Arif Habib, Yunus Brothers, Mari Petroleum to start mining company in Balochistan

What’s in Balochistan’s soil? That is what Mari Petroleum would like to find out.

In a notice sent to the Pakistan Stock Exchange on November 20, Mari Petroleum said it had created a joint venture company called National Resources Limited (NRL), with four other parties: fabrics traders Y.B. Pakistan, Arif Habib Equity, Liberty Mills, and Reliance Commodities. Mari is to have a 20% equity share in NRL. 

NRL will potentially undertake mineral mining projects in Balochistan. “These projects will involve, inter alia, exploration, survey, extraction, excavation, mining and sale of produced minerals,” the notice said. 

As for Mari Petroleum’s involvement, the notice kept it brief: “As part of its long term growth strategy, MPCL is evaluating multiple opportunities in nearcore and non-core sectors to diversify its business including mineral exploration in the prospective areas of the country.”

There is not much else information on the development so far. But the news is not that much of a surprise for analysts. Some of that has to do with general interest in Balochistan, and revised government of Pakistan rules regarding exploration. But some of it also has to do with Mari Petroleum’s own trajectory, and interests. 

Some quick history: Mari Petroleum’s genesis was as the Mari Gas Field, which was originally owned by Pakistan Stanvac Petroleum Project, a joint venture formed in 1954 between the Government of Pakistan (with a 49% share) and Esso Eastern Incorporated (a 51% share). Pakistan Stanvac Petroleum Project first discovered gas in 1957, while production from the field started in 1967. 

The company changed form, when in 1983, Esso Eastern sold its entire share to the Fauji Foundation. The company was converted into a publicly listed company in 1984, where Fauji Foundation had 40% shares, the Government of Pakistan had a 40% share, and the Oil and Gas Development Company owned 20% (today, the Government of Pakistan has an 18.4% share, while the other two shareholding remains the same). 

Initially, the company only operated only as a gas production company. But in 2001, the company was granted a license for exploration of oil and gas in addition to production activities. The name of the company was also  changed from “Mari Gas Company Limited” to “Mari Petroleum Company Limited in 2012, to reflect its diversified business operations and expanded activities. The company became a fully integrated exploration and production (E&P) company in 2013, when it set up its own 3D seismic data acquisition unit and processing centre, instead of outsourcing their work to other E&P companies. The government was keeping note, and extended the Mari lease twice, in 2014 and again in 2019. 

These incremental steps, and then revamping in the last decade, have paid off. Essentially, the company is now in control of the country’s largest gas reservoir (in terms of remaining reserves). It is the third largest gas producer in Pakistan, with cumulative daily production of 100,000 barrels of oil equivalent, and 19% market share. It has six blocks and fields in Sindh; six in Balochistan; two in KPK; and five in Punjab. Its net profit has risen from Rs5,650 million in 2015, to Rs30,313 million in 2020 (in fact, 2020’s profit is nearly double that of 2018’s). 

And it has taken to exploring quite well: it has an exploration success rate of 70%, compared to the national industry average of 33% international average of 25%. And in Pakistan, more than 90% of urea production now relies solely on Mar provided gas, making it a critical player. 

So, now to Balochistan. Mari Petroleum already has a presence in the province. It has been handling the operations of Block 28 in the Marri area of Balochistan, which had remained dormant for decades due to security concerns. Mari has started a 2D seismic data acquisition campaign, to acquire about 1,633 line km data, of which 58% has been completed so far. According to the annual report ending June 2020, total acquisition will be completed in February 2012, and an exploratory well is expected in May 2021.

“These blocks are strategic and have the potential to significantly enhance the company’s reserves-base with expected production commencement in 2024-25,” the company said. 

But the company has also been encouraged by a change in regulation: this year, the government introduced changes to the Petroleum Policy to allow Pakistani public sector E&P companies, or reputable private sector companies with government shareholding, to farm-in in strategic blocks. And the government also created a new zone to promote E&P activities in KPK and Balochistan, through incentive pricing. 

In short, it is now lucrative to investigate places like Balochistan. As Shankar Talreja, deputy head of research at Topline Securities, pointed out, the potential is huge, “Pakistan is endowed with a huge resource of minerals covering 6,000km area. Pakistan has 92 known minerals, out of which 52 have been commercially exploited.”

And it is not just Mari. Much earlier, another listed E&P company Pakistan Petroleum, started a joint venture company with the Balochistan government called Bolan Mining Enterprises (BME). That has proven very successful, according to Tareja: BME sold 186,320 tons of minerals during fiscal year 2020. 

Mari has also been categorical about its expansion plans, hinting not just in annual reports, but also in various quarterly reports that it plans to evaluate exploration of metallic, precious and strategic minerals. That is why it has also acquired three exploration licenses in KPK for placer mining, and rear earth elements. It has also been on the lookout to acquire two exploration licenses in Balochistan for copper and gold exploration.