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Lloyds List: Shell hopes Anne-1 will lead to Pakistan's first offshore oil output

Shell hopes Anne-1 will lead to Pakistan's first offshore oil output
Results of deepwater exploration in Indus basin are keenly awaited in nation dominated by onshore production, writes Bruce McMichael, Lahore
Lloyds List; May 09, 2006

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PAKISTAN'S energy sector is dominated by onshore gas production but one oil major is hoping to find hydrocarbons offshore.

While the Pakistani exploration and production industry is growing steadily, the bulk of activity has been onshore so far. But this will change as Royal Dutch Shell is set to drill a keenly awaited exploration well later this year.

Although there is no offshore production as yet, Shell is looking to change this by drilling its Anne-1 deep-water well in the second half of this year to target a Tertiary Delta play in the Indus basin, some 150 miles south of Karachi.

European oil majors have long been involved with exploration and development activities with London-based BP, Italy's Eni and Austria's OMV the most active lately.

Some 26 companies are engaged in oil and gas exploration and production activities, the vast majority of which are foreign-owned. Many are independents such as BHP Billiton, Tullow Oil and Premier Oil, who are building a presence in the country.

As many as 1,467 exploration and appraisal wells have been drilled in Pakistan, with 183 successful discoveries, 51 of oil and 132 of gas.

The southern province of Balochistan, home to the Sui gas operations, is the most prospective hydrocarbon province.

The region's gas infrastructure is well established with supplies coming from the south piped to fast growing cities such as Lahore in the east and Islamabad'Rawalpindi further north.

Pakistan is also the centre of a strategically important $7bn project to pipe gas from Iran to India with deliveries also made into the country's own network.

Speaking earlier this month, the country's leader, General Pervez Musharraf, said: 'Pakistan supports the project totally and because of increasing needs for energy in Pakistan, we request the project be accelerated.'

Security has long been an issue for operators in the country with rebel groups occasionally bombing sections of gas pipeline network causing faults and increasing the power outages for millions of citizens particularly in the Punjab and North West Frontier Province.

In late 2005, tribal separatists in Balochistan claimed responsibility for blowing up the pipeline supplying gas from Mari field to the Guddu and Uch power stations.

With Pakistan on the frontline in the US-led war on terror and sporadic attacks from local separatists, oil companies maintain high levels of security at their bases in the field.

The location of Sui gas in Balochistan gives the insurgents a hold over the rest of the country. Sui, operated by state-owned Pakistan Petroleum, produces about 45% of the country's total production.

Sui Southern Gas Co recently signed a gas purchase agreement with Eni Pakistan, operator of Bhit and Badhra gas fields, for the supply of additional 30m cu ft of gas per day by July 2007.

The deal was made on behalf of its joint venture partners Shell, Premier Oil, Kufpec of Kuwait and Pakistan's part privatised OGDC company.

SSGC is undertaking a major expansion project for the past three years to add a further 500m cu ft of gas to its 1,200m cu ft daily total by 2008.

Pakistan Oilfields, a subsidiary of the Attock Oil Co, maintains highly diversified exploration and production portfolio as it manages the Ikhlas and Hyderabad blocks.

It is also acquiring interests in five exploration licenses at Tal, Gurgalot, Kotra, New Block B, and Nawabshah blocks in joint ventures operated by OMV, OGDC and Tullow.

BP's current operations are in southern Sindh, 100 km to the east of Karachi, where it recently signed a two-year extension on KCA Deutag's T-34 land drilling rig.

Malaysia's Petronas Carigali is a new entrant to Pakistan's upstream sector and is now selling gas from the Rehmat field in the southern Sindh province and is taking on new exploration blocks.

Production at Rehmat is Petronas' first success in Pakistan after entering the country in 1996. The field was discovered in August 2001 by a Petronas-led joint venture including Eni and Pakistan's Government Holdings.

Another active independent is Tullow, a familiar face on the scene since 1991, which has an office in Islamabad employing 24, mainly local, staff and has a production team at its Sara'Suri gas fields of 25 technical and administrative personnel.

Tullow has a range of exploration, development and production activities continuing in the country with a seismic survey under way at Kohat and drilling expected to start early in 2007. It is also involved in the Chachar gas field where production is due to start shortly.

An additional British company, Premier Oil, has recently completed its phase-2 development of condensate production from the Zamzama field, which will reach around 3,000 bpd soon.

Simon Lockett, chief executive at Premier, said: 'This development will result in an increase in Premier's production by around 2,500 bpd of oil equivalent and marks a milestone in the progress in the company's long-term business in Pakistan.

'Gas commercialisation projects in Premier's other fields in Pakistan, Bhit, Qadirpur and Kadanwari are being actively pursued.'

Gas production from the Zamzama field started in March 2001 and currently supplies on average 270m cu ft of gas per day to its customers, the Sui Southern and Sui Northern Gas Pipelines.

Other foreign groups have expressed an interest in operating in Pakistan and in the continuing part privatisation of the state gas companies.

These include Thailand's PTT, Enbridge of Canada, Japan's Mitsui, US groups Hanover and Tara Energy, plus Calik Energy of Turkey and Korea Gas.

Officials from Brazil's Petrobras have also held talks with Pakistani officials with regard to start exploration offshore and onshore.

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