The previous year proved to be a year of historic transition resulting from the dismantling of Mari Wellhead Gas Price Agreement and its replacement by a market-based pricing formula. The new pricing regime provides a huge stepping stone for expansion of the Company’s business. It has started yielding immediate benefits to all the stakeholders including the Company, Government of Pakistan and the shareholders. These benefits are expected to grow more and more substantial in the long-term. MPCL developed elaborate plans to capitalize on this transition by taking a path of balanced growth encompassing enhanced production, expanded exploration portfolio, lean management processes and adopting an enabling organizational environment. The balanced approach targeted stability and sustainability of steeper growth with minimum exposure to market risks associated with the petroleum sector. MPCL’s strategic objectives have led to defining its operational priorities. The Company’s strategic focus has been redefined taking into account short-term, medium-term and long-term time horizons with well-defined targets set for each horizon.
Opportunities and Strategies
In the low oil price regime, MPCL has formulated plans to exploit price incentives on enhanced production offered by the Government to the E&P sector in Pakistan. During last year MPCL enhanced its production capacity up to about 110 MMSCFD from Mari and Sujawal Fields through significant investments in drilling of additional wells, workovers in the existing wells, augmenting the existing production/processing facilities and laying of additional pipelines. These initiatives resulted in increase of 65 MMSCFD gas from Mari and Sujawal fields. Additional 45 MMSCFD gas is available awaiting installation of gas compression facility by the buyer, which is expected to be completed by end of this year. Enhanced production helped MPCL to generate sufficient revenues to keep its aggressive exploration program on track even during these difficult times.
For the year 2016-17, the Board of Directors have approved MPCL’s most ambitious exploration budget to-date amounting to US$ 108 million. In addition to the minimum commitments in its operated and non-operated Blocks, the budget includes back-to-back prospect generating activities in prime exploration acreages all across the Country. Dedicated professionals from MPCL continually evaluate opportunities to acquire new exploration areas complementary to its asset- base to achieve its target of positive reserves replacement rate. MPCL had undertaken a massive program of over 1000 sq km 3-D seismic data acquisition in the Mari Lease area that has now opened new prospects for additional discoveries. MPCL’s business strategy includes aggressive pursuit of additional exploration acreage within the Country and abroad through bidding process as well as farm-in opportunities.
Operational & Financial Resilience
At the heart of our Business Strategy is the prudent financial discipline and focus on reducing operating costs throughout the business cycle. The new drive is expected to yield healthy growth in the Company’s core operations and strong returns to its shareholders. The results achieved during 2015-16 prove the effectiveness of the MPCL’s business strategy.
As far as local security challenges are concerned, MPCL has managed to operate in the difficult areas through effective liaison with local authorities, tribal elders and the security agencies. MPCL remains one of the very few companies in Pakistan that is operating successfully in the troubled areas of the Country.
In-house capabilities of drilling, seismic data acquisition and processing services have provided synergy as well as flexibility to MPCL operations giving it an edge over those E&P companies operating in the Country that depend on outsourcing these services. Other E&P companies now look to MPCL for roviding them seismic data acquisition service in the troubled areas of the
Key Sources of Uncertainty
- Volatile crude oil prices
- Inherent uncertainties in E&P business (dry-holes; commercially unviable discoveries)
- Security situation in areas of operations (particularly in KPK and Balochistan)
- Natural disasters and extreme weather conditions