cheap and abundant energy is a pre-requisite for rapid economic growth in any country. Pakistan is no exception. The sooner Pakistanis recognize and resolve this crisis, the better it will be for the south Asian nation.

Related Links:

Haq's Musings

Pakistan's Vast Shale Gas Reserves

US Can Help Pakistan Overcome Energy Crisis

Abundant and Cheap Coal Electricity

US Dept of Energy Report on Shale Gas

Pakistan's Twin Energy Crises

Pakistan's Electricity Crisis

Pakistan's Gas Pipeline and Distribution Network

Pakistan's Energy Statistics

US Department of Energy Data

Electrification Rates By Country

CO2 Emissions, Birth, Death Rates By Country

China Signs Power Plant Deals in Pakistan

Pakistan Pursues Hydroelectric Projects

Pakistan Energy Industry Overview

Water Scarcity in Pakistan

Energy from Thorium

Comparing US and Pakistani Tax Evasion

Zardari Corruption Probe

Pakistan's Oil and Gas Report 2010

Circular Electricity Debt Problem

International CNG Vehicles Association

Rare Earths at Reko Diq?

Lessons From IPP Experience in Pakistan

Correlation Between Human Development and Energy Consumption

BMI Energy Forecast Pakistan

Comments

Riaz Haq said…
Here's a Reuters' report on coal in Pakistan:

Yet it has one of the biggest, barely-touched, single coal reserves on the planet - the massive Thar coalfield in the northern Sindh province with 175 billion tonnes of extremely high water-content, low energy coal.

This kind of low-grade, watery coal is found in abundance in other countries, such as Indonesia, the world's biggest exporter, but it has not been economic to exploit in the past.

But high oil and gas prices, rising coal prices and new technology to dry out watery, gaseous coal or leave it in the ground but extract the gas from it instead, has prompted projects around the world.

The Pakistan government this year declared the Thar coal fields as a Special Economic Zone, with tax breaks and incentives to lure investors to develop coal gasification and mining as part of its strategy to fill the energy gulf.

"In five years, coal's contribution to the energy mix will reach 10 to 12 percent. It's minor at the moment," said Najib Balagamwala, Chief Executive Officer of Karachi-based trader Seatrade.

"The private sector is considering coal-fired plants very seriously, as there's margin there," he added.

Pakistan's energy mix has changed in recent years from mostly hydro to thermal, consisting of domestic gas and imported fuel oil, according to a report by the Asia Development Bank this month.
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"The private sector is considering coal-fired plants very seriously, as there's margin there," he added.

Pakistan's energy mix has changed in recent years from mostly hydro to thermal, consisting of domestic gas and imported fuel oil, according to a report by the Asia Development Bank this month.

The supply-demand power gap at peak hours reached over 5,000 MW in financial year 2011, the ADB report said.

"The need for coal to fuel the rising demand for energy in Pakistan is well understood," said Shahrukh Khan, Chief Executive Officer of Oracle Coalfields PLC, which is developing mines in Sindh.

Of the 10 coal blocks in Thar, four have been drilled and explored by Oracle, Cougar Energy, SECMC and another un-named gasification project company, according to the Sindh province website on Thar.

Two Chinese firms are also looking to build gasification and coal mining projects in Thar, industry sources said.
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The high water content of Pakistan's domestic coal makes it tricky to mine and transport long distances economically but mine-mouth power plants and coal gassification projects to capture and extract gas trapped in coal seams without mining it are much more viable, industry sources said.....


http://www.reuters.com/article/2012/04/13/pakistan-coal-idUSL6E8FC45O20120413
Riaz Haq said…
Here's a WSJ report on coal stocks surging again:

Coal stocks are helping lead the way for energy shares, which is the best-performing sector of the S&P 500 today after getting repeatedly creamed amid renewed worries about coal’s future.

Some supporters, it turns out, haven’t fled town.

FBR recently reiterated its view that as cheap as natural gas is, it won’t come close to displacing coal in the U.S. power fleet any time soon. Most of the utilities that have the capacity to switch to gas already have, they argue.

And exports, seen as a potential safety valve for unwanted U.S. power-plant coal, nearly tripled in March from a year earlier, Nomura notes.

Strict federal air pollution regulations likely to limit new U.S. coal-plant construction will do little to cool growing appetites for the fuel in China and India. U.S. miners are scrambling to expand export facilities to take advantage of that.

Plus, some stocks were just starting to look cheap; shares of Patriot Coal and Alpha Natural Resources, each recently up more than 8%, had each sank by more than 70% throughout the last year. Peabody Energy, up 7.4%, and Arch Coal, up 6.8%, also catch the boost.


http://blogs.wsj.com/marketbeat/2012/04/12/bargain-hunters-export-hopes-boost-coal-shares/
Riaz Haq said…
To put the $2 per mmBTU (Rs. 180 per mmMTU) US gas price in perspective, here's what Pakistani gas companies are allowed to charge customer, according to Dawn:

DOMESTIC CONSUMERS: The minimum charges for domestic consumers have also been increased by Rs17.34 per MMBTU (million British Thermal Unit) per month. The first slab of domestic consumers (using 100 cubic meters per month) will now be charged at Rs107.87 per unit, up by Rs12.87 per unit. For the second slab (using 100-300 cubic meters per month) it will go up to Rs215.74 per unit from Rs190 per unit, up by Rs25.74 per unit.

A substantial increase has been allowed for the third domestic slab (of over 300-500 cubic meters per month and the new rate will be Rs908.39 per unit over the existing rate of Rs800 per MMBTU. Domestic consumers using more than 500 cubic meters per month will be charged at Rs1,142.75 per MMBTU, up by Rs136 per unit from the existing rate of Rs1006.

COMMERCIAL RATES: Commercial consumers like cafes, bakeries, milk shops, tea stalls, canteens, ice factories, barber shops, laundries, entertainment places including cinemas and clubs, private offices and clinics would now be charged at Rs526.59 per MMBTU, up by about Rs63 per unit. Minimum charges in this category have been increased by Rs297 per month to Rs2,485.88.

INDUSTRIAL RATES: The price for industrial consumers has been increased by Rs52 per MMBTU to Rs434.18 per unit.

The minimum charge for industrial consumers has gone up by Rs1,747 per month to Rs14,640 from Rs12,893.

FERTILISER: While rates for feedstock have remained unchanged, the price of gas used by fertiliser plants for fuel or electricity generation has been increased by Rs52 per MMBTU to Rs434.

POWER STATIONS: Gas rates for power stations of Wapda and KESC and captive power plants have been increased by Rs54 per MMBTU to Rs447 and while the minimum charge to Rs15,077 per month from Rs13,278 – up by Rs1800 per month.

Likewise, gas rates for independent power producers have been raised by Rs45 per unit to Rs377 per MMBTU.


http://dawn.com/2011/08/08/gas-prices-up-by-135pc/
Riaz Haq said…
Here's an Express Tribune report on planned US AID changes:

In a bid to maximize benefits of civilian aid, Pakistan and the United States have agreed to reconsider the economic assistance programme as dividends of the $7.5 billion five-year package remain largely invisible.
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Under the $7.5 billion aid package, Pakistan has so far received only $680 million in over two years. The US has also delayed approval of spending plan for Kerry-Lugar-financed projects due to strains in bilateral relations.

Shaikh, who along with his team is leaving for the US to participate in meetings of the World Bank and International Monetary Fund (IMF), will also take up the issue of coalition support fund and spending plan with US authorities, the official said.

He said the US was interested in giving assistance for economic reforms and devolution programme, besides education, health and energy.

According to the finance ministry, Rajiv Shah highlighted priority areas for funding, achievements and expectations through USAID. The key areas were energy, agriculture, education and health.

“We are steadily moving forward and we have identified what we need and what USAID can provide,” said Dr Waqar Masood, Secretary of Economic Affairs Division during the meeting.

The ministry said Shah underscored the importance of institutional stability and the need for public-private partnership in the agricultural sector.

He pointed out that they had prepared long, medium and short-term plans. In the long term, focus will be on institutional stability while in the medium term social sector will be provided support.

Shah emphasised that “despite challenges the broader bilateral relationship has faced, civilian assistance has remained steady and USAID looks forward to continuing to work together to support mutual objectives in the future.”

According to the US embassy statement, the two sides discussed the important role of economic assistance in bilateral relationship and how US civilian assistance could create jobs and raise incomes of Pakistanis.

It claimed that the US has disbursed more than $2.6 billion in assistance to Pakistan since October 2009. The assistance also includes disbursements made before the Kerry-Lugar package. Much of this assistance has focused on developing the energy sector and increasing economic opportunity for the Pakistanis.

In the energy sector, the US has collaborated with Pakistan to finance the Tarbela Dam extension project and other major energy projects which have expanded electricity-generation capacity by over 400 megawatts, bringing electricity to over six million more people.

By the end of 2013, US assistance will be adding another 900 megawatts to the national grid, providing electricity to over 14 million people, according to the statement.


http://tribune.com.pk/story/364426/pakistan-us-to-reconsider-assistance-programme/
Riaz Haq said…
Here's an ET report on Pakistan's attempts to negotiate LNG imports:

With Qatar adamant on charging a high price of $18 per unit for liquefied natural gas (LNG), Pakistan has decided to explore the option of cheaper LNG import from energy-rich Algeria.

A senior official of the Ministry of Petroleum and Natural Resources told The Express Tribune that LNG import would come up for discussion in the second session of Pakistan-Algeria Joint Ministerial Commission (JMC) scheduled to be held from April 14 to 19 in Algeria.

The petroleum ministry will lead the Pakistani side while joint secretaries of Economic Affairs Division (EAD) and Foreign Office will also attend the meeting. Petroleum Minister Asim Hussain will join later on either April 16 or 17.

Quoting agenda of the meeting, the official said main focus would be on mutual cooperation in the oil and gas sector. “Pakistan is vigorously pursuing LNG import to overcome energy crisis and the Algerian side will be asked to export LNG and set up a terminal in Pakistan,” he said.

The petroleum ministry is exploring different options for LNG import to achieve a competitive price. Last month, a Pakistani team visited Qatar, but Doha refused to offer gas at less than $18 per million British thermal units (mmbtu).

“The ministry also tabled a summary on an integrated LNG import project in a meeting of the Economic Coordination Committee (ECC) on Thursday, but the matter was deferred to next meeting,” the official said, adding this was also one of the options to buy gas at a competitive price.

Earlier, the government had allocated pipeline capacity to private LNG importers for supply of 1.4 billion cubic feet per day of gas, but they also quoted the price of $18 per mmbtu.
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Earlier, the government had allocated pipeline capacity to private LNG importers for supply of 1.4 billion cubic feet per day of gas, but they also quoted the price of $18 per mmbtu.

Pakistan and Qatar have already signed a memorandum of understanding for the import of LNG on government-to-government basis. According to the agreement, Pakistan will import 500 million cubic feet per day (mmcfd) of gas, which will be utilised to generate 2,500 megawatts of electricity.

The government will also inject LNG into the pipeline network of Sui Northern Gas Pipelines and Sui Southern Gas Company and charge a weighted average price of gas. This may lead to a hefty increase in domestic gas prices to $9 per mmbtu compared to existing $4.5 per mmbtu, which will affect all categories of consumers.

“Many power producers are using furnace oil, which costs a price equal to $20 per mmbtu and LNG import at $18 per unit is still affordable for the companies using furnace oil,” the official insisted


http://tribune.com.pk/story/364425/lng-import-as-qatar-seeks-high-price-pakistan-turns-to-algeria/
Riaz Haq said…
Here's an ET story on TAPI gas pipeline:

The government has approved a draft of gas sale purchase agreement for the US-backed Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline and also endorsed the gas price at 70% of crude price, which is cheaper than the gas to be purchased from Iran.

The approval was given here on Thursday in a meeting of the Economic Coordination Committee (ECC) of the cabinet, headed by Finance Minister Dr Abdul Hafeez Shaikh.

The move will pave the way for signing the GSPA agreement by next month. Earlier, the agreement was to be inked on April 19 but it was deferred due to upcoming talks between Afghanistan, Pakistan and India on transit fee.

US is pushing Pakistan to sign the $7.6 billion TAPI gas pipeline agreement, which will provide 3.2 billion cubic feet of gas per day, and has threatened to impose sanctions if it does not abandon the Iran project.

TAPI gas price has been worked out at 70% of Brent crude price, which is 8% cheaper than Iranian gas, according to petroleum ministry documents. Pakistan and Turkmenistan will share risks to the gas pipeline passing through Afghanistan, said the petroleum ministry. The turmoil in Afghanistan is a major risk to the project.


http://tribune.com.pk/story/363610/govt-approves-draft-of-tapi-gas-pipeline-agreement/
Riaz Haq said…
Here's a Daily Times report on IFI holdings of Pakistani shares:

Foreigners remained aggressive in Pakistan’s oil and gas sector as they continued to own more than 500 million shares ($950 million) in Oil and Gas Development Company (OGDC) and approximately 120 million shares ($250 million) of Pakistan Petroleum Ltd (PPL), which represent 83 percent and 45 percent of free float of OGDC and PPL, respectively. This is primarily due to higher oil prices and decent volumetric growth. Similarly, their shareholding in Pakistan State Oil (PSO) and Pakistan Oilfields (POL) is expected to remain almost the same. Thus out of $2.7 billion worth of stocks that foreigners hold (as of March to December 2011), approximately 50 percent of the foreign shareholding is only concentrated in oil sector, including which OGDC alone contributes 35 percent.
Interestingly, foreigners which own every third Pakistani share of free-float, have been net buyers of $11 million so far in CY2012 primarily due to record inflows in regional markets amid improved risk appetite and better global economic data. Last year due to depressed global markets, foreign participants offloaded their positions in Pakistan liquidating $123 million net in 2011 contrary to net buying of $526 million in 2010. However, thanks to continued interest in Pakistan market, foreigners now hold shares valuing $2.7 billion as of March 30, 2012 (28 percent of free float). Their peak holding was $5.1 billion (27 percent of free float) in April 2008 and lowest was $1 billion (17 percent of free float) in March 2009.
Estimated holdings of foreigners in Pakistan key stocks are OGDC $950 million, MCB $250 million, PPL $250 million, UBL $135 million, Lucky Cement $135 million, FFC $125 million, Unilever $100 million, POL $75 million, Hubco $65 million, NBP $50 million, Engro $35 million, Nestle $35 million, PSO $25 million and DGK Cement $20 million.


http://www.dailytimes.com.pk/default.asp?page=2012\04\14\story_14-4-2012_pg5_17
Riaz Haq said…
Here's an ET report on Pakistan getting WB financing for energy and irrigation projects:

Pakistan and World Bank on Thursday signed five pacts for loans of $1.13 billion for improving power supply and agricultural productivity and revitalising community services in strife-torn areas of the country.

Out of $1.13 billion, $35 million will be provided as a grant under the Multi-Donor Trust Fund, administered by WB and established for restoring livelihood and rebuilding infrastructure in the troubled areas.

Economic Affairs Division (EAD) Secretary Dr Waqar Masood and WB Country Director Rachid Benmessaoud signed the agreements.

The bank has given $840 million for extension of Tarbela IV hydropower project that will produce an additional 1,400 megawatts of electricity.

According to EAD, the project will contribute about 4,000 gigawatts of low-cost non-carbon renewable energy annually. Average cost of electricity generated through the project will be 2.49 cents per unit and the project will lay the foundation for a 5th extension of Tarbela.

WB will also provide $250 million for the Punjab Irrigated Agriculture Improvement project. A high-efficiency irrigation system using drips, bubblers and sprinklers will be put in place over an area of about 120,000 acres under the project.

Italy’s soft loan for citizens programme

Pakistan and Italy also signed an agreement for a soft loan of 57.8 million euros for the Citizens Damage Compensation Programme.

The agreement was signed by EAD Secretary Waqar Masood and Italian Ambassador Vincenzo Prati. WB Country Director Rachid Benmessaoud was also present.

The soft loan has been extended at zero interest rate with a repayment period of 40 years including grace period of 31 years. Masood said the assistance would go a long way in alleviating the miseries of flood victims.


http://tribune.com.pk/story/363929/wb-offers-1-1b-for-power-supply-agriculture/
Riaz Haq said…
Here's a GeoTV report on Pak-China cooperation on energy and other projects in Pakistan:

ISLAMABAD: Pakistan's Ambassador to China Masood Khan Sunday said Pakistan and China would execute 36 projects worth $14 billion during next five years under bilateral Five Year Development Programme for Trade and Economic Cooperation.

Addressing the inauguration ceremony of Pak-China Business Forum, he said the first five year programme has been completed and the second is about to start this year that would be run by a ministerial level Joint Economic Commission and Economic Cooperation Group.

The four-day event was held here by COMSATS Institute of Information Technology in collaboration with Xuzhou Normal University China.

He said the Joint Energy Working Group, established last year, will oversee development and implementation of hydro, thermal, geo-thermal, coal-fired, solar, wind, biomass, and civil nuclear power projects.

The ambassador said the CIIT was the pioneer institution in Pakistan creating an interface between academia, businesses and government to promote Pakistan-China economic relations.

For a better understanding among people from both countries, the ambassador suggested establishment of Pakistan-China centers in all key Pakistani universities.

"Some have already moved in that direction. In China, Pakistan Study Centers are housed in four prestigious universities including Peking, Tsinghua, Sichuan, and Fudan," Masood Khan said.

He said there is a strong aspiration between both the countries for exchange of youth as hundreds of young students and professionals were exchanging visits "but the figure should move into thousands and then into millions."

"Establishment of a Pakistan-China Young Entrepreneurs Forum will be a good initiative in this context," he suggested.

The ambassador said Pakistan's business ties with China would be as robust as strategic partnership.

But, he said the relationship of two countries will continue to flourish with full vigour if we ensure fusion of all the three pillars of our relations - strategic, economic and people to people exchanges.

He said platforms like Pak-China Business Forums prove to be beneficial for the businessmen who seek guidance as how to do business with China and vise-versa.

He said Pakistan provides the best protection for Chinese workers and businesses and the country would not lower its guard.

"In five years time, we will see a different world. Pakistani nation will overcome its current difficulties, realize its full economic potential and emerge as a regional business hub," he hoped.

Khan stressed for collaboration between academia and industry as the universities provide the best nursery to the industrial sector.

He said with the passage of time, the leading entities have developed common platforms to enhance linkage with each other.

"But we should try to look even better. Here comes the role of educational institutes to help exploit maximum possible potential between the two countries," said Pakistan's ambassador to China.

The ambassador said Shanghai Cooperation Organization was fostering connectivity among the East, Central and South Asian neighborhoods and Pakistan, being an observer, hopes to be its member soon.

He said last year, the Industrial and Commercial Bank of China has opened branches in Islamabad and Karachi.

Moreover, in December 2011, the central banks of China and Pakistan have reached an agreement for currency swap to enable traders of Pakistan and China to use Pakistani Rupee and Chinese Renminbi for transactions and settlements.

"Both these steps would stimulate further growth in Pak-China trade ties," Masood Khan added.


http://www.geo.tv/GeoDetail.aspx?ID=44559
Riaz Haq said…
Here are some excerpts of a News interview with Pak industrialist Mian Mansha:

Q: Do you think the decisions taken at recent energy summit would resolve the power and gas crisis? Is it the most burning issue impacting Pakistan’s productivity?



Mansha: Short-term decisions are no solution to a problem that requires long term planning. The government could save a trillion rupees if the power plants using furnace oil were run on coal.



In fact about a year back I proposed to the government to allow me to convert Nishat group furnace oil power plants to coal. The investment plan and revenue sharing formula to cover the cost was also outlined. I regret that things have not moved painfully slow on this proposal of vital national importance. Converting these plants to coal would wipe out entire circular debt in a year and generate resources for alternate energy and hydroelectric projects.



Q: How do you propose to reform the power sector?



Mansha: The deteriorating fuel mix is increasing the base cost. We are producing over 50 percent of power using the most expensive furnace oil as fuel. The losses and theft in electricity distribution are alarmingly high at 35 percent. The public sector power projects are operating a very low efficiency. Sensible solution to the crisis is to privatise and deregulate this sector.



The power distribution companies should emulate KESC that ensures most productive use of electricity by exempting industries from load shedding.



Q: You are pioneer in alternative energy projects, are they feasible?



Mansha: We have been seeking cheaper energy solution. Our cement plant first shifted to coal from furnace oil and then to biomass and municipal solid waste that were even cheaper alternatives.



Pakistan is blessed with large quantity of biomass that has a potential to produce 6000 MW of electricity. Our companies are using corncob, rice husk, wheat straw, cotton plant sticks and other agriculture residue, solid municipal waste, slippers, sandals, and used tyres to generate energy.


http://www.thenews.com.pk/Todays-News-3-102987-India-offers-bigger-trade-opportunities-than-China-Mansha
Riaz Haq said…
Here's a Business Recorder report on Pakistan to renegotiating Iran gas price:

Pakistan will renegotiate gas price with Iran under the (IP) gas pipeline project as the price of Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas is cheaper, sources close to Petroleum Secretary told Business Recorder.

This was disclosed at a meeting of Economic Co-ordination Committee (ECC) of the Cabinet held on April 12, 2012 under the chairmanship of Finance Minister Dr Abdul Hafeez Shaikh.

The IP gas price was $11 per mmcfd while Tapi was estimated at $13 per mmcfd.

However, a week ago in a meeting in the Ministry of Petroleum and Natural Resources it was revealed that Turkmenistan has agreed to reduce the price from 55 percent price parity with international crude price to 45 percent.

In addition, Pakistan would also earn a transit fee from Tapi while India is not party to IP anymore.

Official documents available with Business Recorder reveal that the ECC was informed that matter for signing of Gas Sales Purchase Agreement (GSPA) with regard to TAPI gas pipeline project, during the visit of the Turkmen President on 14th November 2011, was placed before the ECC in its meeting held on 11th November 2011.

However, the ECC decided that, instead of signing GSPA at this stage, a single-page document containing the intention of both the governments of Pakistan and Turkmenistan, may be signed during the visit of the Turkmen President and the draft GSPA be annexed to that one-page document, for subject approval of the government.

The ECC also constituted a committee for drafting the proposed one-page document.

The committee prepared the requisite one-page document (Joint Declaration), which was accordingly signed by both sides on 14th November 2011.

Subsequently, the matter of TAPI GSPA including gas price formula, agreed base price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism was considered by the ECC in its meeting held on 20th January, 2012.

The ECC constituted a committee headed by the Minister for Water and Power to examine the details concerning price and pricing formula for gas to be imported from Turkmenistan and submit its recommendation to the ECC.

Qamar-led committee in its meeting held on 6th April, 2012 examined the gas price formula, agreed based price, risk sharing mechanism with regard to transportation cost, transit fee and gas price review mechanism and recommended it for approval of the ECC.

Based upon the foregoing, the ECC was requested to approve the draft GSPA for execution by Inter State Gas Systems (Pvt) Ltd with Turkmenistan (Turkmengaz) including gas price formula, agreed to, risk sharing mechanism and gas price review mechanism.

During the ensuing discussion, it was explained that gas to be imported from Turkmenistan will be cheaper than the gas to be imported from Iran.

Resultantly, Pakistan will be able to re-negotiate the gas price with Iran.

On a query, the ECC was informed that penalty clauses in TAPI GSPA are similar to those contained in Iran-Pakistan GSPA, where-under Pakistan will be liable for payment towards cost of gas even if no gas is imported.

These conditions will be effective after construction of pipeline.....


http://www.brecorder.com/market-data/stocks-a-bonds/0/1179789/
Riaz Haq said…
Here's ET report on IP and TAPI pipelines:

The Economic Coordination Committee (ECC) scheduled to meet today (Thursday) is likely to allow the petroleum ministry to sign Gas Sales Purchase Agreement (GSPA) with Turkmenistan to materialise the $7.6 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project.

Pakistan and Turkmenistan were scheduled to sign the GSPA agreement on April 17 but postponed it due to negotiations between India, Afghanistan and Pakistan on transit fee here in Islamabad next week, a government official told The Express Tribune.

Official said that Pakistan and Turkmenistan had finalised to keep gas price at 70% of crude oil price, much lower than the 78% parity agreed with Iran in the Iran-Pakistan gas pipeline.

“The two countries have agreed to review gas price after every five years,” official said adding that now GSPA is expected to be signed on May 20 in Turkmenistan. Earlier, Pakistan wanted to review gas price after three years keeping in view the trend in oil prices while Turkmenistan wanted it to be fixed for ten years.

The three countries will hold two-day talks from Monday in Islamabad to discuss the fees for transmission of gas from Turkmenistan through Afghanistan and Pakistan to India. In discussions already held on transit fees, Afghanistan opted for Pakistan to pay the fee in the form of gas but Pakistan opposed and proposed to pay it in cash.

Under the initial TAPI project, Pakistan and India are both scheduled to receive 1.365 billion cubic feet of gas per day (bcfd) and Afghanistan 0.5 bcfd.

However, Afghanistan in a meeting earlier this year with Pakistan informed that it does not want gas supply from the project anymore and only transit fee for use of its territory.

If Afghanistan withdraws, its share will be evenly distributed between Pakistan and India,” official said adding that this issue will also come under discussion during talks scheduled next week.

Afghan and Pakistani officials had discussed three different proposals in first week of February in Islamabad relating transit fee that included fee in cash or kind and fixed fee in dollar term on volume of gas from Turkmenistan. The last option was to link transit fee with per kilometre length of gas pipeline. “These proposals will again be discussed to reach agreement on transit fee,” official added.


http://tribune.com.pk/story/363327/tapi-project-ecc-likely-to-give-approval-for-signing-part-of-the-deal/
Riaz Haq said…
Here's a NY Times report on India's fuel shortages hurting electricity generation:

India — India has long struggled to provide enough electricity to light its homes and power its industry around the clock. In recent years, the government and private sector sought to change that by building scores of new power plants.

But that campaign is now running into difficulties because the country cannot get enough fuel — principally coal — to run the plants. Clumsy policies, poor management and environmental concerns have hampered the country’s efforts to dig up fuel fast enough to keep up with its growing need for power.

A complex system of subsidies and price controls has limited investment, particularly in resources like coal and natural gas. It has also created anomalies, like retail electricity prices that are lower than the cost of producing power, which lead to big losses at state-owned utilities. An unsettled debate about how much of its forests India should turn over to mining has also limited coal production.

The power sector’s problems have substantially contributed to a second year of slowing economic growth in India, to an estimated 7 percent this year, from nearly 10 percent in 2010. Businesses report that more frequent blackouts have forced them to lower production and spend significantly more on diesel fuel to run backup generators.

The slowdown is palpable at Sowmya Industries, a small company that makes metal shutters that hold wet concrete in place while it solidifies into columns and beams, a crucial tool for the construction industry.

The company, located outside this city on the southeast coast of India, is struggling with several issues, including a 20 percent increase in the price of raw materials and falling orders.

But Sowmya’s manager, R. Narasimha Murthy, said the lack of reliable power was an even bigger problem. His company loses three hours of power every evening. And all day on Wednesdays and Saturdays — euphemistically called “power holidays” — it receives only enough electricity to turn on the lights but not enough to use its large metal-cutting machines.
-------------
A major problem is the anemic production of coal, which provides 55 percent of India’s electricity. Coal production increased just 1 percent last year while power plant capacity jumped 11 percent. Some electricity producers have been importing coal, but that option has become more untenable recently because India’s biggest supplier, Indonesia, has doubled coal prices.
------------
For many businesses, the power shortage has become debilitating.

In the southern state of Tamil Nadu, Srihari Balakrishnan, a textile factory owner, said he goes through 6,300 gallons of diesel fuel on an average day to keep his operation running, spending $3,000 more than he would if power were available around the clock.

“We are not able to use 20 to 30 percent of our capacity,” he said. “We can’t use grid power for two full days of the week. When we have power, we have a six-hour cut,” he added, using an Indian term for blackouts.
----------
Other companies are also stuck. Reliance Power, controlled by the investor Anil Ambani, says it has stopped construction on a large electricity plant nearby because it can no longer afford to buy coal from Indonesia as planned.


http://www.nytimes.com/2012/04/20/business/global/india-struggles-to-deliver-enough-electricity-for-growth.h
Riaz Haq said…
The shale gas boom in the US has led to a big drop in its carbon emissions, as power generators switch from coal to cheap gas, reports Financial Times:

According to the International Energy Agency, US energy-related emissions of carbon dioxide, the main greenhouse gas, fell by 450m tonnes over the past five years – the largest drop among all countries surveyed.

Fatih Birol, IEA chief economist, attributed the fall to improvements in fuel efficiency in the transport sector and a “major shift” from coal to gas in the power sector. “This is a success story based on a combination of policy and technology – policy driving greater efficiency and technology making shale gas production viable,” Mr Birol told the Financial Times.

Shale gas has transformed the US energy landscape, with surging production pushing gas prices down to 10-year lows and heralding an industrial renaissance. But it is also the subject of a heated environmental debate, with critics alleging that the production process can pollute groundwater.

Gas is fast becoming the new fuel of choice for the US power sector: in the past 12 months, coal generation has slumped by 19 per cent while gas generation has increased by 38 per cent, according to US Department of Energy figures. A gas-fired plant produces half the CO2 emissions of a coal-fired one.

Overall, however, the IEA said 31.6 gigatonnes of CO2 were released into the atmosphere last year, mainly through the burning of fossil fuels – one gigatonne more than in 2010 and much higher than the average annual increase of 0.6 GT between 2006 and 2010. “The impact of this increase is going to be catastrophic,” said John Sauven, executive director of Greenpeace. “We’ve really got to act now, with a real sense of urgency – which up till now has been completely lacking.”

The increase will make it harder to keep global temperatures from rising more than 2 degrees Celsius above pre-industrial levels – which scientists believe is the threshold for potentially “dangerous climate change”.


http://www.ft.com/intl/cms/s/0/3aa19200-a4eb-11e1-b421-00144feabdc0.html#axzz1vjmtnH3j
Riaz Haq said…
Here's an FT piece on the negative impact of power sector in Pakistan:

...Munir, born and educated in Lahore, makes his case in the latest issue of the Economic & Political Weekly of India, to be published on Saturday.

“The 1994 privatisation of the energy sector offered investors generous returns and created pricey overcapacity,” he told beyondbrics. “This created an expensive legacy which is the real problem of today’s energy crisis.”

Unless that problem is dealt with, he sees no light at the end of the energy tunnel.

He says Pakistan’s government, helped by the World Bank, “sweetened” its energy privatisation with attractive conditions, fearing it wouldn’t be able to attract investors otherwise. It guaranteed a 12 to 15 per cent annual return (indexed in dollars, not rupees), gave tax breaks and paid interest on private funding – more expensive for the government than providing the funding itself. ”The deal was too good to be true for investors,” Munir says.

The government gave those guarantees during an economic boom it assumed would continue. That turned out not to be the case.

Munir says the model turned out to be badly constructed in terms of creating value for the government and people of Pakistan. Even in an environment of economic growth and efficient energy generation, it would have been hard for the government to finance the plan. But since both have been absent, it became nearly impossible to pay for privatised energy.

What else went wrong?

Most private investors chose to build oil-powered plants because of their low construction costs and short lead times. This backfired as the oil price has trebled since the 1990s. Variable costs, and therefore prices to consumers, are at unsustainable levels. “No wonder many consumers can’t afford to pay their bills,” Munir says.

To make things worse, the government neglected to step on the brakes when its generous conditions attracked too many investors. Assuming economic growth would continue, it allowed too much capacity to be built and guaranteed the same return on that extra capacity, whether it was used or not.

But as growth stalled, the government could no longer meet its commitments. So operators have begun shutting down power plants, killing the lights across Pakistan – which is now enduring daily power outages in spite of having excess generating capacity of almost 35 per cent.

Munir says the government should develop new power plants using cheaper fuels, and that this shouldn’t be a problem in a country with an abundance of coal, waterways and sun.

But Pakistan must first escape its vicious payment cycle. The Economist magazine reports that Pakistan’s so-called circular debt to energy producers stands at $880m. It is only getting worse because of rising interest costs and dollar-rupee appreciation.

“We need to get out of the the current deals,” says Munir. But at what cost, and does this imply default? “Your guess is as good as mine,” the academic admits.

Still, he felt it was time to make his point. “I’m not defending people who don’t pay bills and I’m not promoting government subsidies to keep prices low,” Munir says. “But why isn’t anyone talking about the policy that led to this situation to begin with?”


http://blogs.ft.com/beyond-brics/2012/06/22/pakistans-real-power-problem-a-failed-privatisation/

http://www.epw.in/system/files/pdf/2012_47/25/Pakistans_Power_Politics.pdf
Riaz Haq said…
Here's an AP report on US gas and electricity rates:

A plunge in the price of natural gas has made it cheaper for utilities to produce electricity. But the savings aren't translating to lower rates for customers. Instead, U.S. electricity prices are going up.

Electricity prices are forecast to rise slightly this summer. But any increase is noteworthy because natural gas, which is used to produce nearly a third of the country's power, is 43 percent cheaper than a year ago. A long-term downward trend in power prices could be starting to reverse, analysts say. Pacific Gas & Electric, for instance, is asking to raise gas and electric rates by $144 a year for the typical customer in 2014.

"It's caused us to scratch our heads," says Tyler Hodge, an analyst at the Energy Department who studies electricity prices.

The recent heat wave that gripped much of the country increased demand for power as families cranked up their air conditioners. And that may boost some June utility bills. But the nationwide rise in electricity prices is attributable to other factors, analysts say:

In many states, retail electricity rates are set by regulators every few years. As a result, lower power costs haven't yet made their way to customers.

Utilities often lock in their costs for natural gas and other fuels years in advance. That helps protect customers when fuel prices spike, but it prevents customers from reaping the benefits of a price drop.

The cost of actually delivering electricity, which accounts for 40 percent of a customer's bill on average, has been rising fast. That has eaten up any potential savings from the production of electricity.

Utilities are building transmission lines, installing new equipment and fixing up power plants after what analysts say has been years of under-investment.

This may reverse what has been a gradual decline in retail electricity prices. Adjusted for inflation, the average retail electricity price has been drifting mostly lower since 1984, when it was 16.7 cents per kilowatt-hour.

"The ratepayer is going to have to foot the bill," says David Wright, vice chairman of the South Carolina Public Service Commission and president of the National Association of Regulatory Commissioners.

PG&E is seeking permission to raise gas and electric rates by $1.25 billion in 2014, $1.75 billion in 2015 and $2.25 billion in 2016, arguing it needs the money to upgrade its distribution network and hire an additional 2,200 employees. If approved by state regulators, the average residential customer would see their combined gas and electric bill rise in the first year by $12 a month, or $144 a year.

The average U.S. residential electricity price is expected to be 12.4 cents per kilowatt hour for the June-to-August period, up 2.4 percent from the same time last year. For the full year, electricity prices are expected to rise 2 percent. PG&E's average residential price is 16.1 cents per kilowatt hour.

In a typical summer month, that would mean an extra $3 on a residential bill, which includes the cost of generating the power and delivering it to a home, plus local taxes and fees. ...


http://www.mercurynews.com/pge/ci_21053334/electricity-is-cheaper-make-but-bills-are-still
Riaz Haq said…
Here's BR on PPL introducing new petroleum exploration technology in Pakistan:

A PPL statement here on Saturday said that developed by NXT Energy Solutions (NXT), a geophysical service company based in Canada, SFD (Stress Field Detection) is a proprietary cutting edge, eco-friendly airborne reconnaissance method to identify potential hydrocarbon traps and reservoirs in a time- and cost-effective manner, especially in unexplored on- and off-shore frontier regions with limited access and infrastructure.



It said that the SFD is expected to be particularly useful in the current energy scenario, warranting fast track identification of, and production from, relatively deeper, more complex reserves of hydrocarbons to bridge the supply-demand gap.



Welcoming the guests, PPL's Managing Director and Chief Executive Officer, Asim Murtaza Khan, underscored the increasing importance of deploying latest exploration technology to meet production and reserves replacement targets to address the current deficit and ensure future energy security. SFD technology has been successfully applied by leading oil and gas companies in North America, Colombia and other countries. PPL is proud to be the first company to apply the technology in Pakistan', he said.


http://www.brecorder.com/top-news/108-pakistan-top-news/98349-ppl-introduces-stress-field-detection-technology-in-pakistan.html
Riaz Haq said…
Here's a report on Iran-Pak gas pipeline deal by AEI, a conservative American think tank:

On January 30, Pakistan’s cabinet ratified a $1.5 billion agreement with Iran for the laying of nearly 500 miles of pipeline in Pakistan that would connect the country’s gas infrastructure to Iran’s massive South Pars natural gas fields. The pipeline would potentially add over 750 million cubic feet of gas per day to Pakistan’s grid at a time when the country faces crippling energy shortages with some cities suffering frequent protests against 20 hour-long power outages.

Iran offered cash-strapped Pakistan over $500 million in financing to lay the Pakistani section of the pipeline after several private and sovereign foreign entities backed out of the plan over fears of incurring U.S. ire for participating in the project (and when Pakistan refused to award contracts to some without bidding). The Iranians have offered even more funding if the Pakistanis demonstrate seriousness in going ahead with and completing the project. Pakistan, in return, has offered the contract for the construction of the Pakistani segment of the pipeline to an Iranian company called Tadbir Energy (Iran has already largely completed its section).

Tadbir Energy is an Iranian firm that “isn’t sanctioned by any foreign government,” and in July 2012, it made a bid to take over the failing Petit-Couronne refinery in France. The Iranian firm, however, is a subsidiary of the Headquarters for Implementing the Imam’s Directive (HIID), also known as the Imam Khomeini Foundation, an investment firm linked to Iran’s Office of the Supreme Leader. The European Union sanctioned the president of HIID, Mohammad Mokhber, in 2010 for his involvement in Iranian “nuclear or ballistic missiles activities.” Mokhber is also a member of the Sina Bank board of directors, sanctioned by the European Union for its close ties to the Office of the Supreme Leader.

It will be important to watch whether the conclusion of the pipeline agreement leads to further cracks in the U.S.-Pakistan relationship, especially at a time when the U.S. appears to be looking to Pakistan to help facilitate reconciliation in Afghanistan as the U.S. continues to draw down troops from the country. Former Secretary of State Hillary Clinton warned in March 2012 that “beginning the construction of [the] pipeline, either as an Iranian project or as a joint project, would violate [U.S.] Iran sanctions law.” For a time, it appeared as if Pakistan was sensitive to U.S. concerns over Iran and gave some indications that it may scrap or indefinitely delay the pipeline project due to U.S. objections. Pakistan appears now to have calculated that its short-term energy needs are too great, and the threat of U.S. sanctions not strong enough, for it to forgo the deal.

It will also be important to monitor whether Pakistan’s decision to cut a deal with the Iranians has a significant impact on loosening western sanctions on Iran and what sanctions or other fallout, if any, it may face for spurning U.S. entreaties vis-à-vis Iran and engaging with an Iranian company closely linked to already-sanctioned entities.


http://www.criticalthreats.org/pakistan/jan-fulton-iran-pakistan-pipeline-moves-forward-despite-us-opposition-february-5-2013
Riaz Haq said…
Here's a BR report on unconventional oil ad gas policy in Pakistan:

Advisor to Prime Minister on Petroleumand Natural Resources Dr. Asim said that Pakistan offers great potential in the oil and gas sector and the government is doing its part by introducing new policies to meet the rising energy demand .



He was presiding over a seminar organized by the Petroleum Institute of Pakistan (PIP), a representative body of the oil and gas industry, on the topic "Shale Gas Potential in Pakistan" on Saturday.



The purpose of holding this seminar was to create awareness aboutpotential and challenges of shale gas in Pakistan and establish PIP'sprofessional standing in view of assisting the government on dealing with the energy crises in the country.



The forum consisted of 150 distinguished guests from the oil and gas fraternity including government officials, media personnel and students from Karachi's top universities/colleges.



Dr. Asim Hussain said he has been advocating the need to balancecountry's energy mix, which currently is heavily dependent on natural gas.



He stated that the US Energy Information Administration have estimated 51 TCF Shale Gas Reserves in Pakistan, while as estimated reserves for Low BTU Gas are 2 TCF and that of tight gas are 40 TCF.



He added that Shale Gas exploration is high technical and costly, therefore, in order to encourage its exploration, pilot projects are planned.



The Ministry of Petroleum and Natural Resources will facilitate E&P Companies wishing to explore shale gas, by granting special concessions through transparent process and based on merit.



Chairman PIP Asim Murtaza Khan stressed on PIP's role as an effective energy sector advisory body, supporting government and industry in Pakistan todevelop a progressive and sustainable roadmap to meet present and futurechallenges.



He said that PIP is planning to hold series of seminars in nearfuture. The big ticket items that will be discussed and which need theimmediate attention will be the "LPG Outlook in Pakistan", "Fast-trackingimports of LNG", "Refining Vision 2020", "Energy conservation" and"Restructuring of the Pakistan's gas sector".


http://www.brecorder.com/pakistan/business-a-economy/107602-pakistan-offers-great-potential-in-oil-gas-sectors-dr-asim-.html
Riaz Haq said…
Here's a PakObserver report on possible US energy assistance for Pakistan:

With Pakistan fast heading to sign transnational pipeline project with Iran, US is most likely to offer a comprehensive but conditional energy assistance package as alternate to the Iranian gas.

According to diplomatic sources, the Obama Administration was contemplating to use a luring carrot this time to make Pakistan deliver in the so-called endgame in Afghanistan, besides refraining from translational gas pipeline from Iran.

Since the American strategists were working on a long-term plan to keep an influence centre in Afghanistan even after announced withdrawal of US/Nato troops from the war-torn country, they need Pakistan as a strategic partner even beyond war on terror. “That is why you hear a lot of talk back in Washington about focussing on Pakistan as a long-term partner rather than just a war ally or a facilitator of the endgame,” the sources pointed out.

The sources were of the view juxtaposition of anti-Iran and anti-drones sentiments in the American society may benefit this time in terms of a comprehensive American energy assistance package. “But this time the governments in Pakistan would have to deliver, if they really need their energy woes to be done away with,” the sources added. Consistent voices against the drones from within and outside Pakistan have perhaps made US Administration to understand that drones were practically appearing to be counter productive to the war on terror entering the decisive phase now, they underlined.

Other than strategic and political conditionality attached to prospective energy assistance package, the government in Pakistan would have to expand tax net, end blindfold government borrowing, and culture of vague subsidies.

When asked to comment on possibilities of a new US energy assistance package, US Embassy spokesperson Rian Harris said such proposals and details are not known at the embassy level in advance.

Asked what US law bars Pakistan or any other nation to indulge in business with Iran as India was also buying oil from the same country, she said, “US policy on Iran has not changed.”

“U.S. policy on Iran is well known. We have made it clear to all our interlocutors around the world that it is in their interests to avoid activities that may be prohibited by UN sanctions or sanctionable under U.S. law,” she went on.

“We recognise that Pakistan has significant energy requirements and US are committed to helping alleviate shortfalls,” Rain adds

She reminded, that is why we have invested in major energy infrastructure projects, such as renovating the Tarbela and Mangla dams, modernising the thermal power plants in Guddu, Jamshoro and Muzaffargarh, and building the Satpara and Gomal Zam dams.

These efforts have already added more than 400 megawatts of power to the national grid, and will add a total of 950MW — enough power for 2 million households — by the end of this year,” she said.

Asked how India was exempted from sanctions and buying oil from Iran, she said, “the National Defence Authorisation Act provides the ability to grant exceptions of 180 days to those countries that demonstrate they are significantly reducing their volumes of crude oil imports from Iran.

In December the Secretary of State granted exemptions to nine economies that demonstrated significant reductions of crude oil imports, including India.

Economies must take continuous steps to earn a renewal of the exemption for another 180 days through continued reductions in their purchases,” she concluded.


http://pakobserver.net/detailnews.asp?id=197926
Riaz Haq said…
Here's a Dawn story on oil and gas discoveries in Pakistan:

Following a lacklustre period of several years, when things remained quite on the oil and gas exploration sector, in the face of heightened security situation and circular debt issues, the oil and gas fields have started to buzz with activity.

In the current financial year-to-date (July 1, 2012 to March 11, 2013) the country’s oil and gas sector has spudded as many as 56 wells. It represents a big leap over the 31 wells drilled in the same period last year. The sector has drilled 20 new exploratory wells as against 12 wells same time last year, depicting a significant increase of 67 per cent.

On the discovery side, the picture was a lot brighter than the earlier years as a total of 10 discoveries have been made by the sector in FY13 so far.

The sector’s drilling of a total of 56 exploratory and development (E&D) wells during the period also represents achieving 61 per cent of the full year target set at 91 wells. Even in that sphere, the sector fared better than the comparable period last year when only 41 per cent of the target 76 wells could be drilled.

“O&G sector’s focus continues to remain on the development wells”, says Nauman Khan, analyst at Topline Securities. Of the total wells drilled, 36 were development wells (representing 64 per cent of total activity). It reflected improvement over 19 wells or 61pc of total wells drilled in the comparable period last year.

Apart from the development wells, the activity on the exploration side also represented encouraging growth. Although, contribution of the exploratory wells had slightly declined to 36pc as against 39pc in the same period last year, the overall trend was heartwarming.

The sector spudded 20 exploratory wells, which was significantly more than 12 wells drilled in the comparable period last year while it represented 45pc of full year target of 44 wells.

Analyst said that amongst the listed companies, Pakistan’s largest oil and gas explorer, the Oil and Gas Development Company (OGDC) had drilled 13 wells which were 63 per cent higher than eight wells drilled last year. Included in those 13 wells, were two exploratory wells and 11 development wells.

Pakistan Petroleum Limited drilled five wells (one exploratory and four development), up from two development wells in the comparable period last year. However, with full year target of 16 wells (six exploratory and 10 development), sector watchers expect the drilling activity of the company to significantly intensify in the remaining of the year.

The third major oil and gas E&P company, the Pakistan Oilfields Limited drilled only one exploratory. In the comparable period last year, POL had drilled two exploratory wells.

Though much of the success eluded the E&P companies on the listed sector, the revival and discovery would benefit the country. The darkest hour for the sector came possibly in late 2010 and early 2011, when exploration and development work had started to limp.

According to the data compiled by Pakistan Petroleum Information Services (PPIS), 28 E&P companies in the country, that hold operator licences, together had drilled only 19 wells in first half of the year 2011, compared to 80 wells targeted for all of the FY11.Besides the poor security situation, the two major reasons for the underperformance of E&P companies were the nagging circular debt, which had affected the drillers’ liquidity thereby restricting their drilling portfolio and secondly, the continuation of the carry over wells of the earlier year that stalled companies from launching into new wells, keeping them focused on already drilled ground.


http://dawn.com/2013/03/24/oil-gas-sector-makes-10-discoveries/
Riaz Haq said…
Here's an Oilprice report on "water flooding" to extract oil from shale in US:

The cheapest and most profitable oil North America has ever seen is now “flooding” into the market, as producers once again use old technology to create a wave of new profits.

Producers are using “waterfloods”— pushing water into underground formations to flush a large amount of oil out to nearby producing wells — to increase production and profits. It’s the next big money-making phase of the Shale Revolution.

Waterflooding has been around for 70 years or more, but the Big Question over the last five years has been — can you do it effectively with tight oil?

The answer is a Big Yes, and waterflood potential has become so important that institutional investors now see them as major share price catalysts for junior producers—and track them closely.

Waterfloods start 1-2 years after drilling the well, in a time window producers call “secondary recovery.” (Drilling is primary recovery.) Waterfloods are cheap to try and cheap to run (with most operations costing just $5-10 per barrel!), and now the industry is seeing that they are sometimes doubling reserves from a well.

“Secondary recovery is where you really make all your money in this industry,” says Dan Toews, VP Finance and CFO of Pinecrest Energy (PRY-TSX.V).

Pinecrest is very vocal about their waterflood potential. They say they can double the amount of oil they recover (called the Recovery Factor, or RF) from a well — at less than $15/barrel — half the price of primary recovery costs, which are over $30/barrel.
“Everyone is trying to find a new resource play,” says Toews. “First you find a resource, and then you drill it like crazy. But the second stage is to go in for your secondary recovery, through waterflooding of some kind if possible.”

To date, Pinecrest isn’t yet flowing even one barrel of waterflooded oil—so their powerpoint slide is just projections. Toews and his team expect to be waterflooding all of their operations by the end of this quarter. But analysts are already seeing the waterfloods as a share price catalyst.

“Just about every investor and institution we talk to wants to know the status with our waterfloods,” says Toews. “The buy side (fund managers = buy side, brokerage firms = sell side—ed.) is very savvy on waterfloods. Once we apply the method, this is what has the potential to shoot up our share prices.”

Realistically, the effects can be seen within 2-3 months, but it’s best to give them a year—or more—of operations before judging their impact. Waterfloods can last up to 20 years or more.

Another Canadian oil junior, Raging River Exploration (RRX-TSX), also explains the waterflood potential in their powerpoint. They expect to be swimming in 1 million EXTRA recoverable barrels of oil per square mile, courtesy of waterfloods—at an even cheaper cost of $5-10 barrel, vs $30 barrel for the first 600,000 barrels.

Raging River is developing the Viking formation in SW Saskatchewan—a large, tight oil play that since the 1950s has had an improved outlook from 2 billion barrels of oil to an estimated 6 billion barrels of oil in place, all thanks to horizontal drilling.
Raging River expects waterflooding to increase its RF from 8% from primary recovery methods (drilling vertical and horizontal wells) using 16 wells/section, to 16-20%. The simple math says that will increase the number of barrels recovered from 480 million at 8% to 1.25 billion at 20% RF.

If Raging River—or any producer—can show a steady RF for over a year, I would suggest to investors those barrels will be worth $10-$15 each—creating huge value to shareholders on a buyout.

Some Viking waterfloods have even seen results as high as 30% RF....


http://oilprice.com/Energy/Crude-Oil/US-Shale-Industry-Set-for-a-Second-Boom-with-Waterflood-Technology.html

Riaz Haq said…
Here are excerpts of Pepe Escobar's RT.com Op Ed on Iran-Pakistan pipeline:

..When Iranian President Mahmoud Ahmadinejad and Pakistani President Asif Zardari met at the Iranian port of Chabahar in early March, that was a long way after IP was first considered in 1994 – then as Iran-Pakistan-India (IPI), also known as the 'peace pipeline.' Subsequent pressure by both Bush administrations was so overwhelming that India abandoned the idea in 2009.

IP is what the Chinese call a win-win deal. The Iranian stretch is already finished. Aware of Islamabad’s immense cash flow problems, Tehran is loaning it $500 million, and Islamabad will come up with $1 billion to finish the Pakistani section. It’s enlightening to note that Tehran only agreed to the loan after Islamabad certified it won’t back out (unlike India) under Washington pressure.

IP, as a key umbilical (steel) cord, makes a mockery of the artificial – US-encouraged – Sunni-Shia divide. Tehran needs the windfall, and the enhanced influence in South Asia. Ahmadinejad even cracked that “with natural gas, you cannot make atomic bombs.”

Zardari, for his part, boosted his profile ahead of Pakistan’s elections on May 11. With IP pumping 750 million cubic feet of natural gas into the Pakistani economy everyday, power cuts will fade, and factories won’t close. Pakistan has no oil. It may have huge potential for solar and wind energy, but no investment capital and knowhow to develop them.

Politically, snubbing Washington is a certified hit all across Pakistan, especially after the territorial invasion linked to the 2011 targeted assassination of Bin Laden, plus Obama and the CIA’s non-stop drone wars in the tribal areas.

Moreover, Islamabad will need close cooperation with Tehran to assert a measure of control of Afghanistan after 2014. Otherwise an India-Iran alliance will be in the driver’s seat.

Washington’s suggestion of a Plan B amounted to vague promises to help building hydroelectric dams; and yet another push for that ultimate 'Pipelineistan' desert mirage – the which has existed only on paper since the Bill Clinton era.

---

The big winner is… China

IP is already a star protagonist of the New Silk Road(s) – the real thing, not a figment of Hillary Clinton’s imagination. And then there’s the ultra-juicy, strategic Gwadar question.

Islamabad decided not only to hand over operational control of the Arabian Sea port of Gwadar, in ultra-sensitive southwest Balochistan, to China; crucially, Islamabad and Beijing also signed a deal to build a $4 billion, 400,000 barrels-a-day oil refinery, the largest in Pakistan.

Gwadar, a deepwater port, was built by China, but until recently, the port's administration was Singaporean.

The long-term Chinese master plan is a beauty. The next step after the oil refinery would be to lay out an oil pipeline from Gwadar to Xinjiang, parallel to the Karakoram highway, thus configuring Gwadar as a key Pipelineistan node distributing Persian Gulf oil and gas to Western China – and finally escaping Beijing’s Hormuz dilemma.

Gwadar, strategically located at the confluence of Southwest and South Asia, with Central Asia not that far, is bound to finally emerge as an oil and gas hub and petrochemical center – with Pakistan as a crucial energy corridor linking Iran with China. All that, of course, assuming that the CIA does not set Balochistan on fire.

The inevitable short-term result anyway is that Washington’s sanctions obsession is about to be put to rest at the bottom of the Arabian Sea, not far from Osama bin Laden’s corpse. And with IP probably becoming IPC – with the addition of China – India may even wake up, smell the gas, and try to revive the initial IPI idea....


http://rt.com/op-edge/iran-pakistan-syria-pipeline-843/
Riaz Haq said…
Here's a CNBC report on Prince Walid Bin Talal's concern about growing shale oil and gas hurting Saudi economy:

Saudi billionaire Prince Alwaleed bin Talal warned that the Gulf Arab kingdom needed to reduce its reliance on crude oil and diversify its revenues, as rising U.S. shale energy supplies cut global demand for its oil.

In an open letter to Oil Minister Ali al-Naimi and other ministers, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from OPEC member states was "in continuous decline".

He said Saudi Arabia's heavy dependence on oil was "a truth that has really become a source of worry for many", and that the world's biggest crude oil exporter should implement "swift measures" to diversify its economy.

(Read more: Oil prices jump as US crude takes bigger role on world oil stage)

Prince Alwaleed, owner of international investment firm Kingdom Holding, is unusually outspoken for a top Saudi businessman.

But his warning reflects growing concern in private among many Saudis about the long-term impact of shale technology, which is allowing the United States and Canada to tap unconventional oil deposits which they could not reach just a few years ago. Some analysts think this may push demand for Saudi oil, as well as global oil prices, down sharply over the next decade.

Over the past couple of years the Saudi government has taken some initial steps to develop the economy beyond oil - for example, liberalising the aviation sector and providing finance to small, entrepreneurial firms in the services and technology sectors.

Nowhere Is Immune from Unrest: Saudi Prince
Saudi Prince Alwaleed Bin Talal, talks to CNBC about turmoil in the Middle-East and the price of oil.
Naimi said publicly in Vienna in May that he was not concerned about rising U.S. shale oil supplies. Prince Alwaleed told Naimi in his open letter, which was dated May 13 this year, that he disagreed with him.
"Our country is facing a threat with the continuation of its near-complete reliance on oil, especially as 92 percent of the budget for this year depends on oil," Prince Alwaleed said.

(Read more: Don't mess with West Texas: US oil to keep outpacing Brent)

"It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately," he said, adding that the country should move ahead with plans for nuclear and solar energy production to cut local consumption of oil.

The shale oil threat means Saudi Arabia will not be able to raise its production capacity to 15 million barrels of oil per day, Prince Alwaleed argued. Current capacity is about 12.5 million bpd; a few years ago the country planned to increase capacity to 15 million bpd, but then put the plan on hold after the global financial crisis.

While most Saudi officials have in public insisted they are not worried by the shale threat, the Organization of the Petroleum Exporting Countries (OPEC) has recognised that it needs to address the issue.

(Read more: OPEC ministers: falling demand is our top concern)

In a report this month, OPEC forecast demand for its oil in 2014 would average 29.61 million bpd, down 250,000 bpd from 2013. It cited rising non-OPEC supply, especially from the United States.

At its last meeting in Vienna in May, OPEC oil ministers spent time discussing shale technology and set up a committee to study it.


http://www.cnbc.com/id/100920411
Riaz Haq said…
Here's a WSJ piece on Iran-Pakistan pipeline:

Pakistani Prime Minister Nawaz Sharif said he would proceed with a plan to build a gas pipeline from Iran, despite objections from the U.S., and said that he plans to use his speech at the United Nations on Friday to hit out against American drone strikes in his country.

In an interview in New York with The Wall Street Journal, Mr. Sharif also spelled out, for the first time, the conditions that Pakistani Taliban would have to accept if his government proceeds with a peace deal with the militant group, demanding that they lay down arms and recognize Pakistan's constitution. At the same time, he voiced fears that continued U.S. drone attacks would wreck his policy to negotiate with the Pakistani Taliban, a group closely linked to al Qaeda.

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In the interview Wednesday, Mr. Sharif acknowledged frictions with the U.S. but said he believed that the issues could be overcome. "President Obama was very kind to call me up immediately after my election and express his desire to work with Pakistan. I also want to work with the United States of America," he said.

The White House said Thursday that President Barack Obama and Mr. Sharif will meet Oct. 23 at the White House, part of what officials said was a broader effort to deepen ties.

A White House statement said terrorism and the economy will be among the topics discussed, but didn't mention the controversial pipeline. "The visit will highlight the importance and resilience of the U.S.-Pakistan relationship and provide an opportunity for us to strengthen cooperation on issues of mutual concern, such as energy, trade and economic development, regional stability, and countering violent extremism," the White House said in a statement.

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An inadequate supply of gas, used to produce electricity, is one of the main reasons for the crippling shortage of power in Pakistan. Mr. Sharif said Pakistan had a contractual obligation to go ahead with the agreement, or face penalties from Iran of $3 million a day if it is not completed by the end of next year. He said that in Islamabad's legal opinion, the pipeline wouldn't trigger the sanctions.

He said that Pakistan would proceed "unless you give us the gas, or the $3 million a day."

However, Pakistan still needs to find $1.5 billion to build the pipeline, which is already completed on the Iranian side, according to Tehran. Islamabad is also hoping that a change in Washington's stance on Iran after the election of Mr. Rouhani could help Pakistan avoid the sanctions.

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"The more the drones, the more the terrorists get multiplied. You kill one man, his sons, his father, his brothers, they become terrorists. So this is something that is not helping at all," said Mr. Sharif.

Washington believes the drones have been highly effective in killing senior al Qaeda commanders, Pakistani Taliban leaders and Afghan insurgents who use Pakistan's tribal areas, which border Afghanistan, as a sanctuary.

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In words not used in the offer of talks, Mr. Sharif, in the Journal interview, laid out the terms that would be available to the militants.

"They will have to renounce terrorism," said Mr. Sharif. "They [Pakistani Taliban] will have to abide by the constitution of Pakistan."

"It's been often said by them that they don't recognize the constitution of the country," he said. "But the constitution has to be recognized. If we agree on addressing this terrorism, they will have to be disarmed, lay down their arms."


http://online.wsj.com/article/SB10001424052702303342104579099142009080988.html
Riaz Haq said…
From Financial Times on shale production costs:

As oil prices have fallen, the cost of production from US shale has emerged as a critical question for investors.
In a downturn, higher-cost supply is most at risk, and the need for horizontal wells and hydraulic fracturing – “fracking” – in shale reserves means they are more expensive to develop than many oilfields in the Middle East.


If oil prices fall further, however, US production costs are likely to fall too, providing a safety valve to reduce the pressure on producers.
There is no single answer to the break-even price for shale developments: it varies from area to area and well to well.
Even with US crude prices of about $100 a barrel earlier in the year, the small and midsized exploration and production companies that led the US shale revolution were running large cash deficits.
If oil remains at its present level of roughly $82 per barrel, it will put back the point at which they will be able to cover their capital spending from their cash flows.
However, their costs have already fallen sharply, and could fall further. The median North American shale development needs a US crude price of $57 a barrel to break even today, compared with $70 a barrel in the summer of last year, according to IHS, the research company.
EOG Resources, one of the most successful of the shale oil producers, cut its cost per well in the Leonard shale on the border of Texas and New Mexico from $6.9m in 2011 to $5m this year, while raising average production from each well.


Melissa Stark, a managing director at Accenture, the consultancy, says the industry still has a lot of room for improvement.
With more than 18,000 horizontal wells set to be drilled in the US this year, she argues that improving the “manufacturing model” of repeated similar projects could deliver large savings.
Accenture believes the average cost of a US shale well could be cut by up to 40 per cent by better management of factors such as planning, logistics, and relationships with suppliers.
David Vaucher of IHS says that if prices remain at around today’s levels, rates charged to oil producers for fracking and other services are likely to remain about where they are.


http://www.ft.com/intl/cms/s/0/0a25ecf4-5937-11e4-9546-00144feab7de.html

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