#Geology Archives | Saif Energy Limited

Pakistan’s Oil & Gas Investment and Regulations

The oil and gas industry in Pakistan offers a promising environment for energy companies. Pakistan has set up strategic areas, rules, and benefits for companies that explore and produce oil and gas (E&P). These policies are designed to make things easier and to bring in more foreign money. Let’s look at the different areas, how companies get permission to work there, and the good deals available in Pakistan’s oil and gas industry.

Zoning for Onshore and Offshore Oil and Gas Exploration

Pakistan has divided its onshore and offshore areas into different categories based on the geological risks and the amount of investment needed:

Onshore Zones:
- ZONE-I and ZONE-I(F): High-risk, high-cost areas with significant geological challenges.
- ZONE-II: Moderate risk with high to medium cost requirements.
- ZONE-III: Low risk and low cost, making it more accessible for E&P activities.
Offshore Zones:
- Shallow (up to 200m): Easier to access with lower risks.
- Deep (200-1000 m): Moderate accessibility and higher technical challenges.
- Ultra Deep (Beyond 1000m): High-risk, high-investment areas with potentially large rewards.

This organized zoning helps companies assess the balance between risk and reward in each area, guiding their strategies according to geological and financial considerations.

Concession Award Process for E&P Rights

Pakistan’s upstream sector provides three procedures for granting E&P rights:

Competitive Bidding:

Petroleum Exploration Licences are given for both land and sea areas. Companies try to win these by using Work Units, a new idea that lets them change their plans to get the best results.

Government-to-Government Agreements:

Companies that work closely with the government can get the right to explore new areas without having to compete with others. This helps build strong relationships between the government and these companies, and it also benefits both sides.

Reconnaissance Permits:

For businesses that conduct research and surveys, non-exclusive licenses can be acquired through direct talks, allowing them to gather data from multiple sources.

Invitation to Bid: Transparency in the Bidding Process

To guarantee a fair and clear process, the Directorate General of Petroleum Concessions (DGPC) publishes public invitations for companies to submit their bids. These bids are open for at least 60 days, giving enough time for interested companies to join. The process favors companies that offer the most Work Units. If several companies offer the same amount, they can submit new bids to make the competition more equal.

Agreement Execution for E&P Activities

The DGPC helps make it easy and fast to sign Petroleum Concession Agreements (PCA) or Production Sharing Agreements (PSA) using standard templates. This organized process reduces paperwork and delays, so companies can start their exploration work as soon as possible.

Gas Market Access and Infrastructure

E&P companies have permission to build and run pipelines for both local use and exporting. The gas market works with an open-access system, where companies with solid plans get priority. The building of pipelines follows the government’s energy plan, and the prices are controlled by the right groups, making sure companies make money while also looking out for the public’s needs.

Investment Incentives: A Favorable Onshore Package

Pakistan’s onshore oil and gas exploration package has several benefits to encourage foreign investment:

• Royalties: A standard 12.5% royalty on the value of petroleum produced is applied. This gives the government a fair share while keeping costs reasonable for companies.

• Corporate Income Tax: The tax on profits is capped at 40%, and royalty payments can be deducted as expenses. This makes Pakistan a good choice for large oil and gas companies.

• Local Partnership Requirement: Foreign companies must partner with local firms, like GHPL. This helps local businesses grow and allows international expertise to enter the market.

• Production Bonuses and Work Units: Companies get bonuses based on how much they produce, and Work Units allow for flexible work requirements. This helps companies adjust their plans based on the actual conditions they find.

Import Duties and Taxes

The rules for taxes provide significant benefits for companies doing oil and gas work:

Imported equipment that isn’t made locally has a 5% import tax, while locally made items have a 10% tax, and wellhead equipment has a 15% tax.
Companies that provide technical services to oil and gas firms don’t have to pay import duties, sales tax, or license fees, which lowers their costs.

Social Welfare and Training Contributions

Acknowledging the significance of community well-being, the rules require oil and gas companies to make social and training payments:

Training Payments: These companies pay yearly, with $25,000 during the search for oil and gas and $50,000 during the building phase.
Social Welfare Payments: Depending on how much oil and gas they produce, companies fund local welfare projects, helping communities in areas where they search for and produce oil and gas.

Key Takeaways

Pakistan’s oil and gas industry is set up to bring in investments while considering economic, environmental, and social needs. By using a system of zones and competitive offers, along with government help and benefits, the country makes it easier and more profitable for companies to find and produce oil and gas.

For more details, refer to the Petroleum (Exploration and Production) Policy 2012.

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Overview of Offshore Exploration in Pakistan

Offshore exploration in Pakistan began in 1963, with Sun drilling three wells in the Indus Delta’s shallow waters: Dhabo Creek-01, Patiani Creek-01, and Korangi Creek-01. Subsequent attempts included Wintershall’s Indus Marine A-1 and B-1 wells in 1972, and Indus Marine C-1 in 1975. In 1976, Marathon drilled the Jal Pari 1A well, which encountered high pressure and forced a halt in drilling. Later, Husky Energy’s 1978 Karachi South-1 well revealed shaly source rocks in the Mughalkot Formation beneath the Deccan volcanic series, though the reservoir quality was poor. In 1985, OGDCL’s Pakcan-1 discovered gas in the Miocene; however, further efforts, such as Oxy’s 1989 Sadaf-1, yielded no significant results. The 1990s and 2000s saw additional wells by Canterbury, OPC, PPL, and Total Energies, including Pasni-1 and Gwadar-1, yet these too were largely unproductive. The most recent exploration, Kekra-1 by ENI in 2019, also yielded no viable resources. This outcome is likely due to a lack of hydrocarbon charge, attributed to the absence of Early Cretaceous source rocks in the area. No shallow source rocks could be established, despite some occurrences of thermogenic gas.

Geological Influence of Plate Collision

The collision between the Indian Plate and Eurasian Plate created the Himalayas and initiated significant erosion, transporting sediments southward to form the Indus Fan in the Arabian Sea, one of the world’s largest sedimentary fans. The uplift accelerated erosion, feeding massive sediment into the Arabian Sea and building the Indus Fan. Following the continental collision between the Indian and Eurasian plates in the Oligocene, the influx of clastic sediments buried Paleogene carbonates in the offshore Indus Basin. This process intensified from the mid-Miocene onward, with uplifting and tilting of turbidites east of Murray Ridge. The Upper Oligocene to Recent Indus Fan clastics now form a thick succession of channel-levee systems.

Hydrocarbon Potential and Challenges

Data from offshore wells has yet to show evidence of significant Tertiary-age source rocks, and deeper sections remain largely unassessed. The thick Eocene to Pliocene deposits in the Indus Fan have shifted initial oil-rich zones into the gas window, creating migration barriers due to impermeable basal shale layers. Future drilling could reveal if hydrocarbons bypass these barriers through fault systems intersecting source rock. Findings from deepwater wells, such as Pak G2-1, indicate immature rocks for hydrocarbon generation. If the drilled sections are extrapolated to Paleocene Ranikot Formation, Ro levels around 0.4-0.5% suggesting early maturation for oil generation but lack of data and unconformity between Upper Miocene and Upper Eocene make the accurate predictions of thermal maturity very hard as all readings of present maturity are above unconformity. That’s why the Paleocene hydrocarbon potential might be overstated given limited data, as regional modeling suggests Paleocene source rocks may have become post-mature by the Oligocene, potentially charging Miocene and younger reservoirs via shallower source rocks would have occurred.

In contrast, wells like Karachi South A-1 and Pakcan-1 (Paleocene-Eocene to Mid-Miocene intervals) remain within the hydrocarbon window. Although Pakcan-1 confirms thermogenic gas, data limitations impede a complete source rock assessment across the basin. Ghazij Formation modeling based on Karachi South A-1 suggests it reaches the peak oil window (Figure-01) and about to approach the gas window.

Exploration Outlook and Economic Incentives

In the Lower Indus Basin, the Lower Cretaceous Sembar and Goru formations serve as primary source intervals; however, their offshore extension places them beneath Deccan volcanic rocks, rendering them less viable for the Indus Fan play. Offshore, rapid sedimentation has lowered geothermal gradients, reducing the likelihood of source rock maturation to depths comparable to onshore zones.

Seismic interpretation reveals laminated Deccan basalts within Upper Cretaceous–Paleocene marine-facies strata in the southeastern basin, adjacent to the Somanath Ridge and Saurashtra High (Khurram et al., 2019). Conversely, the northwestern basin, with minimal basalt influence and proximity to the Murray Ridge strike-slip fault zone, may offer potential for oil and gas exploration. With developed fault structures near Murray Ridge, the northwestern region is promising, presenting opportunities to uncover established Cretaceous plays.

To reduce import dependency, the government has introduced favorable terms, including a gas price of US$7-9/MMBtu and contractor profit shares up to 95%, aiming to attract foreign investment. While exploration results have been limited, recent multi-year surveys suggest offshore Pakistan still holds potential.

Reference

Calves G, Schwab AM, Huuse M, Peter DC, Asif I. 2010. Thermal regime of the northwest Indian rifted margin Comparison with Predictions. Marine and Petroleum Geology, 27, 1133–1147. doi: 10.1016/j.marpetgeo.2010.02.010.

Chatterjee S, Goswami A, Scotese. 2013. The longest voyage: Tectonic, magmatic, and paleoclimatic evolution of the Indian plate during its northward flight from Gondwana to Asia. Gondwana Research, 23, 238–267. doi: 10.1016/j.gr.2012.07.001.

Jian-ming Gonga, b, c, Jing Liaoa, b, *, Jie Lianga, b, Bao-hua Leia, b, Jian-wen Chena, b, Muhammad Khalid, Syed Waseem Haidere, Ming Meng. Exploration prospects of oil and gas in the Northwestern part of the Offshore Indus Basin, Pakistan

Shahzad K, Betzler C, Ahmed N, Qayyum F, Spezzaferri S, Qadir A. 2018. Growth and demise of a Paleogene isolated carbonate platform of the Offshore Indus Basin, Pakistan: Effects of regional and local controlling factors. International Journal of Earth Sciences, 107, 481–504. doi: 10.1007/s00531-017-1504-7.

Exploring the Offshore Indus Basin Opportuintites

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Exploring the Offshore Indus Basin: Opportunities and Challenges

Exploring The Offshore Indus Basin: Opportunities And Challenges

The Offshore Indus Pak G2-1, the deepest well drilled in the Offshore Indus in terms of water depth, offers interesting insights into the region’s hydrocarbon potential. Despite its depth, the 1D burial history graph (Figure 1) indicates that the well did not achieve the required burial to crack any hydrocarbons. This well, drilled near the Saurashtra Volcanic Arch, encountered a reef, yet remained dry, and the play couldn’t be established.

Reservoir Insights:

Drilling data reveals two sets of proven reservoirs in the Offshore Indus Basin

Widely Distributed Miocene Channel Sandstones
Locally Distributed Paleocene–Eocene Reef Limestone

Analogies with the adjacent Kutch Basin and the onshore Indus Basin suggest the possible existence of Cretaceous sandstone reservoirs in the Offshore Indus Basin.

Challenges and Historical Context:

The well stopped in the reef limestone after drilling over 200 meters, and unfortunately, it was dry. It was believed that the adjoining synclines would have generated hydrocarbons that would have migrated to the highs (the reefs) but the concept failed. Since the well was stopped early in the reef, remodeling of data in the context of basin is quite difficult. Had the well penetrated the basement, it would have been quite interesting. It was also believed that the reef would be riding all over the basement rocks. The only proven reservoir is Middle Miocene deltaics that have produced gas in Pak Can-01, but the gas column was too small to justify infrastructure development.

It seems that volcanic activity plays a significant role in the evolution of the offshore part of the Indus Basin and its implications have far-reaching consequences on the hydrocarbon potential.

There have been two major volcanic events in the sea area of Pakistan:

Basalt Eruption of Somnath Ridge (~70 Ma)

Basalt Eruption of Deccan-Reunion (Reunion Mantle Plume, ~65 Ma)

According to Calvès et al. (2010), the basalt eruption of Somnath Ridge contributed to the formation of the volcanic basement in the southeastern Offshore Indus Basin, particularly around Somnath Ridge and Saurashtra High. This area covers approximately 45,000 km².

Geological Insights:

Seismic data interpretation indicates (Figure 2) (that in the southeastern part of the basin adjacent to Somnath Ridge and Saurashtra High, Deccan basalts are distributed in the marine-facies strata of the Upper Cretaceous–Paleocene in a laminated form (Khurram et al., 2019). The northwestern part, far from the Reunion mantle plume, has minimal basalt impact but is close to the strike-slip fault zone of Murray Ridge, making it a potential focus for future oil and gas exploration.

Geothermal Gradients:

Somnath Ridge: Low geothermal gradient of 33℃/km.

Sedimentary Center: High geothermal gradient of 37℃/km – 55℃/km, aiding source rock maturity (Calvès et al., 2010).

The northwestern part, with its developed faults near Murray Ridge, presents an interesting area for future exploration. There are chances that the established Cretaceous plays would be found there (Figure-02).

In most of the wells drilled, the source rocks are in oil window but Pak Can-01 produced gas suggesting that the gas would have been migrated from the deeper part of the basin. Modeling suggests that the Paleocene source rocks (effective in the adjoining onshore) may have become post mature at the end of Oligocene suggesting a charge to the Miocene and younger reservoirs by shallower source rocks.

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Figure 2 . After Shahzad et. al.

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