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  • Feb 3rd, 2005
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A foreign petroleum firm, Sabre Petroleum Limited, has sent a notice to Pakistan Petroleum Limited (PPL), demanding a share in the production of Mazarani gas field (Sindh), and also claimed drilling rights in the deeper horizon of mining lease area in the field. The Sabre Petroleum Limited, Business Recorder has reliably learnt, has claimed its entitlement for a share in the production from the said field, despite the fact it had declined to participate in its development plan.

The PPL, however, has outrightly rejected the Sabre's demand of share in production of the field, saying the claim is 'misconceived.'

The sources said that PPL was currently in process of preparing a written reply of the notice, it had recently received from Sabre Petroleum.

According to PPL, the proposed claim of Sabre Petroleum pertained to an area, which forms part of the Mazarani Development and Production (D&P) Lease granted by the government of Pakistan to PPL, replacing the original MML.

According to terms and conditions of the lease, PPL had the exclusive rights to carry out drilling operations in the area.

The move has surprised PPL authorities, as the Sabre Petroleum and Hunt International, which were the Foreign Working Interest Owners (FWIOs) in Mazarani gas field, had backed out from the implementation of Development and Production (D&P) lease granted in 1994 to PPL for Mazarani gas field for a period of 15 years, over an area of 42.92 square kilometers.

Giving background of the field, sources said that Mazarani Mining Lease (MML) was granted to PPL, Hunt and Sabre for a period of 30 years with effect from September 01, 1959. However, they pointed out that after discovery from the field, working interest owners (WIOs) did not develop the field as per terms and conditions of the MML, and it expired on 30th August 1989.

Subsequently in 1994, the MML was extended by the government for a period of 15 years followed by D & P lease. After having extension in the MML, WIOs were required to develop the field, but both Sabre and Hunt refused to participate in the D & P Lease.

PPL, the operator of the field, then decided to develop the field on 'sole risk basis'. As per earlier agreement, the WIOs were GoP, PPL, Sabre Petroleum and Hunt International. After refusal of the WIOs to participate in implementation of D & P plan of the field, which was to be completed by September 2002, at a cost of 22 million dollar, the remaining FWIOs ie, GoP and PPL left with the sole option to implement the approved plan on 'sole risk' basis by giving sole risk notices to FWIOs under the Joint Operating Agreement (JOA).

However, all efforts of PPL to convince the FWIOs to participate in the implementation plan remained fruitless.

Under the sole risk provisions of JOA, the non-participating FWIOs had one year from the date of sole risk notices sent to them to exercise the option to acquire their working interest in Mazarani field development plan.

The notice period expired on December 2001, therefore, PPL was asked by the government to develop the field on sole risk basis.

According to sources, the FWIOs had backed out from the plan on the pretext of low gas price approved by the government of Pakistan, besides certain reservations with regard to economic feasibility of the project.

Because of backing out of the FWOIs, PPL had to spend a plenty of time to send notices to them due to which development of the field delayed, which was originally due to complete in 2002, the sources said.

According to PPL, the FWIOs have not participated in the development of the field and all the cost incurred has been borne by it, therefore, they have no right to claim any share in production.

Moreover, after the grant of D & P Lease, the original MML had ceased to exist, hence, the Sabre claim to carry out drilling operations in 'mining lease' area as pointed out by it is also baseless.

Copyright Business Recorder, 2005

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