Canadian oil firm wraps up Pakistani operations

AROL had a non-operating 10% working interests in Gambat South, Naushehro Feroz and Kotri North exploration blocks in Pakistan. PHOTO: FILE

ISLAMABAD: 

As Canadian-based firm Asia Resources Oil Limited (AROL) decides to divest interest in all its assets in Pakistan, Pakistan Petroleum Limited (PPL) has decided to acquire shares in three of its fields with potential reserves of tight and shale gas.

Several foreign firms have sold their assets in Pakistan due to poor law and order situation, low incentives and bureaucratic hurdles. AROL will add to the growing list.

The government is heading to form a subsidiary of PPL to acquire AROL’s assets. The three blocks are identified by PPL as ideally located in the unconventional exploration fairway of the Middle Indus Basin for tight and shale gas. PPL is spearheading the unconventional exploration initiative in the country, acquiring these blocks of strategic value to kickstart the exploration programme.

Sources said that the petroleum ministry had moved a summary to the Economic Coordination Committee (ECC), seeking approval for forming the subsidiary and acquiring AROL assets in Pakistan.

AROL, a British Virgin Islands (BVI) registered company with an office in Calgary and non-operating 10% working interests in Gambat South, Naushehro Feroz and Kotri North exploration blocks in Pakistan, is divesting its interest in all its assets. PPL, being the operator and a majority interest holder in the three exploration blocks, has an agreement with AROL on right of first refusal upon divestment of AROL’s working interests in the blocks. This means that in the event of AROL selling its stake, PPL will have to be offered the sale before the open market.

In Gambat South Block, PPL recently made two successive hydrocarbon discoveries and plans to drill further exploratory and appraisal wells. In Naushehro Feroz Block, drilling of an exploratory well is currently in progress. Furthermore, drillable prospects have been identified and land acquisition for drilling site is in progress in Kotri North Block.

Petroleum ministry had informed the economic decision-making body that the proposed acquisition by PPL would protect the three assets from being sold by AROL to small entities thereby creating hindrances for PPL in the fast-paced exploration required in these blocks. Moreover, through this acquisition, it would become relatively easier for PPL to raise foreign currency project financing for partly meeting the Gambat South field development costs.

The ECC has been informed that it is therefore of strategic national importance for PPL to acquire the 10% working interest and restructure it to source unconventional exploration technology through it from Canada.

For the corporate acquisition of AROL and three target assets through PPL’s wholly-owned subsidiary, an investment will be required to meet the immediate acquisition cost and for the subsequent exploration and appraisal plan costs for the Gambat South discovery. This amount will be injected by PPL in the form of equity contribution to PPL’s wholly-owned subsidiary.

The acquisition will contribute significantly to the long-term energy security of the country by enabling technology transfer in exploring unconventional hydrocarbon reserves (shale and tight gas).

The petroleum ministry has sought the ECC’s approval for equity investment by PPL. It had also sought approval of external debt financing in foreign currency which may be wholly or partly secured through PPL’s assets in Pakistan.