Nov. 15 (Bloomberg) --
Oil & Gas Development Co., Pakistan’s biggest energy explorer, expects to increase output by as much as 20 percent in the year through June after adding resources in the country’s northwest.
“New oil and gas discoveries will certainly increase our profitability,” Managing Director Basharat Mirza said yesterday in an interview in Islamabad. “I expect a 15 percent to 20 percent addition to our oil and gas production this year.”
OGDC, the largest company on the Karachi Stock Exchange, reported a gas find this week at the Nashpa-2 well in Khyber Pakhtunkhwa province. The discovery may help boost energy supplies in a country where factories are facing three days a week without gas this winter.
The company plans to spend $270 million on drilling some 27 new wells this financial year, Mirza said. It expects to produce 10 million to 12 million cubic feet of gas a day at Nashpa-2 and 5,000 barrels of oil, he said at the company’s headquarters.
An increase in domestic energy supplies may help boost South Asia’s second-biggest economy, which has been hurt by terrorism and dwindling foreign investment. Pakistan is preparing for a gas shortfall of 1.05 billion cubic feet a day by February, Petroleum Minister Asim Hussain said Nov. 13. That may exacerbate the daily power cuts that have forced textile and engineering plants to close and caused riots across the country.
Shares Slip
OGDC dropped 0.6 percent to 155.11 rupees at the close in Karachi yesterday, extending its decline this year to 9.2 percent. The benchmark KSE100 Index is little changed over the period.
As it expands in Khyber Pakhtunkhwa, the company has limited its exploration in the western province of Baluchistan, where attacks on pipelines and other energy infrastructure have disrupted gas supplies, Mirza said. OGDC has taken all “low- hanging fruit” and is left with “difficult areas that include Baluchistan and offshore blocks that require huge investment.”
The company has the protection of the Pakistan army at its Zin block in Baluchistan, where it plans to produce its first gas flows in the “next four weeks” to gather data on the reservoir, Mirza said. The block holds an estimated 10 trillion cubic feet of gas reserves, former Chief Executive Officer Shah Mehboob Alam said last year.
OGDC also expects a further 100 million cubic feet a day from a well in Tando Allah Yar in Sind province by December after completing a pipeline, according to Mirza. Further infrastructure at the field would allow an increase in output capacity to 400 million cubic feet a day, he said.
Payment Defaults
The company is pressing ahead with its investment plan even as domestic oil refineries and gas distributors fail to pay for supplies.
The company is owed about 93 billion rupees ($1.07 billion) in back payments, Mirza said, adding that “so far this default by our customers has not impacted our ability to finance our exploration. We might issue bonds or borrow from banks if this situation persists, let’s say for another year.”
Power utilities, whose earnings are sapped by unpaid customer bills and price controls, have delayed payments to fuel suppliers, which in turn owe money to the oil refiners. The total dues, known as circular debt in Pakistan, amount to more than 300 billion rupees, according to government estimates.
OGDC reported net income of 63.5 billion rupees in the year ended June 30, up 7 percent from the previous year, according to data compiled by Bloomberg.