China welcomes foreign companies in its oil & gas exploration, will Pakistan participate?

China will allow foreign companies to take part in oil and gas exploration and production in the country. PPL, MPCL, OGDCL and GHPL from Pakistan are currently participating in a bidding process of one block of hydrocarbon in Abu Dhabi with an investment of $ 400 million spread over five years. With the vision to expand functions internationally, will these companies look into China as a potential exploration and production centre?

OIL

China will allow foreign companies to take part in oil and gas exploration and production in the country, in what officials hailed Thursday as a “major reform” opening up the industry. 

The Ministry of Natural Resources said foreign firms registered in China with net assets of not less than 300 million yuan ($43 million) will be eligible to obtain oil and gas mining rights. 

The change takes place from May 1 and also applies to domestic companies. 

“Opening to both domestic and foreign enterprises is a major reform measure,” said Deputy Minister of Natural Resources Ling Yueming at a news conference. 

In the past, international companies could only enter the industry by working with Chinese firms, such as state-owned enterprises. 

Read more: Mari Gas: The oil & gas giant helping build a better nation

The move comes as China looks to open to private firms more sectors of the economy that have been dominated by state-owned companies. 

The country’s oil and gas market has been dominated by state players such as the China National Petroleum Company and China Petrochemical Corp (Sinopec). 

On Thursday, the ministry also said permits for mineral resources mining will be valid for five years. Each extension period is five years as well. 

With the objective to further expand its international operations, the company has identified another international oil and gas exploration and development opportunity in the UAE, Abu Dhabi

When firms apply for a renewal of exploration rights, their area of exploration will be cut by 25 percent, said the ministry.

The long-awaited opening comes alongside Beijing’s reshuffle in the so-called “midstream” pipeline business, but experts say the policy relaxation may not draw immediate interest from international drillers due to the overall poor asset quality of China’s hydrocarbon resources.

Pakistan’s foreign exploration

A consortium of PPL, Mari Petroleum Company Limited (MPCL), Oil and Gas Development Company Limited (OGDCL) and Government Holdings Private Limited (GHPL) are to participate in a bidding process of one block of hydrocarbon in Abu Dhabi with an investment of $ 400 million spread over five years.

PPL has embarked upon an aggressive exploration and development program both within and outside Pakistan to replenish and possibly enhance its oil and gas reserves. During the last five years, the company’s oil and gas exploration and development activities both within Pakistan as well as its sole operated international venture in Iraq has remained in full swing and the company, including its partners, drilled 79 exploratory wells including a well in Iraq which so far has added 0.6 Trillion Cubic Feet (TCFs) of gas to the company’s reserve base.

With the objective to further expand its international operations, the company has identified another international oil and gas exploration and development opportunity in the UAE, Abu Dhabi (2nd exploratory, bidding round, 2019). To pursue this opportunity, in line with the decision of the company’s Board of Directors (BoD), consortium was formed with Mari Petroleum Company Limited (MPCL), Oil and Gas Development Company Limited (OGDCL) and Government Holdings Private Limited (GHPL) with equal participation.

Read more: MPCL ready to explore new Horizons: CEO Explains

Lt. General (retd) Ishfaq Nadeem gave further insights into the project during a detailed discussion with GVS. He said this initiative is of considerable significance because this is the first time that the three most prominent energy companies in Pakistan, the PPL, MPCL, and OGDC, along with GHPL are joining hands to achieve a shared goal.

Each company plans to have a 25% share into the venture and will share the costs and revenues as well. According to General Nadeem, the revenues will start flowing in three years if the bidding is successful. In such a case, there will be a production sharing agreement and the Pakistani venture will receive 40% of what is brought into production.

General Nadeem said foreign investment in the field is essential to expand Pakistan’s expertise not just in oil and gas but also shale resources. The project will not allow transporting gas back into Pakistan but other improvements are expected depending on the nature of bidding.

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