Ministry seeks approval for $100m PPL investment in Iraq

Thursday, April 12th, 2012 2:00:18 by


Despite the fact that investment of Pakistan Petroleum Limited (PPL) has got stuck in Yemen due to poor law and order situation, the Ministry of Petroleum and Natural Resources has sought the approval of the Economic Coordination Committee (ECC) for an investment of 0 million by the company in war-torn Iraq in a joint venture with a Chinese firm.

To strengthen its case, state-owned PPL in a document submitted to ECC said so far some initial studies including base modelling study had been completed in Yemen. “Geological field work and seismic acquisition are planned to be initiated as soon as security situation becomes favourable,” PPL said.

Although block 29 of Yemen falls in a high-risk area, exploration work in nearby areas suggested possible encouraging results, it said.

PPL has a 43.75% participating interest and is a non-operating partner with OMV of Austria in block 29. Initially, the block has been given for exploration for four years effective March 17, 2009.

“Currently, all activities in Yemen are on hold as operating and service companies have left the country and are waiting for improvement in the security situation before resuming operations,” PPL added in order to support its proposal for investment in Iraq.

For the Yemen venture, PPL and OMV signed an agreement in April 2008. Later, in violation of laid-down criteria, the petroleum ministry sought approval of ECC on March 27, 2009 for a .5 million investment. Though ECC gave the go-ahead, it asked the ministry to seek prior approval before entering into any agreement in future.

“This is the reason why the ministry is seeking approval of ECC, which is meeting on Thursday, before making investment,” a source said, adding PPL was making a huge investment in two blocks only.

Though the country needs enhancement in exploration activity to overcome energy shortage, PPL finds no lucrative opportunity here and is going for further investment abroad.

In a bid to step up exploration work, the government has planned to announce bidding schedule for 36 blocks following settlement of issues that arose after the passage of 18th Constitution Amendment which gave provinces rights over natural resources.

In addition to this, the government is going to offer a handsome price of to per million British thermal units (mmbtu) to oil and gas explorers in the new petroleum policy for 2012 in an attempt to attract investment. In the previous policy for 2009, the price was .5 per mmbtu.

An attractive price of to .75 per mmbtu has also been approved for exploration of tight gas and low Btu gas.

“These incentives are being given to stimulate foreign investment in exploration activity but PPL’s shift in focus to Iraq is rather surprising,” a government official said, adding PPL needed to accelerate exploration at home as production at its major field in Sui was declining rapidly.

PPL and Zhenhua of China will participate in Iraq’s fourth licensing round for exploration blocks and are expected to make a joint investment of 0 million if they win the bid for two of the three blocks in which they are interested.

According to an agreement between them, the ratio of shares will be 49:51 (PPL and Zhenhua). However, Zhenhua has the right to increase its share up to 70% with PPL holding the remaining stake.

Oil price revision

A committee, set up to decide on the revision in oil prices, has given the go-ahead to fortnightly revision compared to the current practice of monthly review and has sent a summary in this regard to ECC.

The committee was constituted in a bid to address reservations of the finance ministry about fortnightly changes in petroleum product prices.

Published in The Express Tribune, April 12th, 2012.

Islamabad News Sources -2

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