OGDCL negotiating oil JV in China

Pakistan's Oil and Gas Development Co. Ltd. (OGDCL) is in talks for its first overseas joint ventures in China and is exploring forays into the Middle East, North Africa and Eastern Europe, its chief said on Thursday.

"We are still negotiating. There is an opportunity in China and our people are there to look into it," Chairman and Chief Executive Officer of the country's top listed state-owned firm, Arshad Nasar told Reuters in an interview.

OGDCL is also seeking joint venture possibilities in Oman, Yemen, Egypt, Libya and Hungary, he said.

"Much ground has been covered in this respect," Nasar said, without giving details. Another OGDCL official, who declined to be named, said the company was in discussions with Chinese companies such as China National Petroleum Corporation International (CNPCI) and Petro China Co. Ltd.

"We are exchanging data and negotiating with these companies and looking for commercially viable projects," said the official, who would not say when a deal was likely.

OGDC will be the first Pakistani oil firm to venture abroad, coming late into an arena led by Chinese, Indian, Japanese and South Korean companies competing to secure scarce energy resources, sparked by trebled oil prices and geopolitical uncertainty in the Middle East.

Chinese and Indian state firms have also agreed a series of cooperation pacts, but apart from a few small acquisitions, there is little evidence of multi-billion-dollar deals.

OGCDL had bid for a block in Qatar but did not succeed, the official said.

With a market capitalisation of about $9 billion on the Karachi Stock Exchange, OGDCL holds the largest share of the country's recoverable hydrocarbon reserves: 32 per cent of gas and 37 per cent of oil.

Pakistan produces about 69,000 barrels of oil and nearly four billion cubic feet of gas a day and spends more than $6.5 billion annually on petroleum imports to meet its growing energy demand.

The country's domestic gas production is forecast to decline after 2010 and it would have to import costly fuel beyond that.

Nasar said his company has a strong financial base to expand its exploration activities both at home and overseas. OGDCL reported a 4.3 per cent increase in net profit for the nine months to March 31 to 34.63 billion rupees ($571million), up from 33.2 billion rupees in the year-ago period.

In December, the company went for global listing and raised about $813 million through a global depositary receipt (GDR) issue on the London Stock Exchange.

OGDCL operates 37 wells and 17 exploration sites in Pakistan and has interests in 28 non-operated leases.

Nasar said after "record-breaking" achievements in 2006-07, OGDCL would adopt a more aggressive approach in financial year 2007-08 (July-June).

"For this year, OGDCL has set a target of 50 wells and is aiming to increase its gas output to over 1,000 million metric cubic feet."

Last year, OGDCL drilled 41 wells in Pakistan, 11 more than in the 2005-06 year, and made 10 new discoveries. Its average daily production of oil rose to 36,300 barrels versus 31,500 barrels in 2005-06, and gas output rose to around 900 million metric cubic feet, Nasar said.

OGDCL also plans to go offshore and is working on a project with Shell Pakistan, aiming to have a first spud in August.

Around 25 companies, 15 of them foreign, are engaged in oil and gas exploration in Pakistan. Officials hope to attract increased investment following a new Petroleum Policy announced last week.

A major initiative in the new policy is removal of a five-year cap on the wellhead price of gas, considered a major hurdle in luring foreign investment in the oil and gas sector.

Pakistan attracted $479.6 million in oil and gas exploration investments in the first 11 months of fiscal 2006-07.