AsianOil: Oil, gas production in Pakistan down in 1Q 2024

Oil and gas production in Pakistan recorded a significant decline in the first quarter of the fiscal year, with oil output dropping by 8%, and gas production faring only slightly better – down by 7%.

According to a report by Pakistan's largest securities brokerage, investment banking, and research firm Arif Habib Limited (AHL), the decline was attributed to annual turnarounds (ATAs) and forced curtailments at several major fields.

Key oil fields, including Nashpa, Mela, Dhok Sultan, Adhi, Makori East and Pasakhi, recorded the most significant drops in output. The gas fields affected included Qadirpur, Naimat West, Uch, Sui and Nashpa, according to Pakistan Today.

To date, 2024 has been a turbulent year for the Pakistani energy sector as Islamabad continues to grapple with a number of ongoing challenges that have affected both electricity generation and overall energy security. Some of the key issues include energy shortages and load shedding, the depth of Pakistan’s reliance on imported fossil fuels and the nation’s energy sector being plagued by persistent circular debt.

At present, despite improvements in installed capacity, Pakistan still faces regular power outages due to demand exceeding supply. This problem has been exacerbated by the country's growing population and economic activities. This is further compounded by a large portion of Pakistan's energy production relying on imported oil, coal and LNG, which in turn exposes the country to global price volatility and supply disruptions.

However, even when imports can be brought in at a reasonable cost, the energy sector often stands on the brink of collapse as producers are unable to recover costs from distribution companies, which in turn struggle to collect payments from consumers.

The extent to which this has affected output is still being debated. During the first quarter, local exploration and production (E&P) companies drilled six exploratory wells and nine appraisal/development wells, falling short of the fiscal year’s targets of 27 exploratory wells and 40 appraisal/development wells. Despite these production challenges, nine new discoveries were made, including the Razgir, Chak 202-1 and Baloch-2 wells.

The AHL report also forecasted a decline in earnings for Pakistan Oilfields Ltd (POL), which itself saw a 6% year-on-year decrease in oil production and a 4% fall in gas output. The company also faced a 6% drop in realised oil prices, a 5% appreciation of the rupee, and rising exploration costs.

Oil & Gas Development Co. (OGDC) meanwhile is expected to report lower earnings due to a 3% drop in oil production and a 13% reduction in gas output, compounded by a 10% decrease in oil prices and currency depreciation.

The same Pakistan Today report stated that exploration costs across the sector are projected to rise by 57% y/y, mainly due to the dry well Tando Allahyar NE-1. Meanwhile, Pakistan Petroleum Limited (PPL) is also expected to see a decline in earnings, driven by an 11% and 7% y/y fall in oil and gas production respectively, and increasing exploration expenses. However, PPL is still forecast to benefit from a 41% rise in other income, due to better returns on its short-term investments.

In contrast, Mari Petroleum Co. (MARI) is projected to achieve earnings growth, supported by an 11% increase in gas production. Exploration costs for MARI are also expected to decrease by 20%, reflecting reduced seismic activity during the quarter.

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