Pakistan has made significant strides in discovering, exploring, and developing unconventional hydrocarbon resources, following pioneering efforts initiated nearly two decades ago.
Pakistan has made significant strides in discovering, exploring, and developing unconventional hydrocarbon resources, following pioneering efforts initiated nearly two decades ago.
Last month, in August, commercial production of tight gas began at the Nur West Well-1 in Sujawal District, Sindh. The well is currently producing 1.50 MMSCFD (million standard cubic feet per day) of gas, which has been integrated into the Sui Southern Gas Company Ltd (SSGC) network. The state-owned Oil & Gas Development Company Ltd (OGDCL) operates the Nur Development and Production Lease and plans to drill an additional 15 wells in this lease area, with a total of 80 wells planned across various districts in Sindh.
The first discovery of tight gas in Pakistan dates back to 2005 in the Kirthar Block, District Dadu, Sindh. This was followed by the commissioning of a tight gas reservoir at Rizq-1 Well in 2016, with subsequent wells Rizq-2 and Rizq-3 coming online in the following years. Two tight gas discoveries have been made in the Kirthar Block -- Rizq gas field and Rehman gas field. In 2012, Pakistan Petroleum Ltd (PPL) and Polish Oil and Gas Company (POGC, a member of the Orlen Group) signed a gas sale-purchase agreement with the SSGC to supply gas to industrial areas in Sindh. Currently, daily production at the Rizq gas field stands at 16.40 MMSCFD, while the Rehman gas field produces 33.82 MMSCFD and 3.24 barrels per day (BBL/d) of condensate.
Tight gas -- a strategic priority amid an energy crisis: As Pakistan faces a growing energy crisis driven by the depletion of conventional natural gas reserves and increasing demand from its expanding population and industries, the development of unconventional gas resources, such as tight gas and shale gas, has become a strategic priority.
Tight gas is found in impermeable rock formations like sandstone or limestone, with low permeability and porosity. Unlike conventional gas, which flows easily through porous rock, tight gas is trapped in small pockets and requires specialized extraction techniques, such as hydraulic fracturing (fracking) and horizontal drilling, to be commercially viable.
Pakistan is believed to have substantial tight gas reserves, particularly in Sindh and Balochistan, where several large conventional gas fields are already in production. Estimates from government sources suggest that Pakistan's tight gas reserves could range between 35 TCF (trillion cubic feet) and 70 TCF which represents a significant portion of the country’s overall natural gas potential. Developing these resources could require an investment of around $20 billion. The Sui and Kirthar formations in the Lower Indus Basin are considered prime areas for tight gas exploration, and several companies, including international oil and gas firms, have already begun exploration and pilot projects in these regions.
Challenges in tight gas development: Despite the promising potential of tight gas, several challenges remain. Tight gas extraction is expensive, requiring advanced technology and significant investment. The cost of techniques like hydraulic fracturing is higher than conventional gas production, necessitating substantial financial backing and technical expertise. Furthermore, tight gas extraction raises environmental concerns, including potential groundwater contamination, induced seismicity, and excessive water usage. Adhering to stringent environmental standards will be crucial to minimizing the impact on local communities and ecosystems.
Pakistan has limited experience with tight gas extraction compared to countries like the United States or Canada, where unconventional gas development is more advanced. Therefore, Pakistan will need to rely on international partnerships and technology transfer to efficiently develop its tight gas fields. Additionally, extensive infrastructure is required for tight gas production, but Pakistan’s existing gas infrastructure is aging and may not be equipped to handle the complexities of tight gas extraction, necessitating significant upgrades and new investments.
Government policy and investment challenges: Recognizing the potential of tight gas, the government of Pakistan introduced the Tight Gas (Exploration & Production) Policy in 2011 to encourage investment in this sector. However, the policy did not yield the desired results, leading to its revision in February this year as the Tight Gas (Exploration & Production) Policy 2024. The new policy provides incentives for both domestic and foreign investors, aiming to attract the expertise and capital needed to develop tight gas resources. The policy offers a higher wellhead price for tight gas compared to conventional gas, recognizing the higher costs and risks associated with its extraction.
To make tight gas projects more economically attractive, the policy also includes tax breaks, royalty concessions, and customs duty exemptions on the import of specialized equipment. The policy also encourages foreign companies with experience in tight gas extraction to invest in Pakistan, either through joint ventures with local firms or independently. The government offers a range of protections and guarantees to foreign investors to ensure a stable investment environment. Furthermore, streamlined regulatory procedures, including faster approvals for exploration licenses and environmental impact assessments, are emphasized to facilitate the quicker development of tight gas resources.
However, the success of the policy depends on creating an environment conducive to attracting investment, particularly foreign investment, which is currently lacking. In recent years, many international exploration and production (E&P) companies have exited Pakistan due to factors such as security concerns, high operational costs, and a negative business environment. Companies like BHP of Australia, ENI of Italy, and OMV of Austria have all withdrawn from the Pakistan market. The response to recent government invitations for energy project investments has been lukewarm.
In July, Federal Minister of Energy (Petroleum) Dr Musadik Malik acknowledged in a briefing to the National Assembly Standing Committee on Energy that more international companies operating in Pakistan's oil and gas sector were leaving and that others were reluctant to invest due to security concerns and an unfavourable business climate.
The development of tight gas resources offers Pakistan an opportunity to address its energy crisis and reduce reliance on imported fuels. However, realizing this potential will require overcoming financial, technical, and environmental challenges, as well as creating a more attractive investment climate for both domestic and international investors. With the revised Tight Gas Policy 2024, the government is taking steps in the right direction, but sustained effort, strong partnerships, and a commitment to environmental stewardship will be key to unlocking the full potential of tight gas in Pakistan.
The writer is a retired chairman of the State Engineering Corporation.
