Exploration activities: Existing state financing insufficient, says oil company

Mari Petroleum has demanded the market price of $6 per mmbtu under the Petroleum Policy of 2012 while setting aside the cost-plus formula. PHOTO: FILE

ISLAMABAD: 

Mari Petroleum Company Limited has said that the multi-million-dollar state financing facility is not enough to meet exploration expenses and asked the government to increase the wellhead gas price by doing away with the existing pricing formula.

“At present, the financing facility provided by the government stands at $20 million, which will be enhanced to $40 million if it does not touch the gas pricing formula for Mari Petroleum,” Chief Executive Officer of the company, Lieutenant General (Retired) Nadeem Ahmed said while talking to The Express Tribune.

Terming the current fund disbursements insufficient, he suggested that the company needed an overall financing of $120 million per year for exploration work.

Mari Petroleum also engaged in a joint venture overseas and conducted surveys as part of the tie-up, but the venture did not succeed. “The company will wind up its operations there,” he remarked.

Speaking to the media late Friday evening, Ahmed said they had sought to discard the cost-plus formula under which the company was offered $0.73 per million British thermal units (mmbtu) compared to prices of $6 and $8 per mmbtu enjoyed by other exploration firms.

Mari Petroleum has demanded the market price of $6 per mmbtu under the Petroleum Policy of 2012 while setting aside the cost-plus formula as was done in the case of Pakistan Petroleum Limited.

“However, the government has agreed to give $2.15 per mmbtu under the Petroleum Policy of 2001,” he said, adding if the price was granted, the company would be able to ramp up exploration activities.

In this connection, the Ministry of Petroleum and Natural Resources has sent a summary to the Economic Coordination Committee (ECC), suggesting scrapping of the existing pricing mechanism and a gradual revision of the wellhead gas price to $2.15 per mmbtu over the next 10 years.

Ahmed pointed out that Mari Petroleum was contributing Rs54 billion in taxes to national coffers and the amount would shoot up to Rs74 billion after the suggested initiatives were undertaken. “Apart from this, Mari will also be able to boost gas production, which will definitely benefit the consumers.”

In an attempt to encourage gas exploration, the government should increase the offered price, he said, fearing that 90% production of the company, which came from existing fields, would start falling soon.

“We should be offered the market price for expansion of operations with the help of fresh discoveries in new blocks,” he said. “Mari Petroleum’s success rate of gas discoveries is high compared to other companies.”

He boasted that Mari Petroleum was contributing a lot to the country’s economy and referred to different fertiliser plants including Engro that were running on dedicated gas supplies from Mari fields.

The company expects new gas discoveries in Balochistan despite a vulnerable law and order situation. “We expect to find gas in new Balochistan fields, which is estimated to yield 20 million cubic feet per day. It will be allocated to Quetta to meet the city’s needs,” he said.