LAHORE: Production enhancement along with latest significant exploration activities are set to boost growth momentum for Mari Petroleum (Mari) for FY18, officials revealed.
Talking to Pakistan Today, they pointed out the structural increase in gas price on key asset and benefits of increased production seen in last quarter of FY17. They anticipate earnings to grow by a significant 116 per cent in 2018 and by another 18 per cent before normalizing in FY20. Mari has set aside $259mn for exploration budget with drilling target of 9-10 wells, which was 5-6 wells previously. Future drilling is expected to add to company’s reserves, given Mari’s recent track record on discoveries and reserve replacement.
The favourable change in incentive mechanism for Mari adds to the robustness of earnings growth associated with gas price upside on the key field. Previous gas price incentive on Mari field was applicable on gas production above 577mmcfd which is around 10 per cent higher than the baseline production of 525mmcfd as agreed with the government. Gas price incentive is significant and entails 4 times higher gas prices relative to prices on the base production.
The gas price incentive is clearly dependent not only on Mari’s ability to produce above the baseline but also on the reliability of plant operations of Mari’s customers (fertilizer and IPPs). Shutting down plants by such customers due to maintenance or other issues obstructs Mari’s ability to benefit from gas price incentives. The latest favourable change in pricing mechanism approved by the Economic Coordination Committee allows such maintenance shut-downs to be accounted for by lowering the benchmark production for price incentives to 525mmcfd. ‘This is significant as it will lead to more volumes from the field to be eligible for additional gas price incentives’ spokesperson for Mari added.
Last year growth steered an impressive 51 per cent jump in earnings and Mari has established an impressive track-record on earnings growth delivery. Scheduled gas price revision on fields contributed over 90 percent to revenues, which was increased to USD1.04/mmbtu from USD0.84/mmbtu. The production growth of 5 to 17 per cent respectively in Oil & Gas and reduction in exploration expenses, primarily due to lower prospecting expenditure, contributed to revenue growth.
The exploration write-off of Rs2.26billion in Sujawal block made up 56 per cent of total exploration expense in last year. Mari struck four discoveries out of which two were in Mari field. The reserve replacement ratio improved to 45 per cent than the average of 27 per cent previously. Mari made a significant revision in recoverable reserves on Mari field by 65 per cent based on latest reservoir study. Discoveries made in in June 2016 imply reserve life of 21 years.
The officials expect further reserve addition in the field as the company has maintained its exploration campaign whereby two successful wells were drilled in FY17 and one more well is currently being drilled.
THE ABOVE MENTIONED ARTICLE RIGHTLY HIGHLIGHT THE OPTIMISTIC VIEW OF MARI PETROLEUM COMPANY AS FAR ITS FUTURE GROWTH POTENTIAL IS CONCERNED. ITS DISCOVERIES STARTED IN LATE SIXTIES WHEN A SMALL, 300 TONS A DAY, SAY 500 TONS A DAY UREA PLANT WAS SET UP BY ESSO, A US BASED COMPANY WHO HAD EXPLORED AND DRILLED NATURAL GAS DISCOVERY THAT LATER ON SET UP MANY UREA PLANTS IN THE NAME OF ENGRO FERTILIZER AND THEN FFC AT VARIOUS SITES IN PUNJAB /SINDH. IT IS THEREFORE REITERATED THAT PAKISTAN NEED TO AUGMENTS ITS EFFORTS IN THE EXPLORATION OF HYDROCARBON RESOURCES INDIGENOUS INSTEAD OF DEPENDING ON IMPORTS.