Much To Cheer From Eni's Gas


BMI View : Eni's latest discovery gives Pakistan much reason to cheer as it continues to seeking new sources of gas to meet the country's growing needs. While it has been exploring import options, the uncertainty of these alternatives in the short-term means that domestic output is still the greatest source of energy security.

Eni has hit another gas reservoir in Pakistan with its probe of Lundali-1. On May 6 2013, the Italian oil company reported that this onshore gas discovery was made in the Sukhpur block, north of Karachi in the Sindh province. During production tests the well flow ed 924,000mn cubic metres of gas per day, highlighting ' the excellent deliverability of the reservoir' according to the Italian firm. Another well will be drilled on the block in the next 12 months to further determine its hydrocarbons potential.

Eni has a 45% operating interest in the block, alongside Kuwait Foreign Petroleum Exploration Company (25%) and state-owned Pakistan Petroleum Limited (30%). The Italian firm plans to bring the discovery into commercial production by linking output to its existing gas infrastructure. The Bhit gas processing facility is 30 kilometres (km) west of Sukhpur.

Shoring Up Gas Fortunes

This discovery continues to strengthen Eni's position as Pakistan 's largest upstream producer. It will also boost the country's gas supplies at a time when it risks suppressing demand growth as a result of gas shortages. Gas production and consumption have been growing in tandem, though limited supplies of domestic gas and the lack of gas import infrastructure means that real consumption could have been compromised as a result.

Our Power team expects gas to continue to occupy a prominent position in the country's power sector, with gas generation growing at an average of 4.41% over our 10 -year forecast period to 2022. Another key factor accounting for the 3.6% average annual growth projected for gas consumption comes from rising demand from the transport sector for gas-fuelled vehicles.

Powering Future
Pakistan Gas Generation (LHS) & Share In Total Electricity Generation (RHS), 2012-2022

Without imports, it will be difficult for domestic gas production to meet these needs. In our forecast, we assume that import infrastructure that will come online in the next decade, such as liquefied natural gas (LNG) import facilities and pipeline exports possibly from Iran and Turkmenistan, will support domestic needs (see our online service, January 15 2013, 'Gas Shortage Keeps Looming On Long-Term Outlook'). However, there are key downside risks to this outlook, given the political and financial difficulties of realising the Iran-Pakistan and Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline projects which are to deliver Iranian and Turkmen gas to Pakistan. Moreover, gas pricing disagreements and contractor difficulties could also delay the operation dates of planned LNG import projects.

Import (In)security
Pakistan Gas Production & Consumption, 2012-2022 (bcm)

Hence, whatever domestic production Pakistan can muster will be much welcomed as it is a much more secure source of gas than imports. The country is trying to promote further interest in upstream exploration through a recently concluded onshore licensing round that put 60 blocks on offer. Its shale gas potential - the EIA estimates recoverable resources at 1.4trn - also promises to give new life to its domestic gas industry, though the Asian Development Bank has warned that water scarcity in Pakistan could threaten shale gas exploration and production (E&P) efforts. The challenges of unconventional production and gas imports, combined with growing population needs, will certainly continue to push Pakistan towards greater E&P of its conventional sources.

This article is tagged to:
Sector: Oil & Gas
Geography: Pakistan