Tight gas seen costlier but cheaper than imports

Karachi: Tight gas in Pakistan will cost 40 to 50 percent more than the conventional gas, but it remains cheaper than the imported gas, analysts said.

“Pakistan will have to pay a maximum of $6.5/British Thermal unit (BTU) for the gas against $12.3/BTU for gas imports,” an analyst said. Tight gas is unconventional gas locked in impermeable, hard rock, making it extremely difficult to extract.

The Ministry of Petroleum on Thursday approved the new tight gas exploration policy that offers better incentives to exploration firms than the previous 2009 policy. Under the new policy, exploration companies will be offered 40 to 50 percent higher prices for gas against $4.26/BTU price announced in Exploration and Production Policy, 2009.

Companies, which succeed in recovering gas from tight fields within two years, will get 50 percent over the 2009 price and if it takes more time they will get only a 40 percent hike on the 2009 price.

Analyst say the policy has removed a major hurdle in the development of tight gas reserves since it requires expensive and unconventional drilling techniques. The reserves are estimated to be around 40 to 50 trillion cubic feet in the basins, stretching from lower Indus to Potohar region.

Besides, the leases for the fields will now be for 40 years against 30 years stated in the 2009 policy. According to an official of the petroleum ministry, the new policy was approved to overcome the country’s gas shortfall and attract foreign investment.

Analyst say it is a more feasible option for the economy as even after giving incentives, the cost of gas available will be less than imported gas and there will be no burden on the foreign exchange reserves.

The policy bodes well for the exploration and production sector also. “We expect Pakistan Petroleum Limited (PPL) and the Oil and Gas Development Company (OGDC) to be relatively well placed as compared to their peers,” analyst Nauman Khan said.

“Both firms have working interest in Sawan and Miano fields where the operator OMV has reported to have found traces of tight gas.” OGDC holds 52 percent working interest in Miano field.

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