Table of Contents Chapter 1: 1.1 1.2 1.3 1.4 1.5 Chapter 2: 2.1 2.2 2.

3 General Introduction Mission Statement Functions of the Ministry Organization of the Ministry Website of the Ministry Activities, Achievements and Progress during Financial Year 2006-07 Development Wing - Ministry Mineral Wing - Ministry Policy Wing - Ministry 2.3.1 Directorate General of Petroleum Concession 2.3.2 Directorate General of Oil 2.3.3 Directorate General of Gas Attached Department Geological Survey of Pakistan Autonomous Body Hydrocarbon Development Institute of Pakistan Companies Oil and Gas Development Company Limited. Sui Northern Gas Pipeline Limited. Sui Southern Gas Company Limited. Pakistan State Oil Company Limited. Pakistan Petroleum Limited. Pak Arab Refinery Company Limited. Saindak Metal Limited. Lakhra Coal Development Company. Government Holding (Pvt) Limited. Pakistan Mineral Development Corporation (Pvt) Limited. Inter State Gas Systems (Pvt) Limited. Annexure Organizational Chart of the Ministry Public Sector Organizations under the Ministry Sanctioned Strength of the Ministry Puclic Sector Development Program 2006-07

Pages 3 3 3 4 6

7 8 13 13 17 20 29 37

Chapter 3: Chapter 4:

Chapter 5: 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11

47 55 63 71 83 99 113 121 127 137 145

I II III IV

151 152 153 155

PREFACE
This report has been prepared in pursuance of Sub Rule (2) of Rule 25 of the Rules of Business 1973 which provides that at the beginning of each financial year, each Division shall, for the information of the Cabinet and information of general public prepare as a permanent record, a Book which shall contain: a. the detail of its activities, achievements and progress during the preceding financial year giving only the unclassified information which can be used for reference purposes; the programme of activities and targets set out for the Ministry for the preceding financial year and the extent to which they have been realized; and the relevant statistics properly tabulated.

b.

c.

The report gives an overview of the activities, achievements and progress of the Ministry of Petroleum and Natural Resources, its attached department and

organizations/companies under its administrative control, during FY 2006-07. However the reflection of activvties of the achievements will provide a birds eye view on the broader parameter of policies and functions. For details on particular topics, the website of the Ministry may kindly be referred to which is updated on regular basis to

incorporate the current issues and policies relating to the oil, gas and mineral sector.

I hope that this book will serve as a useful reference document.

Islamabad: 30th September 2007

Farrakh Qayyum Secretary

CHAPTER 1 GENERAL
1.1 INTRODUCTION

Ministry of Petroleum and Natural Resources was created in April 1977. Prior to that, the subjects of Petroleum and Natural Resources were part of the Ministry of Fuel, Power and Natural Resources. 1.2 MISSION STATEMENT

To ensure availability and security of sustainable supply of oil and gas for economic development and strategic requirements of the country and to coordinate development of natural resources of energy and minerals, in order to cater for energy needs of the people of Pakistan.
1.2.1 STRATEGY TO ACHIEVE MISSION

i.

To adopt an integrated approach for promoting exploration and fast track development of oil, gas and mineral resources. To deregulate, liberalize and privatize oil, gas and mineral sectors through structural reforms. To attract private investment and to establish credible institutions for facilitating the development of petroleum and mineral sectors. To develop technical and professional human resource. To optimize existing energy delivery infrastructure (oil/gas pipelines). To substitute imported fuel oil with indigenous gas by optimally balancing the gas availability and supplies from local and imported sources.

ii.

iii.

iv. v.

vi.

1.3

FUNCTIONS OF THE MINISTRY

The Ministry is responsible for dealing with all matters relating to petroleum, gas and mineral. Its detailed functions as per the Rules of Business are as under: 1 i. ii. All matters relating to oil, gas and minerals at the national and international levels, including: policy, legislation, planning regarding exploration, development and production; Import, export, refining, distribution, marketing, transportation and pricing of all kinds of petroleum and petroleum products. (Pricing of all kinds of petroleum and petroleum products are determined by Oil and Gas Regulatory Authority w.e.f 01.04.2006).

iii. iv. 2. 3

i.

ii. iii. 4. i. ii.

5. i. ii. iii. i. ii. 1.4

6.

matters bearing on international aspects; Federal agencies and institutions for promotion of special studies and development programms. Geological Surveys. Administration of Regulation of Mines and oil fields and Mineral Development (Federal control) Act, 1948, and rules made there under, in so far as the same relate to exploration and production of petroleum, transmission, distribution of natural gas and liquefied petroleum gas, refining and marketing of oil; Petroleum concessions agreements for land, off-shore and deep sea areas; Import of Machinery, equipment, etc; for exploration and development of oil and natural gas. Administration of Marketing of Petroleum Products (Federal Control) Act 1974 and the rules made there-under; Matters relating to Federal investments and undertakings wholly or partly owned by the Government in the field of oil, gas and minerals, excepting those assigned to the Industries and Production Division. Administration of The Petroleum Products (Development Surcharges) Ordinance, 1961, and the rules made there-under; The Natural Gas (Developmetn Surcharges) Ordinance, 1967, and the rules made thereunder; and The ESSO Undertakings (Vesting) Ordinance, 1976. Coordination of energy policy, including measures for conservation of energy and energy statistics; Secretariat of National Energy Policy Committee.

ORGANIZATION OF THE MINISTRY

To perform its functions, the Ministry of Petroleum & Natural Resources has been organized into four wings i.e. Administration, Development, Mineral and Policy. The Ministry has one Attached Department, one Autonomous Body and 11 companies. The Secretary is assisted by an Additional Secretary, one Senior Joint Secretary, one Joint Secretary and five Director Generals. Organizational chart of the Ministry and its public sector organizations are placed at Annexure-I and II while the staff strength of the Ministry is at Annex-III.
1.4.1 ADMINISTRATION WING

Administration Wing consists of a Joint Secretary, two Deputy Secretaries and six Section Officers along with the support staff and one Network Administrator. The Wing is responsible for the following functions: i. Personnel and General Administration of the Ministry (Secretariat). All matters relating to Administration of the Policy Wing, Oil and Gas companies, Geological Survey of Pakistan (GSP), Pakistan Mineral Development Corporation and Hydrocarbon Development Institute of Pakistan.

ii. iii. iv. v. vi. vii. viii.

Corporate affairs of oil and gas companies. All matters relating to technical assistance, tours and training. Coordination work of the Ministry and its attached departments, organizations with other ministries. Processing of non-development budget of the Ministry and its attached department All matters relating to web site and networking of the Ministry. Coordination work related to P&NR committee on defence planning. All matters relating to the Parliament Bussiness.
1.4.2 DEVELOPMENT WING

This wing comprises of one Senior Joint Secretary, two Deputy Secretaries and four Section Officers along with the complementary staff. The Wing is mainly responsible for all coordination on policy matters, processing and seeking approval on Oil and Gas infrastructure, projects, monitoring of Development schemes. It also processes foreign aid/loan and coordination with World Bank, ADB, CIDA, IDB, JICA; handles joint Ministerial Commisions, ECO & bilateral relations, Prepare development Budget (PSDP), long term plans, Economic Survey & Budget speeches; Matters relating to ECNEC, ECC, CCOI, CCOP, Cabinet and implementation of decisions and Foreign Investment, privatization, import of natural gas projects are handled by the Wing.
1.4.3 MINERAL WING

Mineral Wing is a technical arm of the Ministry of Petroleum and Natural Resources and looks after following functions: i. Frame and update National Mineral Policy and overview its implementation by concerned Federal and Provincial agencies. ii. Periodical review of available geological data bases and publication of its annotated bibliography. iii. Provide support to provinces to improve their regulatory laws and institutions for making them international competitive. iv. Facilitate interaction of the foreign private mining investors with various Federal and provincial regulatory agencies. v. Provide inputs for formulating plans for mineral sector (5 year plan) in consultation with the Provincial government. vi. Scrutinize and processing of mineral development schemes of Federal agencies for approval. vii. Initiate and process mineral sector proposals for inclusion in the programs of international agencies. viii. Dealing with all operational issues (except personal administration and general training circulated by EAD) raised by any Federal agency in mineral sector requiring approvals of MPNR or other ministeries. ix. Monitor Progress and implementation of public sector projects funded by PSDP in Mineral sector.

1.4.4

POLICY WING

The Policy Wing is comprised of (i) Directorate General of Petroleum Concessions (ii) Directorate General of Oil (iii) Directorate General of Gas and (iv) Directorate General of Admn /Special Projects. Each Directorate is headed by a Director General. The Policy Wing is responsible for developing policies for oil and gas sectors, forecasting future requirement and assessing the impact of existing policies, rules and regulations. 1.4.5
ATTACHED DEPARTMENT, AUTONOMOUS ORGANIZATION, CORPORATIONS AND COMPANIES OF THE MINISTRY

The Ministry has one attached department i.e. Geological Survey of Pakistan (GSP) and following organizations / companies under its administrative control: i ii iii iv v vi vii viii ix x xi xii 1.5 Hydrocarbon Development Institute of Pakistan (HDIP) Oil and Gas Development Company Limited (OGDCL) Sui Northern Gas Pipeline Limited (SNGPL) Sui Southern Gas Company Limited (SSGCL) Pakistan State Oil Company Limited (PSOCL) Pakistan Petroleum Limited (PPL) Pak Arab Refinery Company Limited (PARCO) Saindak Metal Limited (SML) Lakhra Coal Development Company (LCDC) Government Holding (Pvt) Limited (GHPL) Pakistan Mineral Development Corporation (Pvt) Limited (PMDC) Inter State Gas Systems (Pvt) Limited (ISGSL)

WEBSITE OF THE MINISTRY

The Ministry is regularly updating its website www.mpnr.gov.pk on the basis of feed back received from different stakeholders.

CHAPTER 2 ACTIVITIES, ACHIEVEMENTS AND PROGRESS DURING THE YEAR 2006-07 2.1 DEVELOPMENT WING - MINISTRY 2.1.1
LIBERALIZATION OF OIL AND GAS SECTOR

The public sector oil and gas entities have been made independent. The Board of Directors of these companies have been given complete autonomy to operate on commercial lines without interference. As a result, the performance of the companies has improved significantly. In pursuance to issuance of LNG Policy April 2006, SSGC initiated the process for appointment of a potential project developer. In this regard, the timelines for receiving contractual and technical proposals upto June 2007 were successfully achieved.

ii

2.1.2

PRIVATIZATION OF PUBLIC SECTOR ENTITIES

i.

GOP has decided in principle to privatize PSOCL, OGDCL, PPL, SNGPL and SSGCL. Government has also divested its minority shareholding in seven oil fields.

2.1.3

REGULATORY REFORMS

Oil and Gas Regulatory Authority (OGRA) was established under OGRA Ordinance in March 2002 with expressed objectives of fostering, competition, increasing private investment and ownership in midstream and downstream petroleum sector and protecting public interest through effective, efficient and equitable regulation. OGRA is playing an important role in the implementation of governments comprehensive reforms programme of Oil & Gas Sector. Government Holdings Company Limited has been established to manage the Governments investments in the upstream sector.

ii

2.1.4

REGIONAL GAS PIPELINES

i.

Ministry of Petroleum and Natural Resources after assessing future demand/supply, concluded that indigenious gas reserves of the country will not be sufficient to meet the increasing demand beyond 2010. The Ministry therefore is exploring the possibility to import gas from the neighbouring countries that is Iran, Qatar, and Turkministran and is working on all of the possible options.

2.1.5

GAS IMPORT PROJECTS

The Ministry of Petroleum and Natural Resources has been pursuing the import of gas through pipeline and LNG projects from the neighbouring region that is Iran, Turkmenistan and Qatar. These projects are being actively discussed at different level Working Groups/Committees constituted from time to time. In the last one year two meetings of Pakistan-Iran Working Group and two meetings of Pakistan-India Joint Working Group have been held on Iran-Pakistan-India (IPI) gas pipeline project. Similarly, 8th Steering Committee meeting of TurkmenistanAfghanistan-Pakistan (TAP) Gas Pipeline Project was held in April, 2005 in Islamabad and 9th meeting is being scheduled in the 3rd/ 4th Quarter of October, 2005 in Ashgabat. 1st meeting of the Technical Working Committee of MPNR and Qatar Petroleum on GUSA gas pipeline project has been held in June, 2005 in Doha, Qatar and 2nd meeting of the committee is being scheduled during the last week of September, 2005 in Islamabad. Ministry has successfully completed Comparative Evaluation of the Gas Import Projects by appointing a consultant through Asian Development Bank (ADB) to prioritize the available gas import options. In order to ensure safe and secure world class pipeline and LNG import projects, MPNR has already appointed a Financial Advisor for LNG import and for transborder pipeline project, a separate Financial Advisory Consortium is likely to be appointed, shortly.

ii

iii

iv

vi

2.1.6

Public Sector Development Programmes/Projects Ministry of Petroleum and Natural Resoruces has been allocated a sum of Rs. 929.92 million in PSDP for the Financial year 200607. Detail of on-going/new projects are at Annexure -V

2.2

MINERAL WING - MINISTRY

In order to encourage investment in the mineral sector, the government has assigned priority to the sector and has also given number of fiscal and regulatory incentives in the mining sector, so that the sector can contribute its due share in the GDP which is at present less than 1% whereas, international studies have reflected the contribution of about 3-4% in the national economy.

With the implementation of National Mineral Policy (NMP), for the first time the Mineral Sector has taken a forward stride. International mining companies have

responded favourably to the Policy and three major mineral projects are in production/under implementation which would enhance the share of sector in national economy. However, in geological data generation and mineral exploration, FDI is minimal. Data generated by Geological Survey of Pakistan (GSP) is not being utilized to the extent of promotion, aiming and attracting international investment. The Ministry of Petroleum & Natural Resource in coordination with the provinces and Special Areas and with the support of other stakeholders is striving to develop the Mineral Sector on fast track basis. International development partners are being persuaded to assist the provinces in capacity building, acquaintances, deployment of latest mineral exploration technologies and to further improve the Regulatory regime facilitating inflow of foreign direct investment. The significant projects/initiatives are described as under: 2.2.1 ACHIEVEMENTS OF THE MINISTRY: Special Initiatives i) Feasibility Study on Gasification of Thar Coal, District Tharparkar, Sindh To harness large Thar coal deposits as alternate source of energy, the Ministry endeavored to explore utilization options. One of such option is determining techno-economic viability of converting coal into pipeline quality gas and extraction of high unit value chemicals. For conducting the Feasibility Study under a development project an international consultant M/s Lurgi of South Africa has been selected. The study is comprised of Phase I and Phase II. The consultant has successfully completed Phase 1A (Laboratory Study) of the Study. The consultant has been asked to initiate work on the Phase 1B (Conceptual Study). The Feasibility Study will be completed in 2008-09. ii) Feasibility Study for development and exploration of Chechali iron ore and commissioning of Steel Mill at Kalabagh The project is aiming to ascertain techno-economic viability of utilizing iron ore for setting up of Steel Mill at Kalabagh. The study has been awarded to a Chinese company M/s MCC. The consultant has completed Laboratory Study of the project and has demarcated zones amenable to upgradation. Work on the project is in progress to ascertain economic viability of Chichali iron ore deposit. The study will be completed in 2008-09. iii) Strategy on Development and Exploitation of Gemstones To tap full gemstone potential as a source of foreign exchange, and as a part of implementation of strategy on Mining, Cutting, Polishing and Marketing of Gemstones approved by the Cabinet, the Ministry has sponsored project valuing Rs.100 million for imparting training to locals of gem bearing areas of NWFP, AJK and Northern Areas in flawless mining. The projects are being implemented by the Govt. of NWFP, AJK and Northern Areas. Under the project about 500 locals of

these areas have been trained in mechanized mining, grading, processing of gemstones. Work on the projects in NWFP and Northern Areas is in progress. iv) Basic Training in Gemstone Cutting and Polishing Centres in Gilgit and Muzaffarabad As a follow up of the strategy for developing cutting and polishing skill in gem bearing area it was decided to establish two training centers at Muzaffarabad and Gilgit. Under the project codal formalities have been initiated to select a consultancy firm having developed expertise in gemstone cutting and polishing. Ministry has finalized training programmes with Sri Lankan government. In this regard a high level delegation visited Sri Lanka to finalize a training programme of the locals of AJ&K and Northern Areas. 2.2.2 Restructuring of the Federal Mineral Sector Organizations a) b) c) d) e) Restructuring of Geological Survey of Pakistan Restructuring of Pakistan Mineral Development Corporation (PMDC) Privatization of PMDC Projects Evaluation of Nokundi iron ore through Bolan Mining Enterprises The Ministry has secured international assistance (World Bank) for development of Mineral Sector in the following areas: Capacity building Institutional Strengthening Generation of basic geological data Development of Small Scale Mining (SSM) in gemstones/coal Development of exploration targets into investment opportunities.

2.2.3

INTERNATIONAL INVESTMENT MINERAL SECTOR

FACILITATED

IN

As per policy of the present government and approved National Mineral Policy, the role of public sector organization in the mineral sector has been curtailed. Ministry of Petroleum & Natural Resources is facilitating private investment for the development of mineral sector. Following are the major projects initiated through facilitation by this Ministry:

i.

Development and exploitation of Dudder Lead Zinc Project (Balochistan)

10

With the concerted efforts of the Ministry of Petroleum and NR an agreement has been signed between PMDC and MCC China for the development of Dudder Lead Zinc project. MCC would invest about US$ 72 million for mine development and commercial exploitation. According to agreement the project will produce 100,354 tones Zinc and 32,584 tones Lead concentrate during 14 years mine life. Work on the project has started. Mineral Wing is fully coordinating/facilitating Chinese Company in construction of project. Construction of 100 K.M road to link the project with RCD Highway is near completion. Construction of civil works like pre-fabricated site office and camp for Chinese employees and staff, warehouses, workshops and field Laboratories, water purification plant has been completed by the company. Exploration and development work in the project is in progress. The company has completed environmental studies and basic design of the plant also. Commercial production by the company is expected to commence in 2009-2010. ii. Facilitation in Development of Reko Dik Copper-Gold Project Balochistan To develop Reko Dik Copper deposit in Balochistan, an Australian company, M/s Tethyan Copper Company has finalized feasibility study of the starter project aiming to produce 40,000 tones of pure copper with investment of $ 200 million. As a result of extensive drilling in the area about 167 million tones copper ore reserves have been proved. Field studies to assess social and environmental impact of the project has also been completed. Due to large size of the deposit, worlds largest copper & gold producing companies; M/s Antofagasta & Barrick Gold have taken over 100% Australian shares of the TCC. The new management has decided to launch a mega project with an investment of over US$ one billion by 2010. The mega project would produce 2,50,000 tonnes of copper annually, thus bringing Pakistan for the first time on the major copper producing country on world map. By commencement of the mining activities in the area, job opportunities are expected for about 1200 locals. Moreover commencement of the Project would give an impetus to foreign investment in mineral sector of Pakistan. As desired by M/s Antafagasta-Barrick Gold, Ministry of Petroleum & NR is working on the preparation of international mineral agreement to be signed between the company, Govt. of Balochistan and this Ministry. To solve the issues relating to the exploration/mining of Reko Dik copper-gold deposit on fast track a high level Steering Committee has been constituted by GOP having representation from all the stakeholders in GOP and Govt. of Balochistan.

iii.

Development of Thar coal as alternate source of energy Thar coalfield in Sindh province has huge coal resources of 175 billion tons. Due to high cost of imported energy Govt. of Pakistan has decided to enhance the share of coal in the over all energy mix from 05 to 19%

11

up to 2030. In view of anticipated shortfall of electricity and other energy resources during the next 10 years the maximum utilization of coal would be required in power generation and gasification. Approved Energy Security Action Plan has set a target of generating about 20,000 MW power from coal by 2030 and 50% by 2050. As a result of govt. endeavors, about 80% of cement industry has switched over to indigenous coal from furnace oil that has saved considerable foreign exchange being spent on the import of furnace oil. The conversion of cement industry to coal has generated a demand for 2.5-3.00 million tons coal per annum.. M/s Associated Group of Lahore has been assigned a block in Thar coalfield for conducting feasibility study for integrated coal mining and commissioning 2x 250 MW coal fired power-generating plants. GOP has also decided to establish a coal mining company for harnessing Thar coal resource. iv. Establishment of Thar Coal Mining Company (TCMC) For power generation of 1000 MW at least 6 million tons coal is required to be mined per year. The present production of domestic coal is about 5.5 million tons per year. Therefore, GOP has established Thar Coal Mining Company (TCMC) under the Companies Act 1984 on 6th June, 2007 with the objective to develop a large coal mine in Thar coal field having production capacity of 6 million tons coal per year on Block No.II. The financial obligation of the company envisages 80% share of Federal Govt. and 20% of Govt. of Sindh. In the 80% GOP share, National Logistics is also holding 20%. Out of 60% share of Ministry of Petroleum & NR 40% will be offloaded to international coal company alongwith management of the company to plan for large mechanized coal mine. Interim institutional arrangements of the company has been made by this Ministry. v. Commissioning of Integrated Coal Mining and establishment of coal fired power plants in Sonda Jerrick and Lakhra coal field Sindh To increase share of coal in energy mix Government of Sindh has signed an agreement with Chinese company M/s China National Chemical Engineering Group Corporation (CNCEC) to conduct feasibility study on a coal block in Sonda Jherrick coalfields in Sindh province for integrated mining project of 1 million ton and commission 250 MW coal based power plant. The company has completed feasibility study and is planning for commissioning of power plant. For establishing integrated coal mining and commissioning of 200 MW power plant, an other coal block has been assigned at Sonda Jherrick coalfield to M/s Dadabhoy Hydrocarbon Ltd. by Govt. of Sindh. As a part of promotional activities to increase share of coal, Govt. of Sindh has leased out a coal block to M/s Fatteh Group of Hyderabad to

12

commission a coal-based power plant of 250 MW in Lakhra coal field, Sindh.. 2.3 POLICY WING MINISTRY
2.3.1 DIRECTORATE GENERAL OF PETROLEUM CONCESSIONS

i. a

Concession Activities Exploration licences A total of one hundred and forty-eight applications for grant of Exploration Licences were processed during 2006-07. Two bidding rounds were held in which eighteen blocks were offered. As a result seventeen Exploration Licences covering an area of 45,851.08 sq. kms. were granted. There were one hundred and thirteen active Exploration Licences covering an area of 242,713.68 sq. kms on 30-06-2007. During the year, around 6,264.71 sq. kms. area of two Exploration Licences remained under Force Majeure, while an area of 6,257.23 sq. kms. of four Exploration Licences was surrendered/relinquished by different operators. Twenty five E&P companies operate in upstream Petroleum sector of Pakistan. In Sindh Province 64,111.83 sq. kms, Punjab 47,233.93 sq. kms, Balochistan 63,137.76 Sq. kms and NWFP 14,654.16 Sq. kms and Indus Offshore 53,576 sq. kms area was under exploration.

Mining/Development & Production Leases Seven (7) Development and Production Leases were granted during 2006-07. A total of one hundred & twenty five leases covering an area of 11,712.92 sq. kms. were operative at the end of the year. In Sindh Province 8,125.30 sq. kms, Punjab 1,943.16 sq. kms, Balochistan 1,176.57 sq. kms and NWFP 467.89 sq. kms area remained under Mining/D &P Leases.

13

Table-1 Exploration Licences Granted during 2006-2007

S.No. Block Province Operator Grant date Area (sq. kms) 2266-9 (Offshore Indus-U) 1 2 3 4 5 2265-4 (Offshore Indus-V) 2264-1 (Offshore Indus-W) 2266-4 (Offshore Indus J) 2365-3 Offshore Indus-P Offshore Offshore Offshore Offshore Offshore BP (Alpha) BP (Alpha) BP (Alpha) PEL PEL 21-07-2006 21-07-2006 21-07-2006 29-09-2006 29-09-2006 6,294.28 7,377.03 7,270.17 2,436.30 900.36

2266-7 Offshore Indus-O

Offshore

PEL

29-09-2006

833.78

7 8 9 10 11 12 13

2366-7 (Eastern Off Indus-C) 3372-20 Marg ala 3372-21 (Mar gala North 2972-3 (Maharvi) 3170-2 (Marwat) 2266-8 (Offshore Indus-S) 3070-13 (Baska)

Offshore Punjab,NWFP Punjab,NWFP Punjab NWFP Offshore NWFP/Punjab/Bal ochistan

ENI MOL MOL OPII OPII OGDCL ZhenHua Oil

12-10-2006 08-11-2006 08-11-2006 22-01-2007 22-01-2007 22-03-2007 29-03-2007

2,493.51 1,386.73 1,561.72 2,359.85 1,79.87 2,129.91 2,442.00

14 15 16 17

2971-5 (Bahawal ur East) 2267-1 Offshore Indus-R 2769-12 (Khetwaro) 2468-7 Kunri Grand Total

Punjab Offshore Sindh Sindh

PPL OGDCL Saif Energy New Horizon

29-03-2007 19-04-2007 03-04-2007 05-06-2007

2,495.45 1,492.23 98.96 2,485.93 45,851.08

14

Table-2 Development & Production Leases Granted during 2006-07

S.No. 1 2 3 4 5 6 7 Usman Siraj South Manzalai Kausar Deep Bukhari Deep Bilal N rth Naimat Basal Grand Total Block Province Sindh Sindh NWFP Sindh Sindh Sindh Sindh OPII OPII MOL OPII BP OPII OPII Operator Grant date 17-11-2006 13-12-2006 11-01-2007 10-04-2007 18-04-2007 26-05-2007 14-06-2007 Area(sq. kms) 10.67 12.32 382.89 12.35 48.00 3.06 16.09 485.38

ii. Seismic Activities Seismic activities conducted during 2006-07 were as following; i. 2D seismic acquisition (onshore) ii. 3D seismic acquisition (onshore) iii. 2D seismic acquisition (Offshore) iv. 3D seismic acquisition (Offshore) v. No. of Service companies vi. No. of active crew teams Company wise seismic acquisition details are as under;
Eni MOL Nativus POGC OGDCL Paige OPII MGCL PO L PPL Hycar bex

7,984 L.kms 1,240 sq.kms 687 L.kms 1,356 sq.kms 08 15

PEL

Petronas

TOTAL

213 (L.Kms) 3D (sq.kms)

2681 1284

168

50

162

3,269 661

49

252

733

442 162 210

85

721

60 280

8671 2596

iii.

Drilling Activities

In 2006-07 ninety wells were planned including forty five as exploratory and forty five as appraisal/development wells. Against the target of ninety, seventy seven wells were spuded i.e. thirty six exploratory and forty one as appraisal/development wells. In the Public Sector, OGDCL spuded nineteen exploratory and twenty two appraisal/development wells, and in Private Sector thirty six wells were drilled which included seventeen exploratory and nineteen appraisal/ development wells. On an average 276 meters were drilled per day.

15

iv.

Discoveries

During fiscal year 2006-07 there were seventeen oil and gas discoveries in the country namely Mela-1, Ahmed-1, Pasakhi North East-1, Sakhi South Deep-1, Unar-1, Nim West-1, Kamal North-1, Latif-1, Chak66NE-1, Dhachrapur-1, Dakhni Deep-1, KunarWest-1A, ZaurWest-1 Rahim-1, Thora Deep-1, Tajjal-1 and Chandio-1 v. Production Activities

In 2006-2007 average oil production in the country remained 67,438 BOPD and gas production was 3,873 MMCFD. OGDCL was the highest oil producing company with a production of 13.261 million barrels at an average rate of 36,332 BOPD which was 54% of the yearly oil production of the country, followed by BP producing 4.025 million barrels at an average of 11,029 BOPD which is 16% of the total oil production. POL produced 3.231 million barrels, PPL 1. 832 million barrels, BHP 0.732 million barrels, OPII 0.680, MOL 0.674 million barrels , Eni Pakistan 0.125 million barrels, Petronas 0.030 million barrels and OMV 0.030 million barrels. OGDCL was also the major producer of Gas in the year. They produced 310.163 BCF of gas, at an average rate of 850 MMCFD, this constitute around 21.9% of the total yearly gas production of the country. PPL was the second highest gas producing company with 303.068 BCF at an average of 830 MMCFD, which is around 21.4% of the total yearly gas production of the country. Mari Gas produced 172.465 BCF, OMV 195.286 BCF, Eni Pakistan 140.493 BCF, BHP 111.415 BCF, BP 83.608 BCF, OP11 36.677 BCF, POL 15.395 BCF, MOL 22.775 BCF, Petronas 9.702 BCF, PEL 11.453 BCF and Tullow 1.08 BCF. In the fiscal year 2006-07, the LPG production was 1,523 metric tones per day. PARCO was the major LPG producer with an average of 411 metric tons per day, followed by JJVL who produced 401 metric tons per day LPG. The total remaining recoverable oil reserves at the end of the calendar year 2006 has been estimated as 353.164 million US barrels and the remaining gas reserves (including non-pipeline quality gas) as 32.376 trillion cubic feet.

16

2.3.2 i.

DIRECTORATE GENERAL OF OIL

Achievement

Marketing A target of Rs.4.65 million tons valuing at US $ 2.69 billion for the import of diesel oil and furnace oil during 2006-07 was set. Actual import of these products during the year remained at 8.3 million tons valuing at US $ 3.6 billion. Similarly, a target of 73 million barrels valuing at US $ 4.5 billion for the import of crude oil during 2006-07 was set. Actual import of crude oil during the year remained at 60.7 million barrels valuing at US $ 3.7 billion. It was estimated that around 14.7 million tons of petroleum products will be consumed during the year while actual consumption remained at around 18 million tons. Refining Transfer of Regulatory functions to OGRA In pursuance of the reforms policy of the Government to segregate policy functions from regulatory functions, a study was conducted through CIDA consultant for onwards transfer of regulatory functions to Oil and Gas Regulatory Authority (OGRA). In view of the finding, of the study, oil regulatory functions have been transferred to OGRA with effect from 1st April, 2006. Establishment Of New Oil Refinery Project Under the deregulation, privatization and liberalization policy of the Government, Private Sector investment in the down stream oil sector is being encouraged. The Government has therefore, approved additional incentives for setting up of a new gross root deep convergent Coastal Oil Refinery at Khalifa Point near Hub, Balochistan. REFINING CAPACITIES OF EXISTING REFINERIES AS ON 1-7-2006 S.NO. 1 2 3 4 5 6 7 NAME OF REFINERY Pak Arab Refinery Ltd. National Refinery Ltd. Pakistan Refinery Ltd. Attock Refinery Ltd. Bosicor Refinery Ltd. ENAR Petrotech Services Ltd. Dhodak Refinery Ltd. Total:Million M. Tons/annum 4.50 2.71 2.10 1.82 1.50 0.12 0.12 12.87 Barrels per day 100,000 62,050 47,110 40,000 30,000 2,500 2,500 284,160

17

Pricing The prices of petroleum products have increased tremendously in the International market during the past three years. The domestic sale prices of petroleum products, being linked with International Market product prices, were required to be increased accordingly. The Government decided to protect the consumers from the burden of high International prices and capped the domestic sale prices from time to time since May, 2004 till to date. Since the full impact of increase in International Prices has not been passed on to the consumer, the Government had suffered a huge loss of revenue in Petroleum Development Levy and due to Price Differential claims of OMCs / refineries. In other words, the consumer had been benefited through this capping in particular and Government had been able to control the inflation in the country. As against the increase in International Market in the range of 114% to 141%, the domestic sale prices have been increased in the range of 47% to 59% during the period May, 2004 to October, 2007.

18

19

2.3.3

DIRECTORATE GENERAL OF GAS

No increase/ change in average gas consumption have been witnessed during 2006-07 on the evident from following comparative table:-

i.

SECTORAL GAS CONSUMPTION 2005-2006 491,766 198,049 278,973 15,335 38,885 29,268 171,109 1,223,385 3,352 %age 40.2 16.2 22.8 1.2 3.2 2.4 14.0 100.00 Unit: MMCFT 2006-2007 %age 433,930 35.5 193,683 15.8 306,371 25.0 14,541 1.2 56,410 4.6 31,340 2.6 186,892 15.3 1,223,167 100.0 3,352

Sectors Power Fertilizer G. Industries Cement CNG/Transport. Commercial Domestic Total Average per Day

ii.

NEW CONNECTIONS (TARGETS AND ACHIEVEMENTS) With the intention to benefit maximum households, gas utility companies have set their objective to enhance consumer base. New gas connections are provided keeping in view of supply of gas.

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SNGPL Sectors Industrial Commercial Domestic Total 2005-06 531 4,013 206,586 211,130 Targets for 2006-07 495 4,320 213,000 217,815 Achievements in 2006-07 676 3,656 227,710 232,042

SSGCL Sectors Industrial Commercial Domestic Total 2005-06 267 1,661 79,041 80,969 Targets for 2006-07 265 1,615 79,475 81,355 Achievements in 2006-07 286 1,593 84,697 86,576

iii.

COMPANY-WISE TRANSMISSION AND DISTRIBUTION PIPELINES NETWORK (TARGETS AND ACHIEVEMENTS) The gas utility companies focused on their extension of their infrastructure by laying addition transmission & distribution pipeline.

SNGPL Pipeline Network Transmission Network Distribution Mains Services Total 2005-06 209 3,647 832 4,688 (FIGURES IN Km) Target for Achievement in 2006-07 2006-07 539 485 3,700 4,420 745 928 4,984 5,833

SSGCL Pipeline Network Transmission Network Distribution Mains Services Total 2005-06 137 1,475 276 1,888 Target for 2006-07 231 1,940 290 2,461 Achievement in 2006-07 232 1,679 270 2,181

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iv. NATURAL GAS ALLOCATION AND MANAGEMENT POLICY, 2006 During 2005-06 the Government for the first time announced natural gas allocation and management policy to set out priorities for use of natural gas in an optimal manner and also to manage demand during short supplies in an economically efficient manner. Different sectors are prioritized as under:

CATEGORY OF CONSUMERS Domestic and Commercial Sectors I. II. Fertilizer Sector; and Industrial Sector (to the extent of process gas)

PRIORITY ORDER First Second

Independent Power Plants as well as WAPDA and KESCs Power Third Plants with firm gas supply commitments under GSAs I. II. III. I. II. General Industrial Sector CNG Sector Captive Power (for export-oriented textile units)

Fourth

WAPDA and KESCs Power Plants (other than those included in Third Priority Prder) Fifth Captive Power Sector (other than that for export-oriented textile units) Sixth

Cement Sector v. LNG POLICY 2006

Augmenting import of gas supply through LNG import is an important element of Governments energy security strategy to encourage LNG import through active participation of private sector. The Government has announced first-ever LNG policy during 2005-06. Addition in LNG Policy 2006 In order to supplement Governments efforts to enhance gas availability in the far flung areas, a set of policy guidelines regarding gas supply through LNG network to unfeasible areas by the private sector has been added in the LNG Policy 2006 with the approval of ECC of the Cabinet. This new provision provides a possibility of gas supply by private sector to the residents of the areas which are not covered with gas network. Salient features (a) Subject to availability on the transmission main, natural gas will be offered by SNGPL/ SSGCL through a transparent process after meeting requirements of the existing consumers.

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(b) After confirming gas availability from the concerned Gas Utility Company, the project sponsor will apply to OGRA to get an exclusive licence to undertake the project in accordance with OGRA Ordinance, 2002, the validity period of which will be twenty (20) years renewable for further periods of five years each subject to satisfactory performance of the project sponsor. (c) While issuing the licence, OGRA in consultation with the stakeholders, will set clear milestones for implementation of the project, progress against which will be monitored by OGRA on regular basis. (d) The areas to be selected by the project sponsor for supply of regasified LNG shall be those, which do not meet the per consumer cost criteria set out by the Government for development of gas infrastructure or where extension of gas network is technically not viable. (e) The project sponsor may set the selling price of RLNG (Regasified LNG) for the consumers at a level which at no time shall be more than 90% of the National Average Price of LPG domestic cylinder. OGRA shall monitor the RLNG sale price accordingly. Implementation of LNG Policy The first LNG Policy announced in 2006 is being implemented successfully. The said policy provides freedom to the investors to participate in any segment of LNG value chain. Accordingly, LNG Import projects are being developed under public as well as private sectors. M/s SSGC has been mandated to facilitate the LNG import project and act as a project Vehicle Company for implementation of Pakistan Mashal LNG Project (PMLP), the first 3.5 million tons per annum capacity (equal to 500 MMCFD) LNG project through private sector. The project is targeted to be completed in 2012-13 with land-based re-gasification and storage terminal with an optional floating re-gasification and storage facility which can be operational by 2009. Under the LNG Policy, the private sector parties can pursue their projects at their own cost and risk without any off take commitment from the government. At present, M/s Pakistan GasPort Limited (PGL) is working to develop LNG import project in private sector, for which they have signed an Implementation Agreement with Port Qasim Authority for establishment of an offshore LNG Import Terminal Project at Port Qasim, Karachi. The project is expected to commission in third quarter of 2008.

vi. CNG FOR AUTOMOTIVE USE Government of Pakistan is encouraging use of Compressed Natural Gas (CNG) as an alternate fuel for automotives in order to control environment degradation, save foreign exchange in import of liquid fuels and generate employment. Due to Governments encouragement, Pakistan has become third largest CNG user in the world. Total CNG

23

stations and vehicles converted to CNG up to end of financial years 2005-06 and 2006-07 are given as under: S. No 1. 2. 3. CNG Activity By the end of 2005-06 By the end of 2006-07 1,488 1,080,000 6,215 % Increase/ Decrease 48% 11% 55%

Total operational CNG station till end of financial year (F.Y.) Vehicles converted to CNG Total No of provisional licenses issued till end of financial year

1,003 970,000 3,997

vii. CNG IN PUBLIC TRANSPORT The Cabinet considered the Summary by the Ministry of Petroleum & Natural Resources on Replacement of Diesel Oil by CNG and approved the following proposals, a) Provincial government should gradually face out diesel engine intercity urban public transport (which would include buses, mini buses and wagons) in Karachi, Hyderabad, Lahore, Fisalabad, Peshawar, Quetta and Islamabad/Rawalpindi by end 2007. To achieve this target the provincial government may also: a) b) encourage conversion of present diesel buses to CNG if economically feasible for the buss operators: set up and monitor the time bound goals for converting diesel buses to CNG.

b) All new busses/Mini buses/wagons to be inducted in the above-mentioned cities should be dedicated CNG vehicles and or Petrol-CNG duel-fuel with immediate effect. c) No. two- stroke rickshaws should be registered in the above-referred cities after June 2006.

d) To promote induction of CNG busses/mini buses/wagons during the diesel face out period, i.e. upto December 2007 the provincial government should provide incentive to CNG busses/Mini buses/wagons including: c) d) e) Lucrative routes, Exemption from rout tax excise tax and registration fees

Setting up of large CNG refueling stations for busses/mini- buses/wagons should be facilitate by the provincial government. Gas utility companies should provide gas to such station. OGRA should issues licenses to such CNG station within one month. The benefit of exemption from custom duty and sales tax on CNG equipment and busses which are currently available only upto 30-06-2006 may be extended for period of five years. Manufacturing of CNG equipment and buses in Pakistan may be given priority through attractive incentive for local manufacturer under phased plan.

f)

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g) Local manufacturing of CNG equipment should be encouraged in the country and OGRA should expedite approval of locally manufactured CNG equipment. h) In order to facilitate introduction of CNG busses, the Government should incentive the scheme through picking up (fully/partially) interest on bank loans taken by prospective buyer of dedicated-CNG busses/mini buses/wagons. Rs. 5 billion provided in the MTDF for Public-Private Partnership in public transport can be utilized for this purpose. i) State Bank of Pakistan may encourage the commercial banks to establish lines of credit for procurement of CNG busses/mini buses/wagons and for establishing their manufacturing facility in Pakistan. CNG equipment manufacturers and their investors may be motivated to explore the possibility of technology transfer to joint venture with the foreign manufacturer of CNG compressor and CNG cylinders.

j)

k) The testing facility for CNG equipment according to the relevant quality standard should be fully developed at Hydro Carbon Development Institute of Pakistan to make it fully capable of performing the testing functions.

viii.

LIQUEFIED PETROLEUM GAS (LPG)

Liquefied Petroleum Gas (LPG) is a clean, environmentally friendly, portable and economical domestic fuel. It is rapidly becoming fuel of choice in areas, where gas distribution network is not available. Currently out of 19.2 million house holds in Pakistan, 4.85 million are connected with natural gas network; approximately 1.8 million are using LPG, whereas the rest are relying on conventional domestic fuels like coal, firewood, kerosene, dung cake etc. GOVERNMENTS POLICY The Government of Pakistan is making all out efforts to promote LPG as a domestic fuel to replace conventional fuels like Coal, Firewood, Kerosene, dung cake etc to ensure availability of clean fuel to all people especially those residing in far-flung and remote areas with a view to arrest deforestation and improve environment. By virtue of current Policy, the government intends to; a. b. c. d. e. f. g. Ensure supply of LPG to consumers at competitive rates. Enhance availability of indigenous LPG in the country. Ensure supply of LPG in far-flung and remote areas. Attract more investment in the LPG sector. Ensure safety of public life and property Discourage and eliminate unauthorized activities in the LPG business. Generate healthy competition and improve quality of consumer service.

As decided by the Cabinet, the Government has deregulated LPG prices w.e.f. 15th September 2000. All the producers of LPG are now empowered to either market their LPG themselves or dispose it off through the licensed marketing companies or to the new parties. All marketing companies are now

25

free to develop their LPG market, as they wish, except for use in automotive. However in order to ensure LPG supply in remote hilly areas, with a view to protect our precious forests each company is obligated to market at least 7%, of its product in AJK, 7% in Northern Areas, 6% in FATA, and 10% of LPG uplifted from Pak-Arab Refinery Company Limited (PARCO) to Balochistan. The regulatory work regarding LPG has been transferred to Oil and Gas Regulatory Authority (OGRA) w.e.f. 15th March 2003.However the policy formulation function of MPNR will remain intact. ix. LPG IN AUTO SECTOR

The Government in past discouraged the use of LPG in vehicles to ensure its availability to the domestic sector. However, to bring this sector under the safety net and to bring competition in alternate auto fuel, the Government has allowed to use LPG in motor vehicles. x. LPG PRODUCTION AND DISTRIBUTION POLICY 2006.

In order to further increase LPG supplies, streamline its distribution at affordable prices, especially to LPG starved areas of the country and promote healthy competition for growth of LPG market as well as to ensure minimum safety standards across the LPG supply chain, the Government has allowed use of LPG in motor vehicles, while oil marketing companies have been setup to LPG Auto gas Stations at their network of retail outlets, under relevant laws. The salient features of the policy are as under: Public sector E & P companies will out source all LPG production to technically and financially sound private sector parties through a transparent and competitive process. To ensure safety throughout the LPG supply chain, LPG storage tanks, cylinders, bowzers, and distribution outlets of the licensees will meet the minimum safety standards as laid down in applicable Rules. Decanting of LPG from cylinder to cylinder is prohibited and OGRA shall cancel licenses of the defaulting companies. OGRA will prescribe codes and standards for conversion of vehicles to LPG and the establishment of LPG re-fuelling stations for the auto sector by LPG marketing companies with an effective monitoring mechanism. OGRA will publish a list of authorized manufacturers for all LPG equipment including LPG refilling stations, conversion kits, fuel tanks, cylinders, storage tanks, and bowzers. To ensure that cartels are not formed for charging a high consumer price of LPG, OGRA will determine the reasonableness of price keeping in view the import parity price of LPG, producer price and audited accounts of LPG marketing companies for the last two years. All LPG marketing companies receiving LPG from sources in Punjab and NWFP will be obligated to supply at least 7% of their local LPG in Northern Areas, 7% in AJK and 6% in FATA. All

26

LPG marketing companies receiving LPG from sources in Sindh and Balochistan will be obligated to supply at least 10% of their local LPG in Balochistan province. Any party can import LPG after paying applicable government dues. However, no party shall export LPG without the prior written approval of MPNR.

a) Region

REGION-WISE CONSUMPTION OF LPG 2005-06 31,627 17,890 4,465 18,513 63,829 57,308 286,562 98,225 578,419

(UNIT: M. TONS) % increase / (Decrease) 6% 5% 26% 15% (2%) 1% 5% 9% 5%

2006-07 33,579 18,794 5,635 21,454 62,461 58,191 301,366 107,749 609,229

AJK. Balochistan Federal Area FATA NWFP Northern Area Punjab Sindh TOTAL :

b)

LPG IMPORTS. Years : 2005-06 24,779.2

(UNIT: M. TONS) 2006-07 58,613

SECTOR LPG Imports.

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Chapter 3 ATTACHED DEPARTMENT

http://www.gsp.gov.pk/

GEOLOGICAL SURVEY OF PAKISTAN (GSP)

29

30

3.1

INTRODUCTION

Geological Survey of Pakistan (GSP) is an attached department of the Ministry of Petroleum and Natural Resources with its headquarters office located at Quetta and as per its charter the GSP is responsible for study of geology of the country in all pertinent details and to assess its geological resource potential. With a balanced, efficient and competitive structure, GSP is now fully capable to explore mineral resources and undertake geological, geophysical, geo-technical and geo-chemical investigations, and drilling. During the recent past GSPs technical services were frequently availed by the local and foreign companies, institutions and private sector organizations. The GSP also undertakes development projects to cater to immediate needs in the fields of geological mapping and mineral exploration. It undertakes: 3.2 Geological mapping and other geoscientific surveys, Basic and applied research in earth sciences, Scientific investigations for an accurate understanding of the countrys geological resources and their prudent management, and Environmental geology and hydrogeological studies. ACTIVITIES, ACCOMPLISHMENTS AND PROGRESS 2006-2007

Major accomplishments of the department during the fiscal year 2006-2007 are described below: i. REGIONAL GEOLOGICAL MAPPING

. During the period the GSP has completed regional geological mapping on 1:50,000 scale covering an area of 18,580 sq. km in different parts of the country. Out of this 8,450 sq. km area was covered under its regular projects and 10,130 sq. km. area under various development projects. The regional geological mapping of an area of 8,450 sq. km, under regular projects includes the coverage of 1,500 sq. km. area in Sindh; 2,240 sq. km. area in Balochistan; 1,380 sq. km. in Punjab; 2,050 sq. km. area in NWFP; 640 sq. km area in AJK and 640 sq. km in Northern Areas. The mapping of 10,130 sq. km. under the development projects includes 9,130 sq. km. under AGM, 500 sq. km. under Hangu and 500 sq. km. under the Kotli project. ii. REGIONAL GEOPHYSICAL MAPPING

During this period investigations were carried out for the following Geophysical Mapping and Exploration projects: Magnetic mapping for delineation of possible mineralization in the Nagar Parkar Basement complex, Tharparkar Sindh. Detailed geological survey over a magnetic anomaly near Kahna Town/BRB Canal near Jallo Town, Lahore District, Punjab.

31

Geophysical investigations were completed at a number of locations throughout the country for detection of geophysical anomalies and interpretation of metallic minerals under various development projects. Geophysical investigations were carried out for ascertaining ground water potential in different areas for various agencies including Pakistan Army and other forces, agencies and institutions. ECONOMIC GEOLOGY

iii.

During this period investigations were carried out for the following Economic Geology projects: iv. Study/Evaluation of celestite mineralization near Kalu Kohar (35 O/12) Dadu District, Sindh, Pakistan. Petrological studies of Eocene rocks of Meting area, Quadrangle 40 C/4, Thatta District, Sindh, Pakistan. Petrography and Geo-chemistry of basalts to determine the tectonic environment of their emplacement, Ranikot area, Dadu District, Sindh (35 O/13). Coal exploration in the Eocene Domanda Formation in eastern Sulaiman Range, D. G. Khan District, Punjab. Exploration and evaluation of celestite deposits in Central Salt Range, Punjab. Evaluation and assessment of Iron Ore in NWFP, Pakistan. Alteration studies of gold mineraliztion in Hushe, Machulu and Ranthak areas of Khaplu in Northern Areas. NEW MINERAL FINDINGS IN LASBELA, KHUZDAR AND CHAGAI DISTRICTS OF BALOCHISTAN

During the recently conducted geological and geochemical exploration under the development project Accelerated Geological Mapping and Geochemical Exploration in the Outcrop Areas of Pakistan a number of copper-nickel and copper prospective districts Lasbela, Khuzdar and Chaghi have been found. Gacheri Copper Nickel prospect is located at about 26 km. to the north east of Uthal town, Lasbela district. Average copper values are 3.45% of 26 samples while Nickel values range 1200 ppm two samples show the exceptionally high values from the same locality which are 0.44%. Goth Essa (Kanano pir) copper prospect is located at about 48 km. to the north east of Uthal town, Lasbela district. Rocks commonly exposed in the area are volcanic and sedimentary. Mineralization mostly occurs in the part of volcanic rocks in the form of micro veins and vein lets of covellite. These are intermittently exposed in the area along the faults and fracture. Selected samples are having exceptionally high content of copper which ranges between 20 to 25 % while the bulk samples show the content of copper 1.2 to 3%.

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Detho Dhoro copper prospect is located 24 Km north east of Uthal, Lasbela district. The mineralization is commonly hosted by the volcanic rocks along with a development of Gossan. v. EXTENSIVE ALTERATION ZONES IN DETHO DHORO

Ninro Dhoro copper prospect is located 37 km north east of Uthal, Lasbela district. Rocks exposed in the area are basic and ultra basic volcanic gabbro and pelagic sediments. Mineralization is mainly hosted by the altered ultra basic rocks in form of covellite near the faulted contact between the pillow lava and ultra basic rocks. Covellite veins are also found in a shale of upper horizon i-e the part of pelagic sediments. The covellite bearing zones are exposed intermittently in the area which is about 450 meters wide and 1800 meters long. Ali Koh East copper prospect is located 7 km east of Ali Koh levies post, near Wadh in Khuzdar district. Massive Sulphide mineralization is mostly hosted with in the pillow lavas, black carbonaceous and Gypsiferous shale. It is also observed that some magnetite horizon is present in outer massive sulphide zone. Average content of copper is 2.5 - 4.5 % with some gold silver lead and zinc anomalies. Ali Koh West Copper prospect is located about one kilometer south east of Ali Koh levies post and 600 meters from the main ECO road. Rocks commonly exposed along the mineralized zone are pillow lava and pelagic sediments (Mudstone and shale).In this prospect intense staining of Malachite and Azurite found to occur with in and on the magnetite vein which is sticking N 80 W it thickness is 2.3 to 3.0 meters while strike length is 600 meters. We have taken eight samples from the area. The results of the samples are awaited. It is recommended for further detailed exploration Jinno East copper prospect is located 6 km east of Dera khaloo levies post. Mineralization is mostly found along the faulted contact of pillow lava and sediments in form of pyrite and chalcopyrite. Chloritic alteration is also found on the foot wall . Massive sulphides are mostly capped by the black gypsiferous shale. Average copper content of 15 samples is 20 % copper. Waheer copper prospect is located about 1.5 km west of main ECO road near the thesil Waheer, Khuzdar district. Mineralization is found along the fault contact of basic igneous rocks and sediments of pelagic nature. Highly epidotised and chloritised rocks appear on the upper part of mineralized zone but mainly mineralization is confined in the grey colored hard and compact shale in a form of veins. Analyses of 10 samples reflect the copper contents ranging between 6 to 9 %. Malick Sarvanda Kaur copper prospect is located 40 km south west of Dalbandin, Chagai district. The mineralization is mainly controlled by the east west running fault running between volcanic rock of Sinjarani group and Flysch type of sediments. The secondary faults have produced high frequency of fracture which is having the Chalocite, a rich copper mineral. Chemical analysis from the veins shows the 70 74 % copper while the samples from the volcanic parts show 0.9 to 1.4 % copper.

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Zeri Deck and Secnkori copper prospects are located 35 km North West of Dalbandin, Chagai district. Mineralization mostly found in form of veins from 3 mm to 2 cm thick. These veins are epigenetic and mostly cutting the strike direction high frequency of vein supports the idea of massive body at depth. Samples which were collected from the veins are having the high content of copper ranges which ranges from 60 -70 % while the hosting rocks are having much lower content of copper mostly less then 2%. Some silver values were also found. Secnkori copper prospect is located 4 km north east of Zeri Deck. vi. NOORIABAD CELESTITE DEPOSITS

The Government of Pakistan has signed a joint venture agreement with two well known Chinese mining companies to give leasing rights for mining and development of celestite in Nooriabad. The Sindh Minister for Mines & Minerals, Mr. Irfanullah Marwat was present at the signing ceremony in Karachi on December 13, 2006. The mining involves investment of 1.8 million US dollars. On successful commercial mining, the Chinese plans to set up a plant at a cost of 4.5 million dollars which will produce 50, 000 to 300, 000 tons of celestite a year. Part of the production will be utilized domestically while rest of it will be exported. Geological Survey of Pakistan had discovered Celestite deposits in Nooriabad, Thano Bulla Khan, Thatta & Dadu districts, Sindh and Barkhan, Balochistan. At present, Pakistan imports about 80, 000 to 100, 000 tons of celestite every year and domestic exploitation of celestite will provide saving of foreign exchange. Shallow marine Early to Middle Eocene Laki limestone and Late Eocene Tyon Formation host the Celestite deposit in Thano Bulla Khan area. The Celestite of this area is of high grade with 90 to 95.5% Strontium sulphate. vii. ENVIRONMENTAL & ENGINEERING GEOLOGICAL STUDIES

The GSP completed the following project in the field of Environment & Engineering Geology, especially related to the post October 8, 2005 Earthquake in the northern areas, NWFP and AJK. Potential Hazards of Land sliding and Mitigation Measures at Hattian Bala and other Earthquake Hit Areas. Natural Hazard Zonation Map of Muzaffarabad and its surrounding areas. Landslides Study and Hazard Zonation Map of Neelum Valley, AJK Landslides Study and Hazard Zonation Map of Jhelum Valley, AJK. Landslides Study and Hazard Zonation Map of Kaghan Valley, NWFP. Engineering geological studies from Mansehra to Naran. Environment and Urban Geological studies of Gilgit and surrounding areas. Hydrogeological studies including water quality of open reservoirs (lakes) of Dadu Thatta districts, Sindh. Neo-tectonics and Quantification of current Post-seismic Deformation after the October 8, 2005, Earthquake in collaboration with Grenoble and Chambery Universities, France.

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viii.

DRILLING OPERATIONS

The Geological Survey of Pakistan undertakes drilling under various programmes for energy (coal) and mineral exploration. During this period GSP undertook extensive drilling operations under its different development projects, which included drilling of 21 bore holes for a cumulative depth of about 4500 meters. A total of 17 bore holes were drilled in Sindh, NWFP and AJK for exploration of coal for a cumulative depth of 3345 meters depth. The mineral exploration programme of the GSP included drilling of 4 bore holes in Chagai district, Balochistan for a cumulative depth of 1155 meters for assessment of massive sulphide copper mineralization. ix. CHEMICAL LABORATORY WORK

Analyzed 883 samples for 9108 estimations in GSP labs at Quetta, Lahore and Karachi laboratories. Prepared 1207 powdered samples, 53 thin and 44 polished sections. The chemical section analyzed 1491 samples for 8992 estimations by XRF, AAS and wet analysis. Analysed 397 samples by XRD/ DTATG. Petrographic studies of 21 samples completed at the GSP Advance Geoscience Research Laboratories, Islamabad. x. GROUND BREAKING OF HUMAN RESOURCE DEVELOPMENT CENTRE AT GSPS GEOSCIENCE LAB. ISLAMABAD

Mr. Amanullah Khan Jadoon, Minister for Petroleum & Natural Resources, laid down the foundation stone of The Human Resource Development Centre, Geological Survey of Pakistan Geoscience Advance Research Laboratories, Shahzad Town, Park Road, Islamabad on 15th March 2007. xi. MOU BETWEEN GSP AND THE GEOLOGICAL SURVEY OF IRAN (GSI)

An MOU has been signed between the Geological Survey of Pakistan (GSP) and The Geological Survey of Iran (GSI) to pursue scientific and technical cooperation in the field of Earth Sciences. According to the Memorandum of Understanding signed on 16th May, 2007 at Tehran, Iran, both the organizations have agreed on the following: To exchange scientific and technical capabilities in the field of Geochemistry, Mineral Exploration, Airborne Geophysics,Remote sensing, Geo Database, Geomatics, Marine Geology, stratigraphy, Boundry Geoogy, Regional Geology and Medical Geology. xii. MOU BETWEEN GSP AND PAKISTAN DEVELOPMENT COMPANY (PGJDC) GEMS & JEWELRY

A meeting was held between Governor Balochistan, Federal Minister for MOIP&SI, CEO SMEDA, Chairman PGJDC and D.G. GSP at Governor House on 31st October 2006. In the meeting it was decided that a reconnaissance survey will be carried out for gemstone occurrences in potential areas of Balochistan jointly by GSP and PGJDC. In order to initiate the process and accomplish the task a MoU has been signed

35

between both the organizations on 5th June, 2007 at Governor House, in the presence of the Honorable Governor Balochistan. xiii. MOU BETWEEN GSP AND PAKISTAN STONE DEVELOPMENT COMPANY (PASDEC)

As a consequence of the meeting held between Governor Balochistan, Federal Minister for MOIP&SI, CEO SMEDA, Chairman PGJDC and D.G. GSP at Governor House on 31st October 2006, a MoU has also been signed between the GSP and PASDEC for accomplishing Up-gradation of 20 Marble & Granite (M&G) mines in the four major clusters of the province including Chagai, Loralai, Khuzdar and Lasbela Districts for selection of the target areas and establishment of M&G model quarries and training institutes at selected mines. Under the MoU the GSP will undertake, mainly through its in house expertise available. 3.3 PROGRAMME OF ACTIVITES AND TARGETS 2007-2008

The GSP will undertake mapping of about 1,2160 sq. km. area in various parts of the country. In addition to the geological mapping an area of 1,000 sq. km. will be covered through geophysical surveys. Mineral exploration projects include investigations for copper-gold, iron & Lead-Zinc-Barite deposits in Balochistan and NWFP, studies for celestite, limestone and other mineralization in Sindh. Land slide and other geo hazard studies will be carried out in earth quake hit areas in Northern Areas and Azad Kashmir. Geochemical exploration will be carried out in various areas of Balochistan, Sindh, Punjab and NWFP. Urban and hydrogeological studies will be carried out in Islamabad, Mianwali, Khaniwal, Pattoki and Chakwal areas. Research projects will also be undertaken in collaboration with Harvard, Howard and Michigan universities of U.S.A. Five development projects (including 2 in energy sector and 3 in mineral sector) will be executed.

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Chapter - 4 AUTONOMOUS BODY

http://www.hdip.com.pk

HYDROCARBON DEVELOPMENT INSTITUTE OF PAKISTAN (HDIP)

37

38

4.1

INTRODUCTION

Hydrocarbon Development Institute of Pakistan (HDIP) is an autonomous body under the control of Ministry of Petroleum & Natural Resources. It carries out applied research and renders advice to the Government on scientific and technical matters in the oil, gas and energy sectors including energy-environment, energy-planning and energy-policy issues. The HDIP also provides consultancy and laboratory services for the oil and gas industry in Pakistan in diverse fields of its expertise. 4.2 INSTITUTIONAL STRUCTURE

The HDIP was established in 1975 through a Resolution of the Government of Pakistan. HDIP has been re-established as an autonomous body through an Act of Parliament in January 2006. Its Board of Governors has been reconstituted by Prime Minister which is chaired by the Minister for Petroleum & Natural Resources, while its Chief Executive is designated as Director General and Secretary of the Board. Board of Governors Mr. Amanullah Khan Jadoon Chairman Minister for Petroleum & Natural Resources, Islamabad Mr. Ahmad Waqar Secretary Ministry of Petroleum & Natural Resources, Islamabad Mr. Hilal A Raza Director General/Chief Executive Hydrocarbon Development Institute of Pakistan, Islamabad Mr. Jalal-ud-Din Qureshi Financial Adviser Ministry of Petroleum & Natural Resources, Islamabad Mr. Arshad Maqsood Malik Chief Fuels (Energy Wing) Planning & Development Division, Islamabad Mr. M. Naeem Malik, Director General (PC) Policy Wing, M/o Petroleum & Natural Resources, Islamabad Dr. S. Mahmood Raza Advisor (HRD) Higher Education Commission, Islamabad Dr. M. Qasim Jan Vice Chancellor Quaid-e-Azam University, Islamabad Prof. Muhammad Asif Khan Director National Center of Excellence in Geology University of Peshawar , Peshawar Prof. Ahmad Saeed Khan Chairman Department of Petroleum & Gas Engineering University of Engineering & Technology, Lahore

6.

10

39

4.3.

OBJECTIVES AND FUNCTIONS OF THE INSTITUTE As per HDIPs Act 2006, the objectives and functions of the Institute are: (a) to assist the Government in the formulation of national policies for the development of hydrocarbon industry according to the national needs; to undertake basin studies, research and development to facilitate exploration of hydrocarbons; to promote optimum exploitation and utilization of existing hydrocarbon resources; to investigate new energy methods and related technologies for oil and gas sector; to study and recommend measures for controlling environmental pollution relating to hydrocarbon operations; to carry out quality control and standardization of hydrocarbon, as per Pakistan Standards and to review the specifications of petroleum product and their blends; to establish and operate a comprehensive computer managed data base relevant to its activities, linked to indigenous and foreign data-bases ; to develop and promote use of clean, economic and alternative fuels; to provide consultancy, advisory and laboratory services, expertise and facilities to the public and private sector organization and companies; to assist educational establishments in the preparation and conduct of courses and training programmes in the field of hydrocarbons and to conduct such courses for national as well as international trainees; to coordinate research and development in the hydrocarbon sector nationally and with international organizations; to work as a forum of national or international professional bodies in related disciplines; to act as an organization for checking of quality, standards and specifications of hydrocarbons including crude petroleum, petroleum products, liquefied petroleum gas and natural gas; to perform such functions for the Government and the regulators in hydrocarbon sector as the Government or the regulators may assign to it from time to time;

(b)

(c)

(d)

(e)

(f)

(g)

(h) (i)

(j)

(k)

(l)

(m)

(n)

40

(o)

to conduct the functions of demonstration, training, testing, inspection, equipment approval, data processing, technical advice, transfer of technology, refueling and vehicle conversions for use of CNG in automobiles; to establish laboratories, facilities and infrastructure anywhere in Pakistan, and to take all steps and measures which are necessary to promote, implement and undertake assignments and tasks to fulfil its objectives and functions; to conduct research and development and to coordinate and promote the development and commercial application of new energy resources and technologies for substitution of oil and gas; to establish bilateral and multilateral institutional arrangements with national and international universities and other entities of interest; to carry out any other related activity, projects or functions entrusted to the Institute by the Federal Government , any Provincial Government or local authority on appropriate terms and conditions including remuneration for services, etc.; and to carry out any other activity in relation to the above objectives and functions.

(p)

(q)

(r)

(s)

(t)

4.4

ESTABLISHMENT

The Head Office of the Institute is at Islamabad while its main laboratories are located at Islamabad and Karachi. In addition, it maintains four Petroleum Testing Centres at Lahore, Peshawar, Quetta, Multan, five CNG Stations are at Islamabad, Karachi, Lahore, Peshawar and Quetta and four Cylinder Testing Labs at Islamabad, Karachi, Lahore and Peshawar. CNG Station located at Karachi has been temporarily suspended due to cancellation of lease agreement. The HDIP has 240 employees. Its annual budget for 2006-07 was Rs. 89.6 million which included Rs 46.7 million as grant by the Government and Rs 42.9 million generated from HDIP's own resources that included CNG activities, analytical services and consultancy studies. 4.5 4.5.1 UPSTREAM OIL & GAS EXPLORATION Project Completed

The Work Carried out is Summarized as under: Petroleum prospects of the Punjab platform, Pakistan with special reference to adjoining Bikaner-Nagaur basin of Rajasthan, India. The project has been finalized during the 4th Quarter of fiscal year 2006-2007.

41

4.5.2

Projects in hand

1. Petroleum potential of Mangla-Jhelum sub-basin, Pakistan. The study is

underway. Data collection, compilation, draft diagrams and report have been completed. The project will be finalized in the 2nd Quarter of the fiscal year 2007-2008.

2. Evaluation of Chichali formation as potential source rock in western Potwar and

Kohat regions, upper Indus basin, Pakistan. The project would be finalized by the month of February 2008

3. Source Rock Characterization and their correlation with Crude Oil of Upper
Indus Basin. Following activities have been performed for the Upper Indus Basin study: (i) Geological analysis of 156 well cutting samples from Datta & Dandot Formations has been completed and interim report has been prepared. Geochemical analysis of 185 samples from Patala Formation is in progress.

(ii)

4.5.3

Consultancy Works

In Addition to R&D activities, the Institute also offers consultancy services in different geo-scientific disciplines to oil & gas exploration companies. Some 300 samples were analyzed for different companies and institutions. Besides, environmental consultancy services were also provided to several major companies. 4.5.4 Participation in Proficiency Testing Program organized by PNAC

HDIP Geochemistry Labs participated in Proficiency Testing Program conducted by Pakistan National Accreditation Council. In this connection six samples were analyzed for pH Conductivity, Nitrate, Pb, Cr, Cu, Fe, Mn, Ni and Zn. The HDIP labs qualified the proficiency testing programme with good rating. 4.5.5 1. Future Research Projects Role of geology in Reservoir Characterization of Datta Sands in Kohat-Potwar Plateau, Pakistan. The Project is likely to commence from September 2007 onwards. A PC-1 titled Monitoring of Underground Fuel Storage Tanks has been prepared for joint cooperation with Pak-EPA for monitoring of the leakage of fuel from underground fuel storage tanks. Petroleum Core House Consultancy Work/ Progress

2.

4.5.6

During the reported year the Pakistan Petroleum Core House has received core samples from 302 wells (approx. 11,000 meters) and drill cuttings samples from 923

42

wells (approx. 420,000 samples). The core samples from 290 wells have been reboxed and drill cuttings samples from 653 wells have been sorted. The drill cutting samples from 233 wells have been processed and sorted. Core House provided vital services to a number of national and internal companies for their oil and gas exploration and development programmes in Pakistan. 4.5.7 Training

A Pakistani expatriate from USA having vast experience in the field of oil & gas exploration and production, visited HDIP under TOKTEN programme of the Ministry of Manpower, Government of Pakistan for a period of eight weeks. He shared his national and international experiences related to exploration and production of oil and gas with his counterparts at HDIP. 4.6 DOWNSTREAM ACTIVITIES: PETROLEUM TESTING AND QUALITY CONTROL

During the financial year 2006-2007, 5745 samples of POL products were analyzed for different parameters/tests. 4.6.1 Inspections of Lube oil Blending and Reclamation Plants

During 2006-2007, on the directive of OGRA, HDIP conducted more than 70 inspections of Lubricating Oil Blending and Reclamation Plants to ensure that plants have all the required facilities to produce quality products. 4.6.2 Ethanol Pilot Project

As per directive of Prime Minister, HDIP provided technical guidance and assistance to Pakistan State Oil Company Limited (PSO) for the establishment and implementation of ethanol blend fuel pilot projects. Three pilot projects were established by PSO. HDIP provided necessary technical input to design these projects and to select necessary technical parameters for monitoring the performance of blended fuel. The parameters included drivability, fuel economy, exhaust emission and combustion efficiency. The data generated by PSO was analysed and evaluated for determining the efficiency of blended fuel. HDIP labs facilities were also utilized on regular basis for checking the quality of blended fuel. The samples were analysed as per laid down specifications. 4.7. REPLACEMENT AND ENHANCEMENT OF HDIPS ANALYTICAL FACILITIES

The Project titled Replacement & Enhancement of HDIPs POL Analytical Facilities was approved by the DDWP at the cost of Rs. 35 million. The project is being successfully implemented and will be completed in June, 2008. The basic objective of the project was to augment the existing lab. facilities. These labs are responsible for quality control of POL products and provide technical support to the down stream petroleum sector. The main thrust of these labs is to ensure

43

that the quality of POL products (local as well as imported) is as per specifications prescribed by the Government and the Regulator. The main components of the project are: Expansion and modification of existing major lab facilities located at Karachi, Islamabad, Lahore, Peshawar, Multan and Quetta through replacement of outdated equipment and induction of new equipment. Renovation and repair of existing laboratories buildings infrastructure. Enhancing the capabilities of laboratories to provide technical support to the industry. Recruitment and training of the scientists.

4.8.

CAPACITY BUILDING FOR HYDROCARBON RESEARCH & DEVELOPMENT

The project was approved at a cost of Rs. 140 million and it envisages (i) establishment of geological research database system and (ii) strengthening of research & development facilities to carryout geological and geochemical studies in unexplored and under-explored areas. The project has following main components: Establishment of centralized database system based on Geographic InformationSystem (GIS) and Laboratory Information Management System (LIMS). Establishment of local area network and linkages. Establishment of data processing facilities for acquiring data from various sources. Development of infrastructural facilities to provide technical backup support to the petroleum industry and the government. Strengthening of existing geological/geochemical laboratories of HDIP.

4.9

CNG DEVELOPMENT

A research Project of HDIP on using Compressed Natural Gas (CNG) to replace gasoline has grown into a country-wide industry. As a result, 1549 CNG refueling stations were operational as on 30.6.2007 (including 4 by HDIP, Operation of Karachi CNG Station temporarily suspended) catering to the needs of about 1.5 million CNG vehicles. 4.9.1 Regulatory Inspections

The HDIP acts as the, Third Party inspector, on behalf of the Oil & Gas Regulatory Authority (OGRA), to ensure safety aspects of CNG Stations as per CNG rules (Product & Marketing) 1992. Some 2400 inspections of CNG stations were carried out during the fiscal year 2006-07.

44

4.9.2.

Equipment Evaluation

As per directives of Oil & Gas Regulatory Authority, HDIP carries out evaluation of CNG equipment such as CNG Compressors, CNG Dispensers, CNG conversion Kit and CNG vehicle Cylinders in the light of Pakistan CNG (Production & Marketing ) Rules, 1992. During the fiscal year 2006-07, HDIP has evaluated 23 cases of CNG equipment, which included 22 CNG Compressors and one CNG Conversion Kit essentially. 4.9.3 Training

HDIP is imparting training in various professional categories i.e . training of the CNG Compressor Operators, CNG Kit Installers and Refueling Attendants. During the fiscal year, 2006-07, HDIP has trained 94 personnel of different institutions including private Sector. 4.10 INFORMATION DISSEMINATION

The Institute played an important role in the development of domestic energy sector by maintaining a national energy database and publishing the official national energy statistics, viz, "Pakistan Energy Yearbook", which is the most sought after Pakistani publication among national and international energy professionals, investors and financers. The HDIP also publishes a standard research journal Pakistan Journal of Hydrocarbon Research carrying articles relating to Pakistan in the fields of oil and gas exploration, production, processing, utilization, economics, policy and planning. Thirty five (35) technical presentations were made by Director General and scientists of HDIP at various conferences & seminars. HDIP also assisted MP&NR in its technical presentations and new initiatives 4.11 INTERNATIONAL COOPERATION

HDIP is hosting the SAARC Energy Centre (SEC) as approved by the 13th SAARC Summit in Dhaka in November 2005. On recommendation of the Government of Pakistan, the DG HDIP has been appointed as the Director of the Centre by the SAARC Secretary General w.e.f. 1st March 2006. The primary objective for the establishment of SEC is to have a regional institution for the initiation, coordination, and facilitation of SAARC programme in energy. The SEC is envisioned to be a catalyst for the economic growth and development of the South Asia region. The Centre would also help in the integration of regional energy strategies by providing relevant information, state of the art technology and expertise. The Centre developed Strategic and Operational Plan for the next five years which was considered by the 1st meeting of its Governing Board held in November 2006. The Board also approved the programme activities and the staff strength for the year 2007. The Centre has started the publication of a quarterly SAARC Energy Newsletter. The first issue of the Newsletter was released at the 2nd meeting of SAARC Energy Ministers in New Delhi on 6-7 March 2007 which was also attended by the Federal Minister for Petroleum & Natural Resources. The SAARC Energy Centre has started the process of recruitment of its professional as well as general services staff. On completion

45

of recruitment process the Centre will start functioning on its approved programme of activities. HDIP held the Central Secretariat of an international forum "South Asia Geological Congress (GEOSAS)", that provided a platform for promoting cooperation in research and development in the geological sciences in the South Asia region covering 10 countries, viz Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan, Sri Lanka and Turkey. HDIP is also working as the Secretariat of Pakistan National Committee of the World Energy Council (WEC). Director General HDIP was elected Chairman World Energy Council South Asia Region for the years 2004-07. Secretary, Ministry of Petroleum & Natural Resources and the Director General HDIP, attended the WEC Executive Assembly 2006 held from 3-7 September 2006 in Tallin, Estonia. 4.1.12 TECHNICAL ASSISTANCE TO THE UNIVERSITIES

Technical assistance in the form of analytical services, supervision of M.Sc. and M.Phil thesis, training and teaching in various scientific disciplines has been extended to the Universities of Karachi, Balochistan, Punjab, AJK, Peshawar and Bahria University, Islamabad. 4.13 CONCLUSION

The HDIP thus worked as the scientific and technical arm of the Ministry of Petroleum & Natural Resources in the oil, gas and energy sectors while at the same time facilitating private sector investment by providing professional guidance and advice. Although a public sector outfit, it earned 48% of its budget from its own services performed to high professional standards. HDIP has achieved the Goals and Targets assigned to it for expansion of CNG industry in Pakistan.

46

Chapter - 5 COMPANIES

http://www.ogdcl.com

5.1 OIL AND GAS DEVELOPMENT COMPANY LIMITED (OGDCL)

47

48

5.1

INTRODUCTION:

OGDCL, the local market leader in terms of reserves, production and acreage, became the first Pakistani E & P Company to list its shares on the London Stock Exchange. Equipped with its first ever professionally developed Business and Strategic Plan, a debt-free and robust balance sheet, and healthy cash reserves, OGDCL is ready to take on the challenges of an internationally listed company. The FY 2006-07, was the year of milestone achievements for the Company. It fulfilled its Business Plan target of drilling 30 wells in 2005-2006 and exceeded this number when it achieved its targets of 41 wells in 2006-07.The company also exceeded its 2-D Business Plan seismic target by 13% from 2,870 L.kms in FY 2005-06 to 3,250 L.kms in FY 2006-07 and registered a 64% increase in its 3-D seismic achievement from 395 Sq.kms in FY 2005-06 to 642 Sq.kms in FY 2006-07. OGDCL made 10 oil and gas discoveries out of which 8 were in Sindh, and one each in Punjab and NWFP provinces. Never before has the company made this number of discoveries in any single Financial Year. Through these new discoveries OGDCL has added 28 MMbbls of oil / condensate and 965 bcf of gas to its existing reserves base. OGDCL achieved 81% of its production target for oil and 78% of its production target for gas in the FY 2006-07. However, if compared with last years performance it registered 15% increase in oil production from 31,521 bopd in 2005-06 to 36,329 bopd in 2006-07. Another achievement was the recent completion of Mela project. The project was completed in a record time of 19 weeks. The infrastructure laid for this project is capable of handling 10,000 barrels of oil per day and 20 MMcfd of gas. 5.1.2 NEW FINDS: Following oil and gas discoveries have been made during the Financial Year 2006-07 Mela Mela was discovered on 26th September, 2006. The well is located in District Kohat, NWFP and was spudded on 11th April, 2005. The well produced 4,100 BPD of oil and 12 MMcfd of gas at well head flowing pressure of 5,000 Psi at 32/64 choke size. Pasakhi NE Pasakhi NE was discovered on 6th October, 2006. The well is located in District Hyaderabad, Sindh and was spudded on 5th March, 2006. The well produced 1,800 BPD of oil through jet pump.

49

Unar-1 Unar-1 was discovered on 15th November, 2006.The well is located in District Hyderabad, Sindh and was spudded on 21st June, 2006. The well produced 150 BPD of oil and 13.7 MMcfd of gas at well head flowing pressure of 2,765 Psi at 32/64 choke size. Nim West-1 Nim West-1 was discovered on 21st December, 2006. The well is located in District Hyderabad, Sindh and was spudded on 28th June, 2006. The well produced 6.26 MMcfd of gas at well head flowing pressure of 2,700 Psi at 32/64choke size. Chak 66 NE-1 Chak 66 NE-1 was discovered on 16th April 2007, and is located in District Sanghar, Sindh. The well produced 4.1 MMcfd of gas and 1,600 BPD of condensate at well head flowing pressure of 1,400 psi at 32/64 choke size. Dhachrapur well-1 Dhachrapur well-1 was discovered on 18th April 2007, and is located in Tando Alam (M.L), in Sindh. The well produced 9.25 MMcfd of gas at well head flowing pressure of 2,400 psi at 28/64 choke size. Dakhni Deep well-1 Dakhni Deep well -1 was discovered on 23rd April, 2007 and is located in Dakhni (M.L), District Attock, Punjab. The well produced 10.8 MMcfd of gas and 260 BPD of condensate at well head flowing pressure of 2,100 psi at 32/64 choke size. Kunnar west-1 A Kunnar West -1 A was discovered on 23rd April, 2007 and is located in District Hyderabad, Sindh. The well produced 11.02 MMcfd of gas and 170 BPD of condensate at well head flowing pressure of 2,480 psi at 32/64 choke size. Thora Deep Well-1 Thora Deep Well -1 was discovered on 22nd May 2007, and is located in District Hyderabad, Sindh. The well produced 9.90 MMcfd of gas and 100 BPD of condensate at well head flowing pressure of 1,880 psi at 32/64 choke size.

50

Chandio Well-1 Chandio Well -1 was discovered in June, 2007 and is located in District Hyderabad, Sindh. The well produced 2.45 MMcfd of gas and 70 BPD of condensate at well head flowing pressure of 540 Psi at 32/64 choke size. 5.1.3 FUTURE OUTLOOK Initiatives have been taken to enhance OGDCLs business canvas. OGDCL will avail opportunities, to acquire overseas acreage by buying stakes in existing viable producing fields. OGDCL is also looking into the possibility of E&P opportunities and joint venture collaborations outside Pakistan. OGDCL will follow an aggressive business development strategy to provide an enabling environment for foreign participation (either as a JV partner or on a stand-alone basis). The Company is also aiming at fast-track development of its current and future projects at an aggressive pace without compromising quality and transparency. OGDCL BUSINESS PLAN TARGETS (2007-08): Following targets have been set by the company for the year 2007-08: 5.1.4 To drill 50 (41 firm + 9 contingent) wells in the year 2007-08. To carry out 6,625 L.kms of 2-D and 1,975 Sq.kms of 3-D seismic survey in the year 2007-08. To produce 42,000 BOPD of oil and 1,002 MMscfd of gas from OGDCLs own & operated Jvs in the year 2007-08.

OFFSHORE ACTIVITIES: Block-wise activities in the Indus offshore blocks w.e.f 1st July 2006 to 30th June, 2007 are given as per following details: Indus Delta-A (BLOCK # 2367-4): a. The Production Sharing Agreement (PSA) was signed on 23rd October 2004. The area of the block is 2,499.01 sq. kms with grid area 31.72 and minimum work commitment in Phase-I is 215.32 work units. With financial commitment of US $ 2.153 million. During July-September 2006, tendering / process for acquisition of 580 Sq.Kms (405 firm and 175 contigent ) has been completed. Award of contract for acquisition of 580 Sq.Kms of 3D Seismic survey was finalized in October 2006, with M/s Seabird Company of Norway. M/s Seabird started Seismic data acquisition work on 16 November 2006. After acquisition of 392 Sq.Kms of 3D data, the project has been completed on 27th January, 2007.

b. c.

d.

51

Off Shore Block -R (BLOCK # 2267-1): a. The block was granted on 19th April 2007. The area of the block is 1,492.23 sq. kms and grid area is18.92 with minimum work commitment in Phase-I is 113.52 work units. Purchased 858 linear kilometers seismic data from LMKR and being studied / interpreted. Acquisition of 1600 linear kilometers 2D seismic data has been planned.

b. c.

Off Shore Block-S (BLOCK # 2266-8): a. The block was granted on 22nd March 2007. The area of the block is 2,129.91 sq. kms and grid area is 26.06 with minimum work commitment in Phase-I is 156.36 work units. Purchase of 695 linear kilometer seismic data from LMKR is in progress. Acquisition of 1,663 linear kilometer 2D Seismic data has been planned.

b. c.

Eastern Off Shore Indus-A (BLOCK # 2366-6): a. The block was provisionally granted on 10th September 2005. The area of the block is 2500.00 sq. kms and grid area is 31.92 with minimum work commitment in Phase-I of 271.52 work units. The available data is under study to design seismic survey.

b.

Off Shore Indus-G (BLOCK # 2265-1): Offshore IndusG was granted to Government Holding Public Limited (GHPL) wherein the following Contracting Companies with Participating interest indicated hereunder entered into Production Sharing Agreement on 3rd July, 2003 as follows:Petronas Carigali (Pakistan) Limited OMV (Pakistan) Exploration OGDCL Mari Gas Company Ltd 40% 15% 10% 05%

All the partners decided to surrender their participating interest in the block. However OGDCL through an Assignment agreement acquired the share of other contracting Companies till the expiry of the 5th Contract year. One year extension from the date of execution of the assignment agreement with petrobras. An agreement has been signed with Petrobras on 8th February, 2007 for a period of one year, according to which Petrobras will study the data and then will present 3D Petroleum system modeling. DGPC has granted one year extension w.e.f 8th February, 2007 in Phase III (5th

52

year) of the licence based on work programme provided by Petrobras and during the extension period OGDCL will remain the operator of the block. After the extension period Petrobras will have the option to become the operator or to withdraw from the area. Processed seismic data has been sent to Petrobras. Sending raw seismic and well data is in progress. Indus Off Shore-E: (BLOCK # 2365-1) Indus offshore Block E is operated by M/s Shell. OGDCL is Joint Venture partner with an equity interest of 30 %. An Operating Committee Meeting (OCM) was held in July, 2006 in which it was decided to hold next Management Committee Meeting (MCM) in February, 2007 in Singapore on drilling. OCM / TCM was held in Singapore from 19-22 February, 2007. The operator informed that the rig to drill Indus Block-E in April 2007, as previously decided in the OCM / TCM held on 8th November, 2006 in Islamabad, will be available in August, 2007 since the rig needed massive repairs and refurbishment.

53

http://www.sngpl.com.pk

5.2 SUI NORTHERN GAS PIPELINES LIMITED (SNGPL)

55

55

56

5.2.1

INTRODUCTION

Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas company in the country, engaged in the business of transmission and distribution of natural gas beside construction of high pressure transmission and low pressure distribution systems. Transmission network in Punjab and Frontier Province (NWFP) comprising over 6,625 Km of high-pressure pipeline ranging form 6 to 36 in diameter. The distribution activities covering 977 towns and villages in the Punjab and NWFP are managed through its eight Regional offices. An average of about 1583 Million Cubic Feet per day (MMCFD) gas was sold in 2006-07 to over 2.9 Million industrial, commercial and domestic consumers in the Regions through distribution network of over 51,911 km.

57

BOARD OF DIRECTORS
1 Mr. Altaf M. Saleem Chairman, Lahore Mr. A Rashid Lone Managing Director, Sui Northern Gas Pipelines Limited, Lahore Mr. Tariq Iabal Khan, Managing Director/Chairman, National Investment Trust (NIT) Ltd., Karachi. Mr. Hussain Dawood Chairman, The Dawood Group, Karachi. Mr. Saeed Ullah Shah, Director General (Gas), Islamabad Mian Raza Mansha, Nishat Group of Companies, Lahore Mr. Jalaluddin Qureshi Financial Advisor Ministry of Petroleum & Natual Resources, Islamabad Mr. Shahzada Dawood Chief Executive, Dawood Hercules Chemical Limited, Lahore Mr. Arif Saeed Lahore Syed Mohammad Asghar Dawood Hercules Chemical Limited, Lahore Mr. Amanullah Shaikh Karachi Mr. Qasim Rabbani, Executive Director, Invest Capital & Securities (Pvt) Ltd., Karachi. Mr. Abdul Bari Khan , Chief Executive Karachi Mr. Munawar B. Ahmad, Managing Director,

9 10 11

12

13 14

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Sui Southern Gas Company Limited, Karachi 5.2.2 DETAILD INFORMATION ON DIFFERENT ACTIVITIES OF SNGPL DURING 2006-2007

Province/Sector-wise gas sales analysis for 2006-2007 Figures in MMCF SECTOR PUNJAB NWFP TOTAL Power 144,924 0 144,924 Fertilizer 43,465 64 43,529 Cement 8,545 2,885 11,430 CNG/Transport 35,725 7,559 43,284 General Industry 173,518 13,511 187,029 Commercial 20,125 2,209 22,334 Domestic 108,725 16,525 125,250 TOTAL 535,027 42,753 577,780

i.

ii. Sector

New Connections provided During 2006-07 New Connections provided 227,710 3,656 676 232,042 Targets Figures in Nos. Achievement Vs Targets (%) 107% 85% 137% 107%

Domestic Commercial Industrial Total

213,000 4,320 495 217,815

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iii.

No. of Customers as on 30.6.2007 PUNJAB 2,495,632 37,994 4,762 2,538,388 NWFP 373,509 7,693 425 381,627 Figures in Nos. TOTAL 2,869,141 45,687 5,187 2,920,015

Sector Domestic Commercial Industrial Total iv.

Distribution Lines laid During 2006-07 PUNJAB 3,823 800 4,623 NWFP 597 128 7225 Figures in KMs TOTAL 4,420 928 5,348

Description Mains Services Total v.

Distribution Net Work as on 30.6.2007 PUNJAB 34,082 10,463 44,545 NWFP 5,558 1,808 7,366 Figures in KMs TOTAL 39,640 12,271 51,911

Description Mains Services Total vi.

Transmission Net Work Laid during 2006-07 Figures in KMs 215.05 266.72 2.87 0 484.64

Punjab NWFP Sindh Balochistan Total: vii. Transmission Net Work As on 30.06.2007

Punjab NWFP Sindh Balochistan Total:

Figures in KMs 5311.76 829.87 362.72 120.37 6624.72

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viii.

Province-wise Towns and Villages As on 30.06.2007 Figures in Nos. Province Cities/Towns Villages TOTAL Punjab 177 611 788 AJK/Federal Capital 2 3 5 NWFP 43 141 184 Total 222 755 977 ix. Summary Showing Province-Wise Break-Up of Executives and Subordinates Working in the Company as on 30.09.2006 Executives 5 9 0 3 108 618 7 11 761 Subordinates 58 54 3 97 1238 4672 8 32 6162 Total 63 63 3 100 1346 5290 15 43 6923

Province AJ KASHMIR BALUCHISTAN FANA FATA NWFP PUNJAB SINDH ( R ) SINDH ( U ) Total

The following information can only be provided after the finalization of SNGPL accounts by the external auditors, which are expected by 15TH August, 2007. The soonest SNGPL accounts are finalized we would endeavour to submit the same. x. Tax Paid During 2006-2007 Rs. In mIllion INCOME TAX G.S.T. TOTAL xi. Financial Highlights 2007 SALES-GROSS VALUE (Million rupees) PROFIT BEFORE TAX (Million rupees) PROFIT AFTER TAX (Million rupees) EARNING PER SHARE (rupees) 2006 107,879 5,119 3,722 7.46 2004 84,710 4,261 2,734 5.48 2003 64,276 3,664 2,297 4.60 2002 45,649 3,207 2,014 4.03

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SSGCL
http://www.ssgcl.com.pk

5.3 SUI SOUTHERN GAS COMPANY LIMITED (SSGCL)

63

64

5.3.1

INTRODUCTION

Sui Southern Gas Company (SSGC) is Pakistans model gas utility and a blue chip company with a sound financial base, an annual turnover of Rs 76.3 billion, a 3,290 km high-pressure transmission network and a 29,832km distribution network, extending across the two southern provinces of Sindh and Balochistan. SSGC is a public limited company incorporated under Companies Ordinance 1984 and is listed on all three stock exchanges. The present corporate status of the company emerged by merger of three companies viz. Karachi Gas, Indus Gas and Sui Gas Transmission Company, of which the oldest was formed in 1954. It is the first utility Company in Pakistan to receive ISO14001 and OHSAS-18001 certification. i. Company Vision To be a model utility, providing quality service by maintaining a high level of ethical and professional standards and through the optimum use of resources. ii. Mission Statement To meet the energy requirements of customers through reliable, environment-friendly and sustainable supply of natural gas, while conducting company business professionally, efficiently, ethically and with responsibility to all our stakeholders, community and the nation.

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BOARD OF DIRECTORS
1 2 Mr. Aitzaz Shahbaz Chairman, Board of Directors Mr. Munawar Baseer Ahmed Managing Director Sui Southern Gas Company Limited Mr. Saeedullah Shah Director General (Gas) M/o Petroleum & NR. Mr. Jalal-ud-din Qureshi Financial Advisor, PN&R Mr. Abdul Rashid Lone Managing Director, SNGPL Mr. Tariq Iqbal Khan Managing Director National Investment Trust Mr. Muhammad Javed Khan Executive Direct, State Life Insurance Corporation of Pakistan Mr. Khurshid K. Marker Karachi Mr. Qasim Rabani Official Executive Director, Investment Capital & Securities, Karachi Mr. Sajid Zahid Joint Senior Partner, Ordignam & Co. Karachi Mr, Saquib H. Shirazi Chief Executive Officer, Atlas Group of Companies, Karachi Mr. Zahid Majid, Lahore Mr. Asif Saeed 63/1, Phase-V DHA, Karachi Mr. Samiullah Baloch Managing Director, Balochistan Construction, Quetta

3 4 5 6

7 8 9 10 11 12 13 14

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SUI SOUTHERN GAS COMPANY LIMITED

PERFORMA FOR YEAR BOOK 2006-07
1.

ANNEX -3

SECTOR WISE/PROVINCE WISE CONSUMPTION OF GAS Actual MMBTU 2006-2007

July 2006 June 2007

POWER 123,040 FERTILIZER 21,497 CEMENT 3,206 CNG / TRANSPORT 12,426 GENERAL INSUSTRIES* 112,546 COMMERCIAL 8,401 DOMESTIC 59,284 TOTAL __________________________ 340,399 __________________________ JJVL SALE INCLUSIVE
2. NEW CONNECTION PROVIDED: TARGET FY 2006-2007 PROVIDED/ ACHIVEMENT ACTUAL 2006-2007 TOTAL NETWORKS AS ON MONTH END 1,920,098 1515 265 83,900 TARGET FOR 2007-2008 82120 1515 265 83,900

3.

DOMESTIC COMMERCIAL INSUSTRIAL TOTAL

79,475 1,615 265 81,355

84,697 1,593 286 86,576

TRANSMISSION NETWORK PROVINCE WISE KM SINDH BALOCHISTAN TOTAL 128 46 228 2,645 645 3,290

231 NET

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4.

DISTRIBUTION WORK KM

MAINS SERVICES TOTAL *Inclusive of Rehabilitation

2,230

1,978 312 2,290

23,448 6,384 29,832

* 2,122

5.

PROVINCE-WISE CITIES, TOWINS & VILLAGES ON GAS CITIES/TOWN SINDH BALOCHISTAN TOTAL VILLAGES SINDH BALOCHISTAN TOTAL CITIES/TOWN/VILLEGES SINDH BALOCHISTAN GRAND TOTAL 13 1 14 107 124 231 113 24 137 960 409 1,369 7 5 12 166 96 262

13 6 19 117 74 191

130 80 210

120 125 245

1,073 433 1,506

173 101 274

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http://www.psocl.com

5.4 PAKISTAN STATE OIL COMPANY (PSOCL)

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5.4.1

INTRODUCTION

Pakistan State Oil (PSO), the nations largest oil marketing company having an average turnover of around US$ 5.5 billion, enjoys an overall market share of 68% with 79% representation in Black Oils and 59% in White Oil. The company is involved in storage, distribution and marketing of POL products nation-wide, including Mogas, HSD, Fuel Oil, LDO, SKO, petro-chemicals, LPG and CNG. This blue chip company, the winner of Karachi Stock Exchange Top Companies Award for a number of years and a member of World Economic Forum, has been a popular topic of case studies by Business Schools in Pakistan and abroad based on its radical corporate transformation over the last few years. It is among the corporate entities with highest earnings and capitalization. Incidentally, PSO is the only public sector organization in Pakistan competing with many multinational and private owned oil-marketing companies such as Shell, Caltex and Total-PARCO, APL, Admore, Bosicor, etc. 5.4.2 VISION

To excel in delivering value to customers as an innovative and dynamic energy company that gets to the future first. 5.4.3 MISSION STATEMENT

We are committed to leadership in energy market through competitive advantage in providing the highest quality petroleum products and services to our customers, based on: Professionally trained, high quality, motivated workforce, working as a team in an environment which recognizes and rewards performance, innovation and creativity, and provides for personal growth and development. b) Lowest-cost operations and assured access to long-term and costeffective supply sources. c) Sustained growth in earnings in real terms. d) Highly ethical, safe, environment friendly and socially responsible business practices. a)

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BOARD OF MANAGEMENT
1. 2. 3. 4. Mr. Pervaiz Kausar Chairman, Board of Management, PSOCL Mr. Jalees Ahmed Siddiqi Managing Director & CEO, PSOCL Mr. Mahmood Akhter Joint Secretary (Budget), Ministry of Finance Mr. Shaukat Hayat Durrani Additional Secretary, Ministry of Petroleum & Natural Resources Mr. Tariq Kirmani Ex-Chairman & CEO, Pakistan International Airlines Corporation (PIAC) Mr. Tariq Iqbal Khan Chariman & Managing Director, National Investment Trust (NIT) Mr. Istaqbal Mehdi Managing Director, Pak Kuwait Investment Company Mr. Muhammad Yasin Malik Chairman, Hilton Pharma (Pvt) Ltd. Mr. Kamran Mirza Managing Director, Abbott Laboratories Pakistan Ltd. Mr. Arshad Said Former Senior Executive, Shell Pakistan

5.

6.

7. 8. 9. 10.

5.4.4

EXCELLENCE IN CUSTOMER SERVICES

PSO serves a wide range of customers throughout Pakistan, including retail, industrial, aviation, marine and government/defense sectors. Professionals at PSO strive for providing unmatched and diverse services to the customers in line with best international practices. PSOs state-of-the-art New Vision retail outlets are equipped with the most modern facilities including auto car wash, electronic dispensing units, convenience stores, business centers, internet facilities, electronic SSGC bill acceptance and mobile charge top-up through POS terminals.PSO has a network of over 170 convenience stores branded as ShopStop throughout the country. Also as part of its Retail Automation Programme, PSO installed Pump Controllers at the New Vision Retail Outlets to automate flow of transaction data from fuel-dispensing unit to the POS terminals for processing of fuel cards transactions. PSO being the first Oil Company to introduce additized fuel at no extra cost such as GreenXL Plus diesel and PremierXL Gasoline, to deliver high value to customers at no additional cost in terms of improved engine performance, fuel economy and reduced noise and air pollution. The Quick Oil Lube Vans introduced by PSO, provide the lube change facilities at customers doorsteps. Twenty-one ISO9000 certified Mobile Quality Testing Units ensure top of the line quality of products and services.

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PSO being a visionary and customer oriented organization; rigorously eyes on solution providing improved checks on fuel expenditures for customers convenience. Catering to the core objective, PSO would be introducing yet another technologically advanced product to our Fleet Card clients - Vehicle Identification System (VIS). This solution would provide an added security feature, satisfying the customers and the station owners as the system not only identifies the type of fuel to be filled but also restricts the delivery to unauthorized vehicle. Earlier PSO provided a value-added service by launching Fleet Management Solution (FMS) for Fleet & Corporate Card customers. Pertaining to changing customer requirements, FMS was re-launched with enhanced functionalities. FMS is a revolutionary value added service that integrates state-of-the-art technology with total customer convenience that allows to control and monitor fuel consumption on real time basis. Being a believer of catering to changing market needs, the company introduced new denominations of Rs 1,000 and Rs 10, 000 for a different niche of customers. The Look and Feel attribute of Prepaid Cards was improved with bright colors at its base, giving its brand personality an energetic and dynamic character. Owing to its strong brand image, PSO became the first non-banking entity to launch a marketing campaign with VISA international and Disneyland. The alliance placed PSO in the league of few Pakistani brands to have worked with brands of a stature and magnitude of mammoth proportions. Work on other such initiatives is underway, which would further elevate PSOs brand image and customers loyalty. PSO geared towards its vision of getting to future first had introduced yet another convenience for its customers in collaboration with SSGC: Easy Pay of Gas Bills at PSO Stations. The e-bill payment system allows all the SSGC subscribers to settle their gas bills through PSOs Point Of Sale Terminal Network. With bills acceptance round-the-clock at over 250 PSO retail outlets of Sindh and Baluchistan, SSGC subscribers are now relieved from the hassle of standing in long queues outside banks and compliance of stringent bank timings for acceptance of bills. This facility is being extended for payment of other utility bills in due course. 5.4.5 TOTAL QUALITY MANAGEMENT

In its relentless pursuit to continually improve its systems so as to bring further operating efficiencies and achieve the highest level of customer satisfaction, the company has already implemented ISO Certification at all major departments and facilities. During FY07, PSO Cards Division earned the distinction of ISO 9001-2000 certification. Similarly, the Logistics function of PSO has also been awarded the ISO 9001:2000 certification. It is expected that within a year, all offices and locations of Logistics and Cards Division would also achieve the ISO 9001-2000 certification. In FY07, the company introduced Kerosene Detection Test for quality testing of motor gasoline and HSD at retail outlets. This test helps monitor adulteration of dyed Kerosene and has improved the companys image among its customers with on-spot checking of fuel at retail outlets, industrial consumer sites, and other PSO facilities.

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Consistent conformance to prescribed standards and specifications across the whole range of activities from receipt, storage, transportation and delivery of products is the cornerstone of PSOs quality management system. 5.4.6 HEALTH, SAFETY AND ENVIRONMENT

Ensuring the health and safety of PSO employees, contractors, customers and members of public likely to be affected by the Companys operations is one of the basic corporate objectives, and as a priority it ranks equally with market share and profit. Accordingly, it is the Companys policy to perform work in the safest practicable manner, consistent with best industrial practices while adhering completely to the requirements of health and safety codes and practices. The Companys Health, Safety & Environment (HSE) Steering Committee monitors HSE compliance on regular basis while HSE Site Committees ensure that HSE requirements are met at all operating locations, including Depots, Terminals, Plants, Retail Outlets and Airports. PSO is the first OMC to install gas leak detectors at CNG Stations.

5.4.7

REFORM OF CORPORATE GOVERNANCE

This programme covers the revamping of the organizational architecture, rationalization of staff, employee empowerment and development and efficiency and transparency in decision-making through Cross-Functional Teams. PSOs corporate structure has evolved into a matrix, which has divided the Companys major operations into independent activities supported by the financial, legal, information and other services. These activities operate in an autonomous and collegial manner in the form of Strategic Business Units based on the clear and transparent allocation of responsibility and accountability. This structural change has been reinforced and related checks and balances have established by putting in place several corporate monitoring and control systems. One of the top priority areas of PSOs corporate reform is Human Resource Development. The company has undertaken several initiatives to ensure induction and training of professionals with the objective of ensuring high level of professionalism and productivity at all levels of its employees.

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5.4.8

PROGRESS OF ANNUAL GOALS FOR FINANCIAL YEAR 2006-2007 PRODUCT TARGET 2006-2007 Market Share (%) 45.5 60.0 65.0 63.0 32.4.0 58.8 ACTUALS 2006-2007 Market Share (%) 46.0 60.0 70.5 64.2 24.1 58.8

White Oil MOGAS HSD SKO JP-1 Local JP-1 Export Sub-Total Black Oil LDO FO Sub-Total Lubes LPG CNG Chemicals 5.4.9

57.0 79.0 78.5 36.5 5.3 19.6 45.0

44.7 80.0 79.3 31.0 3.6 19.6 38.5

SALES PERFORMANCE

PSO has ended FY07 as a market leader in all major POL products; PSO sold approximately 11.3 million tons of POL products. Despite the increasingly stiff competitive market situation, PSO again emerged as leader with 68 percent share on overall basis. The growth in industry consumption of FO was 2.4 millions tons i.e., 47%. PSO retained its market leadership and captured 80% participation in this segment thereby increasing its market share 1.5 percentage points over last year. This translated into an extraordinary growth in PSOs sales of FO by 49.5%. In White Oil (Mogas, Diesel, Kerosene and Jet A-1), PSO increased its market share to 59%, while in Black Oil, PSOs share increased to 79%. As far as total POL consumption is concerned, PSOs total POL sales grew by 21% - thus outperforming the Industry whose total POL sales grew by 15% only. During FY07, PSO gained 0.7% share in Mogas, bringing its market share to close at 46% - the highest in ten years. As this product segment is undergoing shrinkage in terms of industry consumption, PSOs total Mogas volume is only 2.3% compared to the industry decline of 3.7%. Hence PSO once again outperformed the industry players owing to continued aggressive marketing and further penetration of its plastic cards.

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PSO HSD sales also witnessed a further growth of around 1.4%, outperforming the industry that declined by 0.5% over prior year. As a result, the companys market participation increased to around 60% compared to 59% recorded in the preceding year. Despite the ever-declining kerosene demand, PSO managed to increase its market share by 7% over last year. In FY07, PSO captured market share in JP-1 (excluding exports) to 64% from 63% in FY06. PSO maintained its leadership in that against the industry volume decline of 7.5% over prior year, PSOs JP-1 sales volume declined by just 2.2%. January 2007 became a landmark in the Aviation fuel segment with PSO surpassing all previous records of sales by delivering 63,262 MT of JP-1 at different airports. In Black Oil, PSO sales grew by 49% in FO whereas they declined by 2.2% in LDO. PSO used to have a monopoly in this product segment before the entrance of new players having refinery backup which is the main reason for decline in volume of LDO sold by PSO. 5.4.10 NEW VISION PROGRAMME

In FY07, PSO continued to offer additional value to its customers; another 150 New Vision stations were developed during FY07, bringing the total number of these outlets to a four digit number of 1,609. In order to maximize the return on investment for shareholders, the company closed down 200 more outlets under the Retail Rationalization Program. PSO also commissioned 25 new CNG stations, the highest for any OMC in the country bringing the countrywide number of such stations to 210. PSOs CNG earnings during FY07 climbed to Rs. 345 million, up 72% over previous year. 5.4.11 INFORMATION TECHNOLOGY

In its pursuit to achieve par excellence performance, PSO implemented SAP in FY2005 to operate at higher operating efficiencies thru real-time and online system. Improvements are being continuously made in SAP application by IT in order to attain business efficiency. These improvements are following international standards, of segregating system development quality assurance, volume test before being implemented in the production environment. The implementation of SAP module COPA offering capability for profitability analysis is also being implemented. This functionality offers the opportunity for multidimensional analysis of costs and revenues such as by products, by customer, by region and so on and leads to informed and timely decision making. Being a firm believer of continual improvement in all spheres of operations, specifically after the implementation of SAP, the internal processes of IT were realigned to provide improved internal customer services. SAP functional teams were further strengthened with experienced functional consultants to provide in house support to SAP

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business users. Business processes were improved and aligned with SAP process flows. An awareness program was initiated about the additional or new functionality / features offered SAP. In communications, IT is continuing to explore and implement new technologies that are more economical and offer higher levels of reliability. GPRS technology is being used to connect retail stations with PSO Head office. The company also embarked upon the use of V-sat technology at its retail outlets so as to utilize modern connectivity mode for its financial transactions at retail outlets as well as to maintain its technological edge over its competitors. A network topology transition has been initiated, i.e. from star topology to mash. Local area network security has been upgraded; it has a security framework that combines multiple layers of products and services to provide comprehensive, continuous virus, spam and spy ware protection at every network entry point. Likewise communication facilities were improved by installing video-conferencing facility between five remote locations and PSO Head office. All these strategic thrusts raised PSO to higher standards of performance. 5.4.12
FINANCIAL RESULTS

During FY07, PSO sales revenue touched an all time high and reached at Rs 411 billion, up by 16.7% over preceding year. The company sold around 11.3 million tons of POL products, an increase of 15.3% over prior year mainly owing to the surge in fuel oil demand on account of increased reliance on thermal power generation. For the year ended 30 June 2007, the company recorded profit before tax of Rs 7.1 bn, while profit after tax stood at Rs 4.7 bn. Owing to sharp decline in international prices especially in the 1HFY07, OMCs suffered significant inventory losses, which were further aggravated by increased financing cost borne by OMCs due to delayed reimbursement of Price Differential Claims (PDCs) by Government of Pakistan. Based on this remarkable financial performance the company announced a final cash dividend of Rs 11 per share (110%) to its shareholders, resulting in total dividend of 210% for the whole year, as against 340% cash dividend declared during the preceding year. 5.4.13 CORPORATE SOCIAL RESPONSIBILITY

PSO contributes in improving the quality of life and is embodied for social responsibility, a corporate commitment that is put into practice through our culture, the ethical handling of our business, the development of our associates, support for our communities and environment friendly operations. Our Corporate culture starts with integrity and is practiced through our three basic beliefs; Respect for individuals, Customer service and Strive for Excellence. We promote health, safety, education, women empowerment, citizen issues and heritage preservation both internally and externally. Our support is not only in financial terms, we believe in lining ourselves for causes where we can make a difference and add values to lives. We have also provided recently financial assistance to Institute of Special Children, Quetta for a modern FM system for the deaf to ensure their better

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communication so that they can get education effectively and learn different skills to become contributory members in society in due course of time. PSO partnered with the Citizens Foundation in building a school in Vinder Balochistan, which became operational in August 2006. We are building schools in Earthquake affected areas, two of which will be completed by Sept-Oct 2007. Dowities Operation Theater Society built an OT complex there. PSO funded a complete operation theater in that complex, which will help in achieving the goal of leaving no surgical patient untreated. Our support is in the line of our endeavors to assist various hospitals in the city of Karachi to cater for the needy in the health sector. We did provide appropriate financial assistance to the National Institute of Cardio Vascular Diseases, so that we could play a role in alleviating the health and medical facilities in the country. PSO is also assisting institutions like Marie Adelaide Leprosy Center, which is fighting the battle against leprosy. In the field of heritage preservation, Company has also supported to overhaul and maintain the NED dispensary, Karachi. Today PSO directly impact the lives of over 2.5 million people who visit its outlets and other facilities daily as well as the community in general because of its unstinted commitment to keep the wheels of the economy moving, through procurement, storage and supply of its life bloodthe petroleum products. All business is conducted on high ethical standards and to ensure compliance of all health, safety and environment requirements. 5.4.14 PAYMENT TO NATIONAL EXCHEQUER FY 2006-2007 Sales Tax Levies Income Tax Workers Profit Participation Fund Total (Rs in Million) 52,418 11,054 4,051 573 68,096

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5.4.15

FINANCIAL HIGHLIGHTS FOR LAST FIVE YEARS Year ended 30th June Rs Million (unless noted)
2007 2006 352,515 3,428 11,654 7,525 717 20,813 172 4.9 2.1 36.2 12.3 10.7 11.5 37.8 5.8 44.4 43.9 309.0 7.0 34.0 13.0 1.24:1 1,857 58,822 5,831 1,900 2005 253,777 3,219 9,191 5,656 1,506 17,545 172 5.4 2.2 32.2 12.0 10.9 11.2 39.9 5.4 31.7 33.0 386.0 11.6 26.0 25.9 1.24:1 1,870 38,823 4,459 1,230 2004 195,130 2,634 6,263 4,212 2,096 15,446 172 4.7 2.2 27.3 10.8 9.9 13.1 40.1 5.2 27.5 24.6 256. 10.4 17.5 34.1 1.25:1 1,474 50,942 3,002 1,210 2003 206,376 2,465 6,209 4,030 1,643 14,264 172 4.3 2.0 28.3 13.8 12.5 19.7 35.4 6.3 34.8 23.5 228.4 9.7 16.0 23.6 1.25:1 1,403 53,699 2,744 1,290

Sales Revenue Marketing & Administration Expenses Profit before tax Profit after tax Capital Expenditure Shareholders Equity No. of shares Outstanding PROFITABILITY Gross Profit Ratio Net Profit Ratio Return on Shareholders Equity Return on Capital Employed Return on Total Assets ASSET UTILIZATION Inventory turnover ratio Debtor turnover ratio Total asset turnover ratio Fixed asset turnover ratio INVESTMENT Earning per share Market Value per share Price Earning per share Dividend per share Bonus shares LEVERAGE Interest Cover ratio Current Ratio VALUE ADDITION Employees as remuneration Government as taxes Shareholders as dividends Retained within the business

411,058 3,748 7,122 4,690 1,609 20,939 (in million) % % % % % X X X X Rs. Rs. X Rs. % X 172 3.0 1.1 22.4 35.4 6.3 11.7 32.5 5.7 52.0 27.34 391.45 14.3 21 6.9 1.22:1 2,006 68,096 3,602 1,100

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http://www.ppl.com.pk

5.5 PAKISTAN PETROLEUM LIMITED (PPL)

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5.5.1

INTRODUCTION

Incorporated on June 5, 1950 as a Public Limited company, PPL inherited all the assets and liabilities of the Burmah Oil Company (Pakistan Concessions) Limited, and started business on 01 July, 1952. Burmah Oil Company plc of UK (subsequently renamed as Burmah Castrol plc) was the parent company and majority shareholder of PPL. In 1997 Burmah made a strategic decision to disinvest from the exploration and production of oil and gas worldwide and sold its entire equity in PPL to the Government of Pakistan. In July 2004, the Government sold 15 percent of its holding in the Company through Initial Public Offer to General Public as part of its Privatization Programme, reducing its shareholding in PPL to 78.4%. International Finance Corporation (IFC) holds 4.3% of PPL's equity and the remaining 17.3% is held by private investors. PPL is a leading oil and gas exploration and production company, and is the operator of Pakistan's major gas fields. Gas production by PPL accounts for about 26% of the country's total gas production. It also produces Crude Oil/ Natural Gas Liquids (NGL) from Adhi field, Manzalai/ Makori discoveries in Tal Block and Mela discovery at Nashpa Block. In addition Liquefied Petroleum Gas (LPG) is produced from its Adhi Field. PPL is the owner and the operator of Sui and Kandhkot Gas Fields. PPL's portfolio of developed and producing assets consist of four operated fields (Sui, Kandhkot, Adhi and Mazarani). The Company has working interest in seven partner operated fields / discoveries namely Qadirpur gas field operated by OGDCL, Miano and Sawan gas fields operated by OMV, Manzalai and Makori discoveries in Tal Block operated by MOL, Mela discovery in Nashpa Block operated by OGDCL and Block-22 in which PEL is the operator. PPL's present exploration portfolio consists of 24 exploration blocks out of which eight (8) areas are PPL operated and sixteen (16) areas including four (4) offshore blocks are partner operated. PPL in joint venture with OMV (operator) has also been awarded an area (Block-29) in Yemen after successful bidding. As of June 30, 2007, the remaining proven recoverable reserves of PPL consisted of 3.959 Tcf of gas (707 million barrels of oil equivalent) and around 21 million barrels of Oil/NGL. The Company's current hydrocarbon production in terms of energy is equivalent to around 182,000 barrels of crude oil per day. The gas produced by the Company is sold to Sui Southern Gas Company Limited, Sui Northern Gas Pipelines Limited, and Water and Power Development Authority. A dedicated team of Pakistani professionals manage PPL operations. The Company continues to operate as an independent entity carrying on its business on a commercial basis. The Board consists of nine directors, eight of whom are Government nominated, and one is the nominee of IFC.

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Exploration & Development Prospects The main objective of the Company is to maintain its position as one of Pakistan's leading hydrocarbon producer. In order to achieve this objective, PPL has devised a dynamic exploration and development strategy with a close focus on enhancing its reserve replenishment ratio, improving drilling to discovery ratio and introducing production efficiencies through the use of modern production techniques. The Company's reserve replenishment plan includes review of attractive investment opportunities for acquisition of producing oil and gas assets in order to boost its hydrocarbon reserve profile and at the same time participate in securing the country's overall energy plan. Major capital projects planned for the next five years include addition of high pressure casings for SUL compressor at SFGCS, Performance/ Revamp Study of existing SML compressors; addition of well head compression facilities at Kandhkot for maintaining delivery pressure, Enhancement of Gas processing facilities and installation of compression facility at Qadirpur field; Compression Facility at Block-22, Central Processing Facilities at Tal and fast track development of recent discoveries. Operational Performance PPL's exploration activities increased significantly after the initiation of first licensing round by the Government in 1989 which led to the discovery of Qadirpur in 1990 and Miano in 1993. Since 1998 Companys exploration activities accelerated and gathered unprecedented momentum. From the year 1998 to date, the Company acquired licences and working interest in 33 exploration blocks, acquired a cumulative 7,834 line km 2D seismic data and 7,304 sq. km. of 3D seismic data. The 29 exploratory wells drilled in both PPL operated and partner operated blocks, resulted in thirteen discoveries i.e. Sawan, Hamza, Hassan, Sadiq, Khanpur, Pab formation of Sui field, Manzalai and Makori discoveries in Tal Block, and recent discoveries in Nashpa, Latif, Gambat, Hala and Mamikhel discovery atTal Block. PPL undertook appraisal/development of new fields on a fast-track basis to bring them on stream. This led to commencement of production from Miano, Sawan, Mazarani, Block-22 gas fields, Pab formation of Sui field and Sakesar formation of Adhi field including EWT (Extended Well Test) production from the Manzalai, Makori and Nashpa discoveries. Reservoir/ geological studies have confirmed potential for production enhancement at Adhi Field. Installation of LPG/NGL plant -Phase II at Adhi completed during the year which has now more than doubled the field production capacity. Activities on SUL Compression Project Phase-II at Sui Gas Field has been completed during the year. The Company has also started major capital projects i.e. Kandhkot Well head Gas Compression Project, installation of Gas Compression Facilities at Qadirpur gas field and Block-22, to enhance production and improve efficiencies.

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Present Organizational & Corporate Structure PPL's organizational structure comprises of six functional areas Exploration, Production, Corporate Services, Projects and Technical Services, Finance and Human Resources. Managing Director/Chief Executive heads the operational activities of the Company. Deputy Managing Director (F&A) oversees Finance, Administration and Human Resource functions and Deputy Managing Director (T) looks after Production, Drilling, Information Technology, Projects and Technical Services functions. Exploration function is headed by General Manager Exploration. The Companys Internal Audit Department is headed by Senior Manager Internal Audit. 5.5.2 VISION

Our vision is to maintain PPLs position as the premier producer of hydrocarbons in the country and at the same time make a strategic transition to become an international company, exploiting oil and gas resources beyond the borders of Pakistan, resulting in value addition to shareholders investment and to the nation as a whole. 5.5.3 MISSION STATEMENT

Our mission is to optimize hydrocarbon production and pursue an aggressive exploration programme in the most efficient manner on the local as well as international horizons through a team of professionals utilizing the latest developments in the exploration and production technology and maintaining the highest standards of health, safety and environment protection.

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BOARD OF DIRECTORS
1 2 3 4 5 6 7 8 9 Mr. M.A.K.Alizai Chairman, Board of Directors Mr. S. Munsif Raza Chief Executive / Managing Director , PPL Mr. S.R. Poonegar Former Chief Secretary, Balochistan Mr. Sajid Zahid Barrister-at-law Mr. Shaukat Hayat Durrani Additional Secretary, MP&NR Mrs Roshan Khursheed Bharucha Ex Senator and Social Worker Mr. Jalaluddin Qureshi * Financial Advisor (P&NR) Mr. Pervaiz Kausar Chairman, PSO Mr. Rashad R. Kaldany, IFC Alternate Director, Mr. Nadeem Siddiqui
* expired on 23 August, 2007

5.5.4

COMPARISON OF THE PERFORMANCE DURING THE YEAR 2005-06 & 2006-07

Following is a comparison of current years production with the previous year from PPLs 100% owned fields and its share from all operated and non-operated joint ventures: 2006-07 Natural gas (Million cubic feet) Crude Oil / NGL (Thousand barrels) Condensate (Thousand barrels) LPG (Tonnes) 365,525 956 75 14,220 2005-06 371,714 574 79 9,478

The production during the period under review including share from joint ventures averaged at 1,001 MMscfd of gas, 2,825 bpd of Oil / NGL / Condensate and 39 tonnes per day of LPG.

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5.5.5

OWN PRODUCING FIELDS SUI GAS FIELD (100% PPL)

The Sui Gas Field has served the country for over half a century and still remains an important source of gas supply for a substantial part of gas demand of our country. At its discovery in 1952, it was ranked as one of the largest gas fields in the world. From inception to date, the cumulative gas production from Sui Gas Field has amounted to 9.1 Tcf (around 1.6 billion barrels in terms of oil equivalency), which has resulted in substantial foreign exchange savings to the country and played a role in the industrial development of the country. The operations of the Sui Gas Field continued satisfactorily throughout the year. The volume of gas sales during the year was 207,746 million cubic feet as against 215,972 million cubic feet in 2005-2006. As an option for treatment of gaseous effluents from the Purification Plant, the Company is studying Carbon Emission Reduction (CER) by way of injecting acid gases into Habib Rahi Reservior at Sui Gas Field. One of the wells to be abandoned has been selected as the injection well where injectivity test into Habib Rahi Limestone is planned to be carried out. 5.5.6 KANDHKOT GAS FIELD (100% PPL)

Gas from the Kandhkot Gas Field is supplied mainly to WAPDA's Guddu Thermal Power Station, and SNGPL and a nominal quantity to SSGCL for Kandhkot town. The volume of gas sales from Kandhkot field during the year was 48,370 million cubic feet as against 48,525 million cubic feet in 20052006. To increase the reliability of the existing production facility a new 130 MMscfd Standby Dehydration Unit is planned to be installed for operations in parallel with the existing Dehydration Units. EPCC contract for installation of Kandhkot Gas Compressor awarded to China Petroleum Engineering and Construction Corporation March, 2007. CPECC has commenced work on detailed engineering of the includes installation of wellhead gas compression facilities at the Field to contractual delivery pressure maximizing reserves recovery. 5.5.7 Station was (CPECC) in project. This maintain the

OPERATED JOINT VENTURES PRODUCING FIELDS ADHI FIELD (PPLS SHARE 39%) PPL / OGDCL / POL JOINT VENTURE (OPERATOR PPL)

Following is a comparison of current years sale with the previous year from Adhi Field:

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2006-07 Natural gas (Million cubic feet) NGL (Thousand barrels) Crude Oil (Thousand barrels) LPG (Tonnes) 11,547 1,206 547 36,358

2005-06 6,649 660 607 24,360

The Adhi LPG / NGL Plant-II commissioned in September, 2006 whereafter the production from the field has doubled and current production rates are 40 MMscfd gas, 4,500 bbls of oil and 130 Tonnes LPG. As part of optimization of production capacity, hydraulic fracturing of the last well in Adhi 18(T/K) was successfully carried out which has enhanced the well deliverability by about threefolds. It is planned to further extend the hydraulic fracturing campaign to other wells at Adhi. As part of long term strategy, the Company intends to explore the subthrust, prospect lying in the Mining Lease strata for which geological/ geo physical study has been recently completed. 5.5.8 MAZARANI GAS FIELD (PPL'S SHARE 87.5%) PPL / GHPL JOINT VENTURE (OPERATOR PPL)

Mazarani Gas Field comprising of Gas Processing Plant and an 8 dia 75 km long gas transmission pipeline for injection of Mazarani gas into SSGCLs Indus Right Bank Pipeline network at Larkana was commissioned in June, 2003. The total volume of gas sold from Mazarani to SSGCL during the financial year was 4,072 million cubic feet as compared to 4,344 million cubic feet during 2005-06. Two wells provide the required feed for the plant. In order to maintain gas feed at optimum level, drilling of an additional well Mazarani-4(L) has been completed in October, 2007.

5.5.9

NON-OPERATED JOINT VENTURES PRODUCING FIELDS BLOCK22 (PPL'S SHARE 35.5263%) PPL / GHPL / PYRAMID / PEL JOINT VENTURE (OPERATOR PEL)

The total volume of gas sold from Block-22 for the year was 5,399 million cubic feet as compared to 7,181million cubic feet in 2005-06. Block-22 is currently producing around 15 MMscfd from 4 wells namely Hasan X-1, Sadiq X-1, Khanpur X-1 and Hasan-2. In order to enhance the recovery from the reservoir, drilling of Hasan-3 has been completed in October, 2007. It is also planned to drill Khanpur-2, and Sadiq-2 wells during 2007-08 for meeting the gas sales targets and maximize recovery.

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As per field development plan, a Compression Facility is planned to be commissioned during 2008-09. The Front End Engineering Design (FEED) Study for field compression has been completed. 5.5.10 SAWAN GAS FIELD (PPL'S SHARE 26.184%) PPL / ENI / MND / GHPL/ OMV JOINT VENTURE (OPERATOR OMV)

The total volume of gas sold from Sawan for the year was 129,761 million cubic feet as compared to 124,613 million cubic feet in 2005-06. Sawan field is selling around 370 MMscfd sales gas to northern and southern parts of the country with SNGPL taking around 250 MMscfd and SSGCL 120 MMscfd. In order to meet the gas sales demand, Sawan-10 has been tied-in and processing of the well stream commenced during first week of July, 2007. In order to optimize the reservoir recovery, Sawan-11 is planned to be drilled during 2007-08. The Field Gas Compression Project initiated in 2006 is planned to be installed by 2009. 5.5.11 MIANO GAS FIELD (PPL'S SHARE 15.16%) PPL/ENI / OGDCL / OMV (OPERATOR OMV )

The Miano field gas is being jointly processed with Kadanwari field gas at Kadanwari Plant. The field is currently supplying gas to SSGCL from five wells. During the year the total volume of gas sales from Miano field was 44,041 million cubic feet as compared to 52,744 million cubic feet in the previous year. As per the Development Plan, M-10 was tied to the Processing Facility in 1st quarter of 2006-07. Miano-11 was spud-in May, 2007. The drilling of the well and production testing has been completed.

5.5.12

QADIRPUR GAS FIELD (PPL'S SHARE 7%) PKP / KUFPEC / PPL / OGDCL JOINT VENTURE (OPERATOR OGDCL)

The total volume of gas sales during the financial year was 182,260 million cubic feet (including 12,066 million cubic feet of dehydrated/ raw gas) as compared to 180,886 million cubic feet (including 13,217 million cubic feet of dehydrated/ raw gas) in 2005-06. Qadirpur Gas Field is one of the major gas fields of Pakistan with original recoverable gas reserves of 4.2 Tcf. As part of field Development Program, additional wells are being drilled to sustain /enhance production rates. Based on 2D and 3D seismic data interpretation, an exploratory deep well, Qadirpur Deep X-1 was spud in May, 2006 and reached near target depth. Currently the drilling is temporarily suspended to acquire high temperature pressure equipment to continue operations.

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Existing Membrane based Gas Processing Facilities at the field have installed capacity of 500 MMscfd sales gas. Considering existing reservoir potential and demand for additional gas production from the field, a capacity enhancement project is in progress to increase sales gas from 500 to 600 MMscfd by 2008. In order to maintain long-term sales gas supplies at contractual delivery pressures, Gas Compression Facilities are planned to be installed by 2008-09. An EPCC contract has been executed with M/s China Petroleum Engineering Construction Corporation (CPECC) in November, 2006 for the project. 5.5.13 BLOCK 3370-3 (TAL) (PPL SHARE 27.763%) PPL / OGDCL / GHPL / POL / MOL JOINT VENTURE (OPERATOR MOL) Following is a comparison of current years sale with the previous year from Tal Field: 2006-07 Natural gas (Million cubic feet) Condensate (Thousand barrels) Crude Oil (Thousand barrels) 22,164 638 30 2005-06 16,616 162 142

The sustained deliverability of the discovery well Manzalai-1 has been established through Extended Well Testing (EWT). Following declaration of commerciality, the field is being developed for production. After successful completion of appraisal well Manzalai-2, two development wells have been drilled and the drilling of third development well is in progress. The development plan includes a 300 MMscfd processing facility, with expected commissioning during 2009-10. The EWT of Makori discovery is in progress. Remedial workover and stimulation job was carried out on Makori-1 which has improved the production to about 27 MMscfd gas and 2,000 bpd condensate.

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5.5.14

BLOCK 3370-10 (NASHPA) (PPL SHARE 26.05%) PPL/ OGDCL /GHPL JOINT VENTURE (OPERATOR OGDCL)

The EWT of the exploratory well Mela-1 is currently in progress. To further appraise the discovery drilling of appraisal wells Mela-2 and 3 are in progress. 5.5.15 EXPLORATION ACTIVITIES

The demand for energy is on the rise with expansion in the economy and concerted exploration efforts are required to find new discoveries to boost the energy supply. The Companys exploration activities have gained unprecedented momentum to meet the growing energy demand within the country with the acquisition of new areas and working interests. The Company has employed modern technology including state of the art computer applications, remote sensing and communication techniques to further revamp its exploration efforts. Summary of PPL's seismic and drilling activities is given in Annexure 1. 5.5.16 FOREIGN EXCHANGE SAVINGS AND GOVERNMENT REVENUES

PPL contributes significantly to the national economy. The Companys share of production of natural gas from its operated and non-operated fields, and production of Oil, LPG and NGL from Adhi and Tal fields for the financial year 2006-07 in terms of energy, was equivalent to 182,000 barrels of crude oil per day, resulting in foreign exchange saving of around US$ 4.1 billion for the current year assuming an average crude oil price of US$ 62 per barrel. In addition, payments to the Government Exchequer by the Company was around Rs 34.3 billion during the year (Rs 25.9 billion during 2005-06) on account of taxes, royalties, excise duty, dividend, sales tax and gas development surcharge (Annexure-2).

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ANNEXURE-1

PAKISTAN PETROLEUM LIMITED EXPLORATION ACTIVITIES DURING THE YEAR 2006-07 Seismic Survey Acquried (A) / Purchased (P) 2D Line Km 3D Sq. Km. For the Year 2006-07 Process (P) / Gravity Reprocess (R) & Magnetic surveys 2D 3D Sq. Stations Line Km. Km 128 (P) 210 (P) 451 (R) 451 (R) 338 (P) -

Activity

No. of Exploratory /
Development Wells

PPL Operated Exploration Blocks Block 3372-12 (Kot Sarang) Block 2568-13 (Hala) Block 2766-13 (Khuzdar) Block 2568-15 210 (A) (Tajpur) Block 2969-8 (Barkhan) Bhawalpur East 151 (P) Subtotal Acquire / Process Subtotal Purchase / 151 (P) Reprocess Partner Exploration Blocks Block 3370-3 (Tal) Block 2668-4 (Gambat) Block 2669-3 (Latif) Block 3370-10 (Nashpa) Block 2668-5 (SW Miano-II) Block 2768-3 (Ex Block-22) Block 2667-7 (Kirthar) Block Eastern Sindh Block 2366-4 (Offshore Indus M) Block 2366-5 134 (A) 162 (A)
2,068(A)

1 exp (d) 1 exp (s) -

210 (A) -

168 (A) -

168 (P)

1 exp (d), 1 exp (sus), 1 exp.* 1 exp (s) 1 exp (s)

236 (P)* 302 (P) 317 (R)

215 (P)*

1 exp (s), 2 dev * 1 exp. (d)

162 (P)* 2068 (P)*

277 (A) 409 (A)

702 (A) 310 (A)

277 (P) * 409 (P) *

702 (P) * 310 (P) *

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(Offshore Indus N) Subtotal Acquire / Process Subtotal Purchase / Reprocess

3,218 (A)

1,012 (A)

470 (P), 3,152 (P)*,

1,227(P)*

317(R)

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ANNEXURE-1

PAKISTAN PETROLEUM LIMITED EXPLORATION ACTIVITIES DURING THE YEAR 2006-07 Seismic Survey Acquried (A) / Purchased (P) 2D Line Km Partner Producing Blocks Qadirpur D&PL Sawan D&PL Miano D&PL Hasan, Khanpur, Sadiq D&PL Manzalai D&PL Subtotal Acquire / Process Subtotal Purchase / Reprocess Total Acquired / Processed Total Purchase / Reprocessed Total Wells Drilled- Expl / Dev. s = successful d = dry hole * In progress 62(A), 200 (A)* 200 (A)* 62 (A) 2 dev, 1 dev* 1 exp (sus), 1 dev 1 dev 1 dev (sus), 1 dev 3D Sq. Km. For the Year 2006-07 Process (P) / Gravity Reprocess (R) & Magnetic surveys 2D 3D Sq. Stations Line Km. Km

Activity

No. of Exploratory / Development Wells

3,280(A) 200(A)* 151 (P)

470 (P), 1,222 (A) 3,152 (P)*

338 (P)
1,227 (P)*

10 exp 9 dev

768 (R)

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ANNEXURE-2

PAYMENTS TO NATIONAL EXCHEQUER

FOR THE YEAR ENDED ON JUNE 30, 2007 RS MILLION Royalty Gas Development Surcharge Corporate Tax Dividend Excise Duty Sales tax 3,913 5,490 10,176 6,858 1,339 6,544 34,320

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http:/ /www.parco.com.pk

5.6 PAK ARAB REFINERY LIMITED (PARCO)

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5.6.1

INTRODUCTION

Incorporated in Pakistan in May 1974, Pak-Arab Refinery Limited (PARCO) is a joint venture between the Government of Pakistan (GOP) and Emirates of Abu Dhabi. Established with seed money of Rs.540 million, by the two joint venture partners in the ratio of 60% (GOP) and 40% Abu Dhabi, the paid-up capital of the company is Rs.11.6 billion as at 30.6.2007. Since the commencement of commercial operations 27 years ago, the companys equity base has expanded to Rs. 40 billion; a phenomenal 74 times from its initial equity of Rs.540 million and an asset base approaching Rs. 101 billion or close to US$ 1.7 billion in current dollar terms. It was the first company in the country to be rated AAA by PACRA; maintaining the AAA credit rating for an unprecedented tenth year. PARCOs Board is made up of six Directors including the Chairman and the Managing Director nominated by GOP and four Directors including the Vice chairman nominated by Abu Dhabi Petroleum Investment Company LLC (ADPI). PARCO is truly an Energy Company PARCO as an energy company is a key player in the countrys strategic oil supply and its logistics. With the synergy of a comprehensive and expanding oil pipeline network, integrated with a significant and modern refining capability, PARCO has emerged as the strategic fuel supplier to the country. PARCOs competitive advantages through the integration of pipeline operation, strategic storage, leading edge refining and a significant role in marketing of petroleum products, have enabled it to achieve a unique position in the energy supply chain. Strategic Pipeline Network PARCO operates crude oil and product pipelines. It transports mainly crude from Karachi to Mahmood Kot near Multan for its Mid Country Refinery, through its 864 Km, 16 dia Karachi to Mahmood Kot pipeline. Having the initial annual pumping capacity of 2.9 million tons, with technological upgradation of the system it is now capable of pumping up to 6.0 million tons. In June 1997, PARCO completed MFM (Mahmood Kot-Faisalabad Machhike) Pipeline Extension Project for transport of refined products, like diesel and kerosene, to Faisalabad and to Machhike, near Lahore through its 364 - Km long 16" and 18" diameter pipeline. The Project design allows for future spur lines from Faisalabad to Kharian and Sahiwal. PARCOs Pipeline System includes a network of highly sophisticated Telecommunication facilities and a comprehensive Supervisory Control and Data Acquisition (SCADA) System.

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Mid-Country Refinery PARCOs 100,000 BPD, state-of-the-art Mid-Country Refinery at Mahmood Kot completed at a cost of US$ 886 million, on self financing basis without calling additional equity from its shareholders, represents about 40% of the indigenous refining capacity of the country. It helps in substituting imports of refined value added petroleum products. Marketing Initiatives "TOTAL PARCO PAKISTAN LTD (TPPL), a company formed as a joint venture of PARCO and TOTAL of France is marketing consumer petroleum products. Already 162 stations have been commissioned in the first 6 years of its operations. Under a Technical Services and Support Agreement, SHV of Holland is marketing PARCOs LPG production as PEARL Gas. PARCO is currently marketing OMV Austrias lubricants under the brand name of PEARL Lubes. PARCO is also locally producing lubricants in various grades of engine oil PEARL energy for Gasoline engines, PEARL zabardast & PEARL zabardast Plus for Diesel engines and PEARL Speed for motorcycles, as well as PEARL Gearup for gears and transmission systems and PEARL Hydraulic oil strictly under its own formulation and supervision to ensure the highest standards. White Oil Pipeline (WOP) PARCO has completed another cross-country pipeline at a cost of US$ 480 million. This pipeline is an infrastructural asset of major strategic significance for Pakistan. The 817-km, 26 diameter White Oil Pipeline, commissioned in March, 2005 is designed to carry up to 12 million tons per year of refined petroleum products from Karachi to Mahmood Kot, starting with initial throughput of 5 million tons per year. Pak-Arab Pipeline Company Limited, a joint venture between PARCO (51%), SPL (26%), PSO (12%), and Chevron (11%) owns this pipeline system. PARCO is the operator of this Pipeline. Korangi-Port Qasim Link Pipeline (KPLP) The 22 - Km long, 26 diameter pipeline linking PARCOs Korangi station with PAPCOs Port Qasim station has been commissioned in March 2006. The strategic link has connected both the Karachi ports (Keamari and Port Qasim) with PARCO and PAPCO pipeline systems, providing flexibility in pipeline operations to receive crude as well as product from either port.

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The Management of the company is vested in Board comprising of following members:Board of Directors OFFICIAL Mr. S. Salim Abbas Jilani Chairman Mr. Khadem Al Qubaisi Vice Chairman & Managing Director ,IPIC Mr. M. Rasheed Jung Managing Director, Mr. Mohamed H. Al Mehairi IPIC, Abu Dhabi Mr. Ahmed Ghaleb Al Muhairi IPIC, Abu Dhabi Mr. Shafeeq A. K. Hussain Private Sector Mr. Aijaz Ahmed Chaudhary Member National Assembly Dr. Hans-Heinz Horrak ADPIs/OMV Nominee IPIC Mr. G.A. Sabri Director General (Oil) Ministry of Petroleum and Natural Resources Mr. Mahmood Akhtar Joint Secretary (Budget) Finance Division, (Ministry of Finance)

1 2 3 4 5 6 7 8 9

10

5.6.2

VISION STATEMENT

For PARCO to remain among tomorrows corporate winners, it may not only need to have a clear vision but also a passion for translating that vision into reality. The big challenge is therefore, not only trying to figure out what future will be the right one, but to choose a future that will give definite competitive advantage to the Company over the long-term and to create a cause for action besides charting a course on how to get there.

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5.6.3

MISSION STATEMENT

To maintain PARCOs flagship role in the countrys energy sector by making it a fully integrated oil conglomerate through broader vision, accentuated drive and professional excellence. A continuous struggle is needed to make PARCO a symbol of success that can offer unmatched benefits to its owners, employees, business associates and the community it operates in. 5.6.4 CORE VALUE Professional and Progressive Corporate Outlook Aggressive Technical Thinking and Advanced Planning Reliability of Service Consistency in Performance Organized and Systematic Development

Remaining within the fold of the above core values, following are the objectives: 5.6.5 To enhance and establish a professionally sound corporate identity. To operate the existing Pipeline System in a manner that establishes it as a centre of excellence in Pipeline and Refining Activities in the Country. To embark upon Integrated Investment Programme which takes cognizance of the existing bottlenecks and long-term petroleum needs of the Country. To provide a lead to the indigenous Petroleum Industry in finding of solution to Technical and Managerial problems. To develop appropriate Human Resources for undertaking of large Energy Projects in the Country.

ACHEIVEMENT & PROGRESS FOR 2006-07

PARCO, like any professional organization, strives for self sufficiency, mitigation of risk and profitable operations. The salient features of the actual performance for the year 2006-07 are as under:The company achieved the highest ever sales of Rs.125 billion, including US$ 41.2 million through export of Motor Gasoline and with close monitoring of operating cost, repayment of loans of Rs.3 billion which resulted in reduction in financial charges, the company earned net profit of Rs. 8.5 billion. PARCO has generated significant benefits for national economy against GOPs initial investment of Rs.324 million. During the year it has paid the following amounts to Government Exchequer:

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(Rs. In Million) Income Tax Dividend Customs Duties Total Payments to GOP 5840 3600 90 9530

The statistics for production of the refinery and transportation of oil during the period July 2006 to June 2007 were as under:(Figures in 000 Tons) 150 10 406 39 633 102 1,256 975 18 3,586

Liquid Petroleum Gas HOBC JP-1 LDO MS (90 RON) Kerosene High Speed Diesel Furnace Oil Sulphur Total

The company has transported through its pipeline system 3.648 million tons of crude oil from Karachi to Mahmoodkot and 2.15 million tons of petroleum products from Mehmoodkot to Failsalabad and Machhike. 5.6.6 EMPLOYMENT OPPORTUNITIES AND MANPOWER STRENGTH

It has been the main objective of PARCO to generate direct and indirect employment opportunities by launching new projects in the country so that country develops a highly skilled human resource base to meet the future challenges. PARCO Mid-country Refinery near Multan, oil pipelines and other facilities are playing a catalyst role in expanding countrys industrial base and have been instrumental in the development of down stream units located in underdeveloped areas along their respective routes. A large number of retail outlets for distribution and marketing of LPG and oil products have been established. The company has generated employment for around 2000 people of multi trade skills. 5.6.7 GOALS/TARGETS FOR FINANCIAL YEAR 2007-08 The Prime Goals set for the year 2007-08 are as under:1) Consolidation of the good results achieved in 2006-07 and minimize the negative effects of the volatile prices of crude oil in international market. Revamping and upgrading of the pipeline and telecom system to increase the efficiency of the existing system.

2)

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3) 5.6.8

Eliminating the Shortfall in Guaranteed Return (SGR)

STATUS OF PROJECTS Diesel Hydrodesulphurization Project (DHDS) Scope of Project: In Pakistan, the maximum allowable limit of sulphur in high speed diesel (HSD) as specified by Pakistan Standards and Quality Control Authority is 1.0%, which is much higher than the International standards PARCO is establishing Diesel-Hydrodesulphurization DHDS unit at its MidCountry Refinery MCR, which will reduce sulphur content from Diesel and meet the revised country specifications of 500 ppm or (0.05%) for sulphur. Current Status of the Project: Engineering Design Package (EDS) of the project has been prepared by a world renowned process designer and licensor company M/s UOP of USA. M/s ENAR Petrotech, a leading Pakistani based company was involved in the review of EDS package. On the basis of EDS package, Invitation to Bid (ITB)/Tender Document was issued to pre-qualified Engineering, Procurement and Construction (EPC) contractors. Three leading EPC contractors responded were evaluated and M/s CNCEC of China Hyundai Engineering HE of Korea Consortium is being recommended for the selection as EPC based on the proposal being technically acceptable and lower in cost. Overall project schedule proposed by the bidder is based on 24 months excluding the 180 days of operation. Benefits of the Project 1. 2. Environment friendly low sulphur fuel which will reduce sulphur and particulate matter in the air. Availability of high quality sulphur.

Completion: The project is expected to be completed by the end of 2010. Asphalt Air Blowing Unit Scope of Project: PARCO is implementing Asphalt Production Plant at its Mid-Country Refinery (MCR). The project aims at producing superior grade of Asphalt from furnace oil produced at Refinery. Limited market for furnace oil at certain time of the

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year restricts the Refinery throughput. The project will improve the Refinerys capacity utilisation and prove helpful in fulfilling an important need of High Grade Asphalt which is mainly used for paving roads, roofing & waterproofing purposes due to its excellent weather properties. In addition to this Asphalt is also used for manufacturing of Lubricating Oils for Open Gears System mainly used in Sugar Mills, Cement Industries and Railways. Current Status of the Project: M/s Adelo of Argentina (well known in Roads & Roofing process) conducted a Pilot Plant Test at Mid-Country Refinery (MCR) for samples of different composition of Arab Light, Murban, Upper Zakum & Local Crude of the vacuum bottom which have been found very promising and confirm that multigrades Asphalts can be produced by air blowing of vacuum bottom. M/s Porner of Austria are being contacted to submit their technical and commercial proposals for the basic and detailed engineering design works for the Asphalt Air Blowing unit. Benefit of the Project Availability of high quality Asphalt. Completion: Project is expected to be completed by 4th quarter of 2008.

5.6.9

UP-COMING PROJECT Khalifa Coastal Refinery Project (KCR-P) International Petroleum Investment Company (IPIC) in association with PARCO is setting up an Oil Refinery near costal area of Baluchistan of which IPIC & other UAE Government institutions will hold 74% stake and PARCOs stake will be 26%. Scope of Project: Pakistan is desirous of expanding and improving the Petroleum Refining and Petrochemical base in the country to meet domestic demand as the total projected POL deficit estimated by the year 2011-12, to be around 11 million tons per year while HSD deficit possibly will exceed well over 5 million tons per year. Surplus petroleum products and petrochemicals will be exported for generating foreign exchange. The target capacity of the Refinery is being considered between 200,000 to 300,000 bpd. Product qualities shall be based on Euro IV specifications for improving environmental standards besides ensuring the products be easily traded in the international market.

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Latest technology will be selected for targeting 100% of the local market for HSD currently met by imports that are running at 4.5 million tons at present. Current Status of the Project: The Implementation Agreement (IA) between IPIC & GoP has been signed on November 13, 2007. Site Survey and Geotechnical Investigation of the selected site have been completed by the local consultants. For Detailed Feasibility Study (DFS) of the overall project, M/s Jacobs Consultancy, a UK/USA based company, has been appointed for DFS consultant. The study is expected to be completed by mid February 2008. Benefits of the Project 1. 2. 3. 4. Secure POL Products supply line to Pakistan Infrastructure development in the Country Macro economic activity development in the country Economic turnaround in less developed area of Balochistan

Completion: It has been envisaged that the KCR-P will be commissioned by end 2012. 5.6.10 SOCIAL RESPONSIBILITY & COMMUNITY DEVELOPMENT PROGRAM UNDERTAKEN

Like any responsible corporate enterprise in a developing economy, PARCO is fully aware of its role of a public sector enterprise. The welfare of the society is on its agenda. The Company strives for Zero impact on environment and contribute significantly to reduce the threats to nature. a) Protection of Environment Towards keeping the environment free from pollution, PARCO adopted following measures. i) Introduction of Unleaded Fuel In Pakistan, PARCO pioneered the successful introduction of environment friendly 87 Octane unleaded motor gasoline in June 2001, whose quality has been enhanced to 90 Octane since March 2003. Modern estimates indicate that the worldwide lead contamination cause losses of billion of dollars annually on account of treatment of illness and losses in working hours. In the case of Pakistan such losses are

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estimated to be Rs. 4 - 6 billion per year, which have been minimized by the pioneering action of PARCO. ii) Spent large amount on treatment of waste and to make sure that the air water sources and subsoil strata of the Mid Country Refinery remain free. PARCO introduced lead-free Motor Gasoline four years earlier than the deadline announced by world agencies. Availability of LPG in northern areas to save Junipar trees in Balochistan and northern area is another contribution of PARCO to save the environment.

iii)

b)

Skilled Labor Force Through continuous launching of new project PARCO has provided opportunities to local people to learn new technologies to take-up highly skilled job which has saved substantial foreign exchange.

c)

Corporate and Social Responsibility Program PARCO has taken several steps to provide education and healthcare facilities particularly in the remote and poor areas where these facilities are needed most. Some of these efforts are illustrated below:

Built a school with TCF (The Citizens Foundation) for local community of Qasba Gujrat Constructed boundaries, provided fans and electrical equipment to schools in Moza Haji Shah & Patay Wala. Trained local school students on different matters e.g. Environmental issues, smoking etc. Established a community health centre near MCR. Mobile clinics for rural areas near MCR. The first ever free eye camp was organized by the Parco Community Welfare Clinic for the surrounding community and domestic servants working at MCR Housing Complex through the voluntary donations from the employees and their families. Ground Water Sampling & Monitoring of suburbs to monitor the quality of Drinking Water being used by the local community near MCR. Water purification plant in Dadu district. Contributed generously in cash as well as in kind, towards relief efforts for October 8, 2005 earthquake. PARCO has significantly supported culture and heritage by sponsoring a large number of books on diverse subjects such as poetry, music and other arts.

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5.6.11

Tubewell and ponds for crocodiles (an endangered specie) in the Kirthar National Park. PARCO is a member of WWF.

ACHIEVEMENTS & MILESTONES

During the last twenty seven years, the company initiated, completed and successfully commissioned the following projects for the development of the energy infrastructure of the country. Year of Completion Commissioning of Karachi-Mahmood Kot first crude-cum-product Pipeline system and a mid country Pumping Station at Shikarpur. Additional 50,000 tons of Petroleum Storage at Korangi and direct discharge of tankers in-land to ease pressure on Keamari to release congestion in the Oil Installations area of Keamari Harbour and improving oil transportation logistics up-country. Introduction of flow improving technology (CDR) to increase pipeline installed capacity of 2.9 to 4.0 million tons/ annum. Completion of Bubak (Sindh) and Fazilpur (Punjab) Pumping Stations (BFP) to reach the design capacity of 4.5 million tons to be further increased to 6 million tons per year with the help of CDR. System Up-gradation /Modernization and Telecom,Scada System to improve the existing system thru removing bottlenecks, increasing overall operational efficiency,effectiveness and safety of the system. 1981

1990

1992

1994

1995

Completed and Commissioned 360-Km MFM Pipeline Extension 1997 Project (from Mahmood Kot to Machhike via Faisalabad) to provide an all weather, reliable, sale and quick means of transporting Petroleum products to upcountry. The Pipeline Extension Project is designed to pump upto 5.5 million tons / year of HSD and SKO from the present terminal (TS-2)at Mahmood Kot to Machhike. Tankages having a capacity of 36000 tons each at Mahmood Kot and Faisalabad and 60,000 tons at Machhike have also been constructed as part of this project to augment the much-needed Storage Capacity in the Country. Completion and Commissioning of countrys largest Mid-Country Refinery of 4.5 Million tons / year, to expand and enlarge country's Refining capacity so that local and imported crude could be processed closer to the centers of consumption. 2000

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Soft commissioning of 817- Km White Oil Pipeline (WOP) in November 2004.

2004

Commissioning of 22-Km long 26 diameter pipeline linking 2006 PARCOs Korangi station with PAPCOs Port Qasim Station (KKLP) Triple IMS Certification for Mid-Country Refinery, Pipeline Division and Corporate Headquarters In 2006-07 PARCOs Mid-Country Refinery (MCR), Pipeline Division and Corporate Headquarters received Triple IMS Certification within a span of few months, validating its quality systems, environment concerns and employees safety & security practices.

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5.7 SAINDAK METALS LIMITED

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5.7.1

INTRODUCTION

The Saindak Metals Limited (SML), formerly known as Resources Development Corporation of Pakistan (RDC), is a national company, which deals in exploration, exploitation and development of non-ferrous minerals and extraction of base metals like copper. The Saindak Copper-Gold Project (SCGP) was completed by Metallurgical Construction Corporation (MCC) in 1995 and handed over to SML in January 1996 after trial production of 1,500 tones of blister copper. The project remained closed between 1996-2003, in February 2000, it was decided to restart the project through leasing option by inviting international bids. Accordingly, GoP awarded the lease to MCC Resources Development Corporation of China for a period of 10 years to operate the project as joint venture. M/s MCC Resources Development Company (Private) Limited (MRDL) arranged finances including working capital for maintenance, preparation, and a rehabilitation and production activities amounting to US $ 25.915 million as per terms of contract. The project was handed over to MCC China and commercial production started in August, 2003. 5.7.2 ACHIEVEMENTS FOR THE PERIOD JULY 2006 TO JUNE 2007: PRODUCTION The SCGP remained in production during the period July 2006 to June 2007 and following quantities were produced: i. ii. iii. Copper Ore Copper Concentrate Blister Copper 5,269,840.00 MT 81,889.57 MT 17,924.29 MT

SALES STATUS MCC / MRDL exported following quantities of blister copper during the period from July 2006 to June 2007. Blister Copper Value 5.7.3 15,925.14 Tons US $ 138,897,044 (Rs. 8,333.823 Million)

ESTIMATED PROFIT AFTER TAX FOR THE PERIOD JULY 2006 JUNE 2007: US $ 27 Million (50% share)

5.7.4

GOVERNMENT TAXES:

The Lessee paid Rs. 166.676 million as royalty @ 2% on sale value to Government of Balochistan. Similarly, 1.25% presumptive tax amounting to Rs.104.173 million and EPZ service charges @ 0.5% amounting to Rs.41.669 million were paid to EPZ authorities.

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5.7.5 COMPANYS PROFILE: a) Name and Address of the company with telephone and fax number: Saindak Metals Limited, 73-A, 2nd Street, Jinnah Town Quetta Cantt. (PAKISTAN) Tel: 081-9201690, 081-9201475, Fax : 081-2828336 e-Mail: samsarsml@yahoo.com b) Name of Chief Executive: Mr. Irshad Ali Khokhar c) Type of Company: Limited Liability Company, 100% owned by the Government of Pakistan. d) Annual Turnover: US $ 138,897,044/- (Equivalent Pak Rs. 8,333.823 million) e) Estimated Profit after Tax 2006-07 (50% SML share): US $ 27,000,000/- (Equivalent Pak Rs. 1,620.000 million) f) Type of Business / Manufacturing: Metal Mining g) Auditors: M/s Anjum, Asim, Shahid, Rahman, Chartered Accountants h) Legal Advisor: Mr. Mohammad Riaz Ahmed i) Bankers: i)

National Bank of Pakistan City Branch, Jinnah Road, Quetta

ii)

Habib Bank Limited Complex Branch, Quetta.

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iii)

Bank Alfalah Limited Siddique Plaza, I-10, Markaz, Islamabad.

iv) v) vi) vii) viii)

Muslim Commercial Bank Limited M.A. Jinnah Road, Quetta. Union Bank Limited 6-A, Union Arcade, F-7 Markaz, Islamabad Faysal Bank Limited, Shahrah-e-Adalat, Quetta. The Bank of Punjab, Jinnah Road, Quetta, & Rajan Plaza F-10, Islamabad United Bank Limited M.A.Jinnah Road, Quetta

5.7.6

Vision:

To make the country economically and financially sound through leasing out Saindak Copper Gold Project to a Chinese company, M/s MCC Resources Development Company (Pvt.) Limited. 5.7.7 Mission:

To make Saindak Metals Limited, a vibrant organization, capable of bringing the mineable resources to a stage where investors (local and foreign) are attracted. 5.7.8 TOTAL STRENGTH OF THE MANAGEMENT:

EXECUTIVE / NON-EXECUTIVE STAFF: Executives Regular / Non-Executive Staff (BPS 1-16) Contractual / Non-Executive (BPS 1-16) Sub-Total: Piecework basis workers/miners Grand Total: 8 8 16 5 21

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a.

Province / Region-wise Breakup: Punjab 1 1 Sindh 1 NWFP 1 2 Balochistan 1 2 5 AJK 1 1 FATA

TOTAL

Province/Region Officers Officers on contract Regular / NonExecutive Staff (BPS 1-16 Staff) Sub Total: Piecework basis workers/miners Grand Total: b.

5 3 8

2 2

1 1

3 3

8 3 11

2 2 4

16 5 21

Category and post-wise breakup of officers strength:

MD Company Secretary/ G.M (F) 1 1 Senior Engineer (Mining) 1 1 Sr. Accounts Officer 1 1 Assistant Manager Coord. Officer Sr. Stenographer Total

Category/Post

Head Office, Quetta Branch Office, Islamabad Grand Total:

1 -

1 1

1 1

1 1 2

6 2 8

c.

Breakup of regular / contractual / piecework basis workers etc. etc. 13 08 21

Head Office, Quetta Branch Office, Islamabad Total:

Social Responsibilities and community development programme undertaken: Established Saindak Model School at Project site. SML also established 50-Bed hospital and dispensary at Saindak Copper-Gold Project to provide health services. Lessee is providing potable water to the locals, which is scarce in area. 5.7.9 PAYMENTS TO NATIONAL EXCHEQUER. Rs. In Million 166.676 41.669 104.173 312.518

Particulars Royalty Development Surcharges Presumptive Tax Total

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5.7.10

FINANCIAL HIGHLIGHTS FOR LAST FIVE YEARS: 2003 550.365 118.374 2,569.005 2004 3,620.554 133.810 1,925.814 2005 5,785.066 297.218 3,904.334 2006 (Rs. In Million) 2007 8,333.823 1,620.000 2,987.405

Year Ended 31st December Sales Revenue Profit Before Tax Government Investment.

8,839.565 1,959.625 3,143.833

Note: Government has made capital investment of Rs. 14 million and all assets have been handed over to Lease Operator on a annual rent of US $ 0.5 million plus 50% share of surplus.

BOARD OF DIRECTORS 1 2 Mr. Ahmad Waqar Secretary, P&NR & Chairman, Saindak Metals Limited Mr. Irshad Ali Khokhar Director General (Mineral), Ministry of Petroleum & Natural Resources And Ex-Officio Managing Director, Saindak Metals Limited Mr. Athar Mahmood Khan Addl. Finance Secretary (Corporate Finance) Ministry of Finance GoP Brig.(R) M. Khalid Sajjad Khokhar Managing Director, PMDC Mirza Talib Hasan Director General Geological Survey of Pakistan, GoP Capt. (R) Qayyum Nazar Changezi Addl. Chief Secretary (Dev.) Planning & Development Department, GoB Mr. Maqbool Ahmed Secretary, Mines & Minerals Department, GoB Dr. Naseeruddin Sheikh Technical Director, SML BoD Engr. Muhammad Khalid Pervaiz Technical Director, SML BoD

4 5

7 8 9

119

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web site: www.mpnr.gov.pk

5.8 LAKHRA COAL DEVELOPMENT COMPANY LIMITED

121

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5.8.1

INTRODUCTION & INCORPORATION

Lakhra Coal Development Company Limited (LCDC), was incorporated as a Public Limited Company on 6th February, 1990 under Companies Ordinance, 1984. The Company is a Joint Venture of Pakistan Mineral Development Corporation (PMDC), Government of Sindh (GOS) and Water & Power Development Authority (WAPDA) with equity capital of Rs.50 million shared in the ratio of 50:25:25 respectively. BOARD OF DIRECTORS Mr. Irfanullah Khan Marwat Minister for Mines & Mineral Development Department, Govt. of Sindh/ Chairman of the Board Mr. Abdul Majeed Zahid Managing Director/ Chief Executive Mr. Abdul Hamid Akhund Secretary, Mines & Mineral Development Department, Govt. of Sindh Brig. (R) M Khalid Sajjad Khokhar Managing Director, PMDC Mr. Mohammad Razi Abbas, Additional Secretary, Finance Division Mr. Masood-ur-Rehman General Manager (Finance), PMDC Mr. Haseeb Ahmed Khan Chief Engineer (Thermal), WAPDA Mr. Mumtaz Ali Yousufzai Chief Executive Officer, Lakhra Power Generation Co. Ltd., Khanote, Distt. Jamshoro Mr. Irshad Ali Khokhar, Director General (Minerals), Ministry of Petroleum & Natural Resources

1 2 3 4 5 6 7 8

5.8.2

LAKHRA COALFIELD

The Company project comprising of operating coal mines, is situated in Lakhra Coalfield located about 70 km north-west of Hyderabad city and 200 km North-East of Karachi. The property lies between latitude 25-35 to 25-55 (north-south) and longitude 68-0 to 68-12 (east-west). 5.8.3 MINING CONCESSION

Presently an area of 7943 acres of Compact Block Coal lease is in possession of LCDC at Lakhra Coalfield for development of coal mines and supply of coal to LPGCL (WAPDA) Thermal Power Station at Khanote, District Jamshoro, Sindh. The total proved reserves in the area are 42 million tonnes.

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5.8.4

COMPANYS OBJECTIVE

Prime objective of the Company is to develop Lakhra Coal Mines to supply Coal to 150 MW Thermal Plant of LPGCL (WAPDA) at Khanote which was originally planned for 6x50 MW with annual coal consumption of 15,00,000 M.Tonnes. However, only 3x50 MW plant was set up which also operated much below its rated capacity reducing the coal requirement to even less than 50% and rendering the mechanized mining uneconomical. At later stage it was decided that remaining 3 units would be set up by private sector instead of WAPDA and accordingly an area of 8622 acres, out of 16,564.71 acres of Compact Block was withdrawn from LCDC leased area. 5.8.5 IMPLEMENTATION STATUS

LCDC engaged Chinese Company for Geotechnical studies and design and development of mechanized mines in the entire area of 16,564.71 acres. Geotechnical studies were completed and mine design prepared by the Company. LCDC was in the process of signing mine development contract with Chinese Company but it transpired that WAPDA had decided not to set up remaining 3 power units and the installed units operating at much lower capacity were expected to consume half of stipulated annual quantity of coal. Under these circumstances it also became difficult to arrange finances for the Company and thus it was decided to drop the idea of mechanized mines and was considered appropriate to develop coal mines with present semi mechanized system to meet the limited coal requirement of installed thermal plant. Heavy mechanization cost would have rendered the venture uneconomical if assured uninterrupted market for stipulated annual quantity of 750,000 tonnes was not available for operating coalmines. At present LCDC is operating coalmines through local manual mining system through investment by its Coal Raising Contractor. 5.8.6 INFRASTRUCTURE FACILITIES

For the purpose of development / operation of mines necessary infrastructure as stated below has been developed: i) Fair weather roads have been constructed for transportation of coal from mines to main road leading to market. Also fair weather roads connecting various mines have been developed Sufficient numbers of residential colonies for labour have been constructed along with necessary amenities. Water supply arrangement for residential colonies as well various mines have been made through water tanker as well as concrete water tank at colonies and mines Electric generators have been set-up for emergency lighting and mines lamp charging A mobile phone communication has been set-up to facilitate fast communication with mines site office.

ii) iii)

iv) v)

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5.8.7

MINE PLANNING AND TECHNICAL SUPERVISION

LCDC has employed a technical team of Mining Engineers, Geologist and survey officer supported with mine supervisory Sirdars and clerical staff. All operations of Raising Contractor are supervised/ guided by this team to ensure that all operations are carried out in accordance with statutory guideline and maximum possible recovery is ensured. The technical team overseas that the operations of Raising Contractor are in accordance with mine plan duly approved by LCDC. 5.8.8 STATUS OF MINE DEVELOPMENT

LCDC has 44 mines fully developed and capable of each producing 40 to 50 tonnes coal per day while 39 mines are under development. Coal excavation is carried out by applying shortfall retreating method after developing coal panels at 50 ft interval. When a panel is completely mined, it is sealed off and coal excavation is started from next panel. Ventilation circuit is maintained through main incline as intake and main shaft as return air way. In case mine workings are extended far away from main shaft, an additional shaft is provided to improve airflow through coalface. Shaft is also used for coal hauling and material lowering while incline is also used as traveling way for labor. 5.8.9 COAL SALES

Thermal Plant remained under trial during 1992-93 to 1994-95 and regular coal supplies could be started from the year 1995-96. Initially, coal supplies were made by LCDC partially from its own mines and partially from PMDC. After developing of Companys own mines, the Company is capable of meeting total coal requirement of Thermal plant. However, approximately 60% of coal supplies are made by LCDC and balance 40% supply from coalmines of PMDC through a internal arrangement between LCDC and PMDC. Due to under capacity operation and frequent shutdowns of WAPDA Thermal Plant, coal supplies to plant are much below the planned quantity of 7,50,000 tonnes. The plant is hardly using 200,000 to 250,000 tonnes coal, which is also jointly supplied by LCDC and PMDC. Therefore, LCDC has started selling surplus coal in open market so that the company does not run in losses. The Company has sold total quantity of 2682418 tonnes of coal upto 30.06.2007. The yearly break-up since financial year 1994-95 to 2006-2007 is given below: YEAR 1994 1995 1995 1996 1996 1997 1997 1998 SALES TO WAPDA 63,176 251,777 201,109 186,854 OPEN MARKET ------------TOTAL 63,176 251,777 201,109 186,854

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1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005-2006 2006-2007 TOTAL 5.8.10

262,219 229,204 122,446 163,297 136,200 136,995 139,375 101,973 108,142 2,102,767

8,873 6,914 67,472 110,006 126,122 92,286 58,383 51407 58,188 579,651

271,092 236,118 189,918 273,303 262,322 229,281 197,758 153,380 1,66,330 2,682,418

PROFIT & DIVIDEND FOR LAST 4 YEARS Year 2003-04 2004-05 2005-06 2006-07 Profit After Tax 14.321 million 16.129 million 27.346 million 21.087 million Dividend 50% 16% 20% 80%

5.8.11 PRESENT STATUS: The activities of the Company have been restricted by the Board of Directors to the extent of its existing coal mining operation in Lakhra as the Company is to be privatized. The privatization is under active process of Privatization Commission.

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http://www.ghpl.com.pk

5.9 GOVERNMENT HOLDINGS (PRIVATE) LIMITED (GHPL)

127

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5.9.1

INTRODUCTION

Government Holdings (Private) Limited (GHPL) manages Government of Pakistans working interest in upstream petroleum Joint Ventures. GHPL participates in all Joint Ventures as non-operator. As such it does not have yearly drilling or survey targets like other oil & gas companies. The company monitors the activities of the Joint Ventures on behalf of the Government of Pakistan. GHPL has been assigned GOPs working interest in 63 joint ventures. Current portfolio consists of: Twenty (20) land concessions in exploration stage, 14 concessions in Offshore area under Production Sharing Agreement (PSA) and 29 Development and Production Leases (D&PLs). Total 36 properties are producing Oil and Gas among which 21 are in D&P Leases while 8 are producing under Extended Well Testing (EWT) in Exploration Licenses (E.L) Seven properties in D&P Leases are under development phase. Thirteen (13) more discoveries exist in E.Ls awaiting development for start of production.

GHPL is non-operating partner with local and foreign oil and gas exploration and production companies functioning as operator. Major operating companies in partnership with GHPL are BP, Shell, BHP Billiton, OMV, Petronas Carigali, Tullow, Hycarbex, MOL, OPII, OGDCL, PPL, POL and PEL. Major oil & gas fields currently under development in which GHPL has working interest are Manzalai and Makori being operated by MOL.

5.9.2

STATUS OF MAJOR PROJECTS SAWAN (GHPL WORKING INTEREST 22.5%) Gas production from the Sawan continued in the year 2006-2007 at a steady rate. Debottlenecking job has successfully been completed and average gas production from the field during the year was 397 MMSCFD. ZAMZAMA (GHPL WORKING INTEREST 25%) Zamzama field produced gas and condensate on continuous basis. Average production from the field during the year was 305 MMSCF of gas and 2002 BBLS of condensate per day. Phase-II development work is in progress to produce additional 150 MMSCF of High Calorific Value (HCV) gas after the removal of Nitrogen, which is expected to start production by end September, 2007.

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CHANDA (GHPL WORKING INTEREST 17 %) The Chanda field, the first oil and gas discovery in NWFP started producing from 24th July, 2004. Average production from the field during the year 2006-07 was 10.59 MMSCF of gas and 5166 BBLS of oil per day. LPG production which was expected to start by the end of year 2006 was delayed and now the plant is in commissioning phase. MANZALAI TAL EXPLORATION LICENSE (GHPL WORKING INTEREST 15%) Manzalai is NWFPs second gas and condensate discovery and Operator MOLs first in the block. It was brought on Extended Well Test production on fast track basis. Average production during the year 2006-07 from one well was 44.40 MMCF of gas and 428 BBLS of condensate per day. One appraisal and two development wells have been drilled in the field. Two more wells are planned to be drilled during 2007-2008. Central processing plant is expected to be installed by early 2009 to start production from additional wells drilled. MAKORI TAL EXPLORATION LICENSE (GHPL WORKING INTEREST 15%) Makori is the second continuous discovery by the Operator MOL in Tal Block. The well was put on extended well production in January 2006 and its average production during the year 2006-2007 was 1428 bbls of oil and 18.08 MMSCF of gas per day. One appraisal well is planned to be drilled during 20072008. MAZARANI (GHPL WORKING INTEREST 12 %) Production from the field started in June, 2003. Average production from the field during the year was 11.48 MMSCF of gas and 67.43 BBLS of condensate per day. PARIWALI (GHPL WORKING INTEREST 17 1/2%) Pariwali was assigned to GHPL after it could not be privatized. Average production from the field was around 1941 BBLS of oil, 17.69 MMSCF of gas, 74 BBLS of gasoline and around 55 Metric Tons of LPG per day, during the year 2006-07. Drilling of an additional development well Pariwali # 7 is expected to be spud by end July, 2007.

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JHABERI SOUTH, JUNATHI SOUTH, ALI ZAUR, SHAHDINO, FATEH SHAH NORTH AND FATEH SHAH (GHPL WORKING INTEREST 25%) These small fields operated by BP in Badin-III and Mehran Blocks are on persistent depletion. Junathi South has already been fully depleted. The average total production from these fields during the year was 404 BBLs of Condensate and 8.29 MMSCF of gas per day. MIRPUR KHAS/KHIPRO (GHPL WORKING INTEREST 25%) GHPL has a share of 25% in the Mirpukhas/Khipro, discoveries. Eleven discoveries of gas and condensate namely Naimat Basal, Siraj South, Bilal, Bilal North, Kamal North, Rahim Umar, Ahmad, Usman, Kausar and Ali altogether produced 96.46 MMSCF of gas, 1317 barrels of condensate/oil and 51.54 Metric Tons of LPG per day during the year 2006-07. HASAN, SADIQ & KHANPUR (GHPL WORKING INTEREST 22.5%) Average production from the three fields (Hassan, Sadiq and Khanpur), operated by PEL, during the year was 15.32 MMSCF of gas per day. Three new development wells, one each in Hasan, Sadiq and Khanpur are planned to be drilled to sustain production from these fields.

REHMAT- MUBARAK EXPLORATION LICENSE (GHPL WORKING INTEREST 15%) Development and Production Lease was granted over Rehmat Field w.e.f. 22nd March, 2004. Average production from the field was 26.58 MMSCF of gas and 83 BBLS of condensate per day during 2006-07. A development well is currently being drilled to enhance production from the field. NOORAI JAGIR NIM EXPLORATION LICENCE (GHPL WORKING INTEREST 22.5%) After conducting EWT in 2003, the field was put on regular production by Operator OGDCL in August, 2005. The average production from the field during 2006-2007 was 222 BBLS of condensate and 6.26 MMSCF of gas per day. MINWAL (GHPL WORKING INTEREST 17 1/2%) The field has almost been depleted. Its average production during the year was about 64.62 bbls of oil per day. OFFSHORE BLOCKS

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GHPL being licensee for all offshore blocks has signed a number of Production Sharing Agreements (PSA). Following is the status of offshore concessions; OFFSHORE INDUS E BLOCK After obtaining good data of 3-D seismic, Shell (Operator) and its partners, KUFPEC, GHPL decided to drill a well. OGDCL and PPL have farmed-in by taking 30% and 20% working interest respectively. Production Sharing Agreement between GHPL and Contractors Consortium (Shell, OGDCL, PPL, Premier and KUFPEC) was signed on 23rd December, 2005. A well is expected to be drilled in August/September 2007.

OFFSHORE INDUS M & N BLOCKS Production Sharing Agreements were signed between GHPL and Eni Pakistan Ltd on 25th February, 2005. Operator has acquired 278 L.kms of 2-D and 701.69 Sq.Km of 3-D Seismic data in M-Block whereas 409.35 L.km 2-D and 310 Sq.Km of 3-D Seismic data was acquired in N- Block during January 2007 to April, 2007. The data is under processing and interpretation. OFFSHORE INDUS DELTA-A This is the first offshore block operated by OGDCL. Production Sharing Agreement was signed on 23rd October, 2004 between GHPL and OGDCL. OGDCL has acquired 392 Sq.Km 3D seismic data in the block. The acquired data is under processing. OFFSHORE INDUS C BLOCK The block was awarded to PPL in October 2006. Subsequently, PPL farmed out 60 % of its share alongwith operatorship to Eni. 2-D and 3-D seismic acquisition will be carried out in October 2007. OFFSHORE INDUS J,O & P Offshore blocks have been awarded to PEL. Production Sharing Agreement with GHPL was signed on 29th September 2006.The operator has planned to purchase and reprocess old seismic data as well as acquired new seismic data in the Blocks. OFFSHORE INDUS U, V & W BP has ventured in offshore exploration in Pakistan and has acquired three Blocks i.e. Offshore U, V, and W. Operator has planned to acquire 9500 L Kms. 2-D seismic data. Seismic acquisition started on 16th June 2007 and so far, 111.3 L Kms. data has been acquired. Due to recent cyclone in Arabian Sea with

132

forecast of further storms, BP decided to suspend the survey and rescheduled the remaining survey around September-October 2007. OFFSHORE INDUS R & S The Blocks -R & S were awarded to OGDCL on 19th April 2007 and 22 March 2007 respectively. Preliminary G & G work is in progress.
nd

OFFSHORE INDUS G Initially, the block was awarded to TOTAL E & P. TOTAL drilled a well that was proved to be water wet. Then OGDCL opted to retain the area whereby all other companies assigned their working interest to OGDCL on 31st December 2004. OGDCL farmed out its 50 % working interest to Brazilian State owned company PETROBRAS on 9th February 2007. Presently, existing data on the block is being reviewed by PETROBRAS.

5.9.3

DISCOVERIES MADE DURING FISCAL YEAR 2006-2007

Following oil and gas discoveries were made from the blocks in which GHPL is in Joint Venture. Discovery Nim West #1 Chanda 2 Mela-1 Kamal North-1 Ahmed-1 Rahim-1 5.9.4 Oil/Gas Gas/Condensate Oil/Gas Oil Oil Gas Oil Operator OGDCL OGDCL OGDCL OPII OPII OPII Concession NIM Chanda Nashpa Khipro Mirpur Khas Khipro

PRODUCTION PROFILE

As of 30th June, 2007 GHPLs share of average daily production from all fields is as follows: Oil/condensate Gas LPG Total 2556 BBLS per day 219 MMCF per day 22.46 Metric Tons per day 38400 Barrels of Oil Equivalent per day

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5.9.5

INVESTMENTS, REVENUES, ROYALTY AND TAX

During 2006-07 GHPL invested Rs 4,061 million in the development of discovered oil and gas fields and generated revenue of Rs 16,000 million from sale proceeds of oil and gas. Out of the revenues Rs 1,850 million were paid to GOP as royalty beside payment of Rs 3,849 million as income tax. 5.9.6 GOALS AND TARGETS OF GHPL DURING JULY 2007 TO JUNE 2008 AND EXPECTED ACHIEVEMENTS

During the Financial Year 2007-2008, GHPL will invest about Rs 6,013 million in development and production operations of oil and gas and expects to generate revenue to the tune of Rs. 17,000 million from oil and gas sales proceeds. Following is the quarterly break up of GOPs Investments and Revenues from oil and gas sale proceeds during that period.

INVESTMENT (Rs. Million) JULY-SEPT 2007 1,447 REVENUE 4,000 4,000 4,500 4,500 17,000 OCT-DEC 2007 1,603 Jan-Mar 2008 1,601 Apr-Jun 2008 1,362 TOTAL 6,013

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BOARD OF DIRECTORS
S.NO 1 OFFICIAL Mr. Ahmad Waqar Secretary Petroleum & NR Chairman Mr. Khurshid Anwar, Managing Director/Chief Executive GHPL Mr. Razi Abbas Additional Secretary (CF) Ministry of Finance Mr. Moosa Raza Effendi Joint Secretary (Admn) M/o Petroleum & NR Agha Sher Hamid Zaman Director (Technical) GHPL Mr. Muhammad Amjad Director (Finance) GHPL

5 6

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http://www.pmdc.gov.pk

5.10 PAKISTAN MINERAL DEVELOPMENT CORPORATION (PVT) LIMITED (PMDC)

137

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5.10.1

PERFORMANCE OF PMDC DURING THE FINANCIAL YEAR 2006-07

PMDC is coming up as a progressive organization. The physical and financial results achieved during the financial year 2006-2007 remained satisfactory, in spite of constraints. Hopefully, it will continue to give better results in future as well. PMDC attained record production and sale of salt and even surpassed the land mark of over one million tons during the financial year 2006-07. All this has been made possible because of good governance, concerted efforts of the employees of the Corporation and the dynamic leadership. Board of Directors OFFICIAL Mr. Ahmad Waqar, Chairman PMDC Board of Directors / Secretary M/o P & NR, Islamabad. Brig (R) Muhammad Khalid S. Khokhar, SI(M) Managing Director, PMDC Mr.Muhammad Razi Abbas, Additional Finance Secretary, Finance Division Islamabad. Mr. Irshad Ali Khokhar, Director General (Minerals),M/O P&NR Islamabad. Mirza Talib Hasan Director General GSP, Quetta. NON -OFFICIAL Dr. Engr. Prof. A.G. Pathan Department of Mining Engineering, Mehran University Jamshoro. Engineer Syed Abdullah President, Frontier Mine Owners Association, Peshawar. Engr. Khalid Aziz, CEO Katha Digwell Coal Co, Islamabad. Sardar Farooq Hyat Khan Chief Executive, Wah Stone Industries, Hasanabdal.

1 2 3 4 5

6 7 8 9

5.10.2 Performance and achievements of PMDC during the FY 2006-07 are summarized in the following paragraphs. PHYSICAL PERFORMANCE A. Production & Sale of Salt

During the Financial Year 2006-07, production of salt was 1,032,382 tons which was 101% of the budgeted target of 1,020,000 tons and 104% of salt production of 993,677 tons during the same period last year. The sale of salt during the FY 2006-07 was 1,032,066 tons which was also 101% of the budgeted target of 1,020,000 tons and 105% of 979,749 tons salt sold during the corresponding period last year. During the period under reference, PMDC exported 18,064 tons salt to India and 513 tons to Afghanistan. The physical performance of all the salt projects remained satisfactory. Project wise production and sale figures are given below:

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PROJECT WISE PRODUCTION & SALE OF ROCK SALT (Tons) PROJECTS 2006-07 (Target) Production Khewra Salt Mines Warcha Salt Mines Kalabagh Salt Mines Jatta / B.Khel Salt Quarries TOTAL 450,000 425,000 61,000 84,000 1,020,000 Sale 450,000 425,000 61,000 84,000 1,020,000 2006-07 (Actual ) Production 465,656 406,980 76,228 83,518 1,032,382 Sale 465,900 406,420 76,228 83,518 1,032,066

B. Production & Sale of Coal Production of coal from PMDC coal mines during the financial year 2006-07 was 366,464 tons which was 72% of the budgeted target of 511,000 tons and 94% of production of 479,629 tons achieved during the last financial year. Sale of coal during the FY 2006-07 was 365,333 tons which was 71% of the budgeted target of 511,000 tons and 94% of the sale of 479,556 tons coal during the same period last year. The coal projects could not achieve their production and sale targets mainly because of the following factors: 1. At Sharigh Project which is connected through railway line with Sibi (Balochistan) two railways bridges were blown up by the miscreants. Being the main cheaper route for transportation of coal from Sharigh to Punjab, PMDC lost sale of about 50,000 tons during the year. Lakhra coal sale was adversely affected due to excessive imported coal coupled with heavy rains which resulted in less consumption of indigenous coal by the brick kilns. Adverse mining conditions at Degari coal Project (Balochistan) also affected the sale of coal during the year. Project wise production and sale figures are given below. PROJECT WISE PRODUCTION & SALE OF COAL (Tons) PROJECTS Degari Collieries Sor-Range Collieries Sharigh Collieries Lakhra Coal Mining Project TOTAL 2006-07 (Target) Production Sale 15,000 61,000 170,000 265,000 511,000 15,000 61,000 170,000 265,000 511,000 2006-07 (Actual) Production Sale 3,726 56,005 121,547 185,186 366,464 3,742 55,200 121,544 184,847 365,333

2.

3.

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5.10.3

FINANCIAL PERFORMANCE FOR THE YEAR 2006-07 On overall basis PMDC earned profit of Rs. 128.729 million (before tax) during the FY 2006-07 as compared to the budgeted profit of Rs. 226.435 million and a profit of Rs. 236.601 million earned during the last financial year. Decrease in profit is because of less production and sale of coal. 5.10.4 OTHER ACHIEVEMENTS i) ii) The share of PMDC Rock Salt production/sale in the country has been increased from 52% to 56% approx. It may be mentioned that GOP equity in PMDC is Rs. 10 million only. PMDC is now in accumulated profit of over Rs. 75.161 millions. There is no loan liability nor any bank borrowing. PMDC has already paid Rs. 40 million to the GOP out of which Rs. 25 million was paid during the year 2006-2007

iii)

5.10.5.

GOAL /TARGETS FOR FINANCIAL YEAR 2007-08

Physical Goals/Targets for FY 2007-08 Projects Rock Salt Coal Production (Tons) 10,50,000 434,000 Financial Goals/Targets for FY 2007-08 Budgeted Profit Before Tax 5.10.6 FUTURE OUT LOOK Rs. 192.950 million Sales (Tons) 10,50,000 434,000

1) PMDC is well set to meet the targets fixed for the financial year 2007-08 and expected to give better physical results, which will result in around 50% growth in the profit over last year. 2) Coal is an important energy substitute. PMDC has undertaken development of its mines to meet the enhanced demand of coal for cement & power plants which were previously fired by the furnace oil/ natural gas. In this way, the use of coal by the above said plants will help to reduce the foreign exchange required for the import of furnace oil. 3) All efforts are being made to further increase the export of rock salt to India & Afghanistan and the value added products to other countries.

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4) PMDC is determined to increase the profitability of the corporation by enhancing its share of coal & salt in the domestic market. 5) PMDC has signed two agreements with FATA DA as an Executing Agency for the following projects. a. Exploration and Resource Estimation for Coal in Shirani Area, F.R.. D.I.Khan costing Rs. 92.772 million. b. Exploration and Development of North Waziristan Copper Project costing Rs. 172.722 million. 5.10.7 COMPANYS PROFILE

a) Name and Address of the company with telephone and fax number: Pakistan Mineral Development Corporation (Pvt) Limited, 13 H/9, Islamabad. Tele: 9258701-03 Fax: 9258705-06 b) Name of Chief Executive Brig. (R) Muhammad Khalid S. Khokhar, SI (M) c) Type of Company Private Limited. d) Annual Turnover Gross sales for the year ending 30th June 2007 was Rs. 938.820 million e) Profit after Tax Rs 86.619 million f) Type of Business/Manufacturing

Involved in the mining and marketing of rock salt & coal, also undertakes exploration and development of mineral resources. g) Auditors M/s Anjum, Asim, Shahid, Rehman Chartered Accountants. M/s Awais, Haider, Nauman Rizwani, Chartered Accountants h) Legal Advisor Mr. M. Ashraf Malik Advocate, Islamabad. i) Bankers Name of Bank i. Habib Bank Limited.

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ii. iii.

National Bank of Pakistan. First Women Bank.

5.10.8 VISION AND MISSION STATEMENT Vision To make the country economically viable through development of mineral resources. Mission To make Pakistan Mineral Development Corporation, a vibrant organization, capable of bringing the mineable resources to a stage where investors (local & foreign) are attracted. 5.10.9 TOTAL STRENGTH OF THE OFFICERS / SUPERVISORS AND STAFF/WORKERS AS ON 30.06.2007 Officers Supervisors Staff and Workers Sub-total Province/region wise breakup
Province/ Region Officers Supervisors Staff/ Workers Sub-Total Punjab Sindh NWFP Balochistan AJK FATA/FANA Total

72 26 969 1067

31 18 527 577

13 02 126 141

11 05 96 112

11 01 193 205

02 21 23

3 6 09

72 26 969 1067

5.10.10 SOCIAL RESPONSIBILITY AND COMMUNITY DEVELOPMENT PROGRAM UNDER TAKEN Establishment of Schools & Colleges to provide education for the mining community. Establishment of Hospital & dispensaries to provide health services in the remote area of our mining projects.

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CHART SHOWING PAYMENTS TO NATIONAL EXCHEQUER IN THE FORM OF ROYALTY/ EXCISE DUTY/SALES TAX FOR THE YEAR 2006-07.

Particulars Income Tax Royalty Excise Duty Sales Tax Total

Rs. In million 35.121 43.486 4.924 83.305 166.836

5.10.11 Financial Highlights for last five years Year Ended 30th June Sales Revenue (Rs. In million) Profit Before Tax (Rs. In million) Shareholders Equity (Rs. In million) 2003 465.273 63.350 10.000 2004 584.864 146.403 10.000 2005 785.396 188.000 10.000 2006 959.613 236.601 10.000 2007 938.820 128.729 10.000

Financial Ratios Debt Equity Ratio Current Ratio (acid test) Interest Cover Ratio (No. of times) Selling & Distribution to Sales Revenue (%) Financial charges to Sales Revenue (%) Earning Per ShareBasic / Diluted Dividend Per Share (%) Dividend Yield (%) Return on Capital Employed (%) Fixed Assets Turnover Ratio -11.45 1.83 11.31 6.12% 1.32% 60.82 608.24% 16.771 2.37 1.73 361.60 4.39% 0.07% 123.38 1233.75% 16.060 1.04 1.71 Nil 5.10% 0.06% 126.66 1266.61% 13.980 0.60 2.52 Nil 5.18% 0.07% 159.01 150% 1590.09% 13.125 0.57 3.38 Nil 5.64% 0.05% 86.62 250% 866.19% 12.538

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5.11 INTER STATE GAS SYSTEMS (PVT) LIMITED (ISGSL)

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5.11.1

INTRODUCTION

The Economic Coordination Committee (ECC) of the Cabinet in June, 1995, in consideration of the proposal on Import of Gas from Iran to Pakistan submitted by the Ministry of Petroleum and Natural Resources approved formation of a joint venture company and directed Sui Southern Gas Co. Ltd. (SSGC) and Sui Northern Gas Pipelines Ltd. (SNGPL) to participate in the joint venture company. Inter State Gas Systems (Pvt.) Ltd. (ISGS) was thus established in 1996 as a private limited company incorporated under the Companies Ordinance 1984 as a joint venture of Sui Southern Gas Company Limited (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL). 5.11.2 CORPORATE STRUCTURE

ISGS is wholly owned by Pakistans two major gas utility companies; SSGC owns 51% while SNGPL owns 49% of shareholdings. In view of its current shareholding, ISGSL, under the Company Ordinance 1984, is a subsidiary of SSGC. Under its Memorandum and Articles of Associations, the Company has nine (9) members on its Board of Directors, consisting of five (5) directors representing SSGC while four (4) representing SNGPL. 5.11.3 COMPANY MANDATE

Natural gas is playing an important part as fuel in thermal power plants, plus as a means of diversifying away from expensive oil imports. As a result, natural gas usage has increased rapidly at an ACGR1 of about 10% in the last six years, providing more than 50% of Pakistans primary energy supplies. However, as the following gas supplydemand balance2 graph indicates, the countrys domestic gas reserves, after reaching their peak in 2010, will rapidly start depleting after 2011-12. With the current pace of economic development, the country is expected to face a gas shortfall of about 2.7 Bcfd by the year 2015, which is likely to increase upto 10 Bcfd by 2025.
1 4 ,0 0 0 1 2 ,0 0 0 1 0 ,0 0 0 MMcfd 8 ,0 0 0 6 ,0 0 0 4 ,0 0 0 2 ,0 0 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
FY25 1 2 ,5 0 7 2 ,1 6 9 ( 1 0 ,3 3 8 )

F ig u r e s in M M c fd a t 9 5 0 b tu /s c f

1 0 .3 B c fd 2 .7 B c fd 5 .8 B c f d

E x is tin g In d ig e n o u s S o u rc e s

A n t ic ip a te d D is c o v e r ie s

FY07 D em and I n d ig e n o u s S u p p lie s 3 ,7 9 9 3 ,6 6 7

FY08 4 ,2 5 7 4 ,1 8 7 (7 0 )

FY09 4 ,5 3 8 4346 (1 9 2 )

FY10 4 ,8 1 6 4 ,3 1 0 (5 0 6 )

FY11 5 ,2 2 5 4 ,3 1 5 (9 1 0 )

FY12 5 ,6 0 5 4 ,1 8 3 (1 ,4 2 2 )

FY13 5 ,5 8 2 4 ,0 6 5 (1 ,5 1 7 )

FY14 5 ,9 4 9 3 ,8 1 7 (2 ,1 3 2 )

FY15 6 ,3 8 3 3 ,6 7 2 (2 ,7 1 1 )

FY20 8 ,3 2 0 2 ,5 2 2 (5 ,7 9 8 )

S u p p ly S u r p lu s / ( S h o r t f a ll) ( 1 3 2 )
S o u rc e :

P W C / H a g l e r B a i ll y P a k is t a n I P I P r e - F e a s i b i l it y R e p o r t , 2 0 0 7 .

1 2

ACGR Annual Cumulative Growth Rate, provisional figure for FY2001-06 by HDIP. Estimated by ISGS Consultant, PricewaterhouseCoopers, UK, at a GDP Growth Rate of 6.5%.

147

In order to meet the growing energy deficit, the Government of Pakistan (GOP), besides encouraging local exploration and production, plans to import natural gas from across its borders from Iran, and Turkmenistan. ISGSL has been mandated by the GOP to serve as an interface between the GOP and other external agencies for the import of piped natural gas. ISGSL is mandated to: Analyze long-term gas supply and demand position in the country on regular basis, develop mitigation plan, gas transmission network and gas storages based on techno economic studies; Ascertain, identify, analyze and assess opportunities for reliable sources of natural gas to be imported; Provide technical, commercial, financial and legal consultation in relation to cross border pipeline agreements, pricing and tariff project structure, and other matters related to cross border gas trade; Present different business opportunities to prospective local and international companies and business forums to attract investment interest; Develop underground gas storage projects. COMPANY PROFILE: CONTACT DETAILS Inter State Gas Systems (Pvt) Ltd. 517, Margalla Road F-10/2, Islamabad Tel: +92 (51) 926 7672-74 Fax: +92 (51) 926 7671

5.11.4

NAME OF MANAGING DIRECTOR/CHIEF EXECUTIVE Syed Hassan Nawab TYPE OF COMPANY Private Limited TYPE OF BUSINESS Service

148

BOARD OF DIRECTORS Members of Board of Directors, as of 30th June, 2007: 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. Mr. Aitzaz Shahbaz Chairman, Board of Directors Mr. Shaukat Hayat Durrani Additional Secretary, M/o P&NR, Islamabad Mr. Muhammad Razi Abbas Additional Finance Secretary (CF), Finance Division, Islamabad Mr. Azim Iqbal Siddiqui MD, SSGC, Karachi Mr. Abdul Rashid Lone MD, SNGPL, Lahore Mr. Saeedullah Shah DG (Gas), M/o P&NR, Islamabad Mr. Javed Hussain Ex. MD, SSGC, Lahore Mr. Saquib H. Shirazi CEO, Honda Atlas Limited, Karachi. Mr. Tariq Iqbal Khan MD/Chairman, NIT, Karachi Syed Hassan Nawab, MD/CEO, ISGS, Islamabad

TOTAL PROFESSIONALS EMPLOYED Project team at ISGS is under capacity expansion anticipating the implementation work of Iran-Pakistan-India gas pipeline project to start in 2007. Currently, ISGS comprises of qualified professionals from the fields of engineering, law, economics and finance. Engineering Finance Law Support (Accts, Admin, IT) Total 3 3 1 13 20

149

AUDITORS Ford Rhodes Sidat Hyder & Co., Chartered Accountants, Islamabad. LEGAL ADVISOR Legal Help Center, Islamabad. BANKERS Bank Alfalah Limited.

150

Annexure I

ORGANIZATIONAL CHART OF THE MINISTRY

151

Annexure II

PUBLIC SECTOR ORGANIZATIONS UNDER THE MINISTRY

152

Annexure - III SANCTIONED STRENGTH OF MINISTRY OF PETROLEUM AND NATURAL RESOURCES (Main Ministry and Mineral Wing)
S.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Name of Posts Secretary Additional Secretary Joint Secretary / Sr. Joint Secretary Director General Deputy Secretary Director Deputy Director Section Officer/OSD Network Administrator OSD Private Secretary Assistant Accounts Officer Superintendent Assistant Incharge Stenographer Stenotypist Assistant Upper Division Clerk DMO Telex Operator Dispatch Rider Lower Division Clerk Staff Car Driver Daftari Qasid Naib Qasid Farash Total BPS 22 21 20/21 20 19 19 18 17/18 18 18 17/18 16 16 15 15/16 12 11/15 7 7 7 7 7/5 7/4 2 2 1 1 No. of Posts 1 1 2 1 4 2 2 10 1 1 5 1 1 1 14 12 16 4 1 1 1 9 6 1 3 33 1 135

153

Annexure - III SANCTIONED STRENGTH OF MINISTRY OF PETROLEUM AND NATURAL RESOURCES (Policy Wing)
S.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Name of Posts Director General Director Deputy Director Assistant Director Accounts Officer Research Officer Deputy. Asstt. Director Superintendent Accountant Stenographer Stenotypist Assistant Accounts Assistant Draftsman UDC LDC Ferro Printer DMO Driver Dispatch Rider Daftary Naib Qasid Chowkidar Farash Sweeper Total Grand Total BPS 20 19 18 17 17 17 16 16 16 15 12 11 11 11 7 5 4 4 4 4 2 1 1 1 1 No. of Posts 4 11 20 16 2 4 2 1 3 10 27 16 1 1 6 11 1 2 4 1 1 40 3 2 3 192 327

154

Annexure-IV REVIEW OF PSDP 2007-08 (July 2007 September 2007)

Sr. No. 1 1 Name of the project/Approval status 2 Feasibility Study for Development & Exploration of Chichali iron ore and commissioning of steel mill at Kalabagh CDWP 01.02.2005 Geo-Hydrological Exploration for Development of underground water in Hamun-eMushkel Basin, Chagia Distt. Balochistan CDWP 28.04.2006 Strengthening & Capacity Building of Mineral Wing CDWP 28.04.2006 Basic Training for Gemstone cutting Polishing AJK (Muzaffarabad) and NA Admin (Gilgit) 07.03.2004 Establishment of Project management Unit (PMU) for PHRD Grant CDWP 27.01.2007 Feasibility study on Gasification of Thar Coal/ Approved by CDWP on 4.12.2004 Establishment of Thar Coal Mining Company National Coal Policy of Pakistan Training in Gemstone mining, processing and evaluation on scientific lines to private sector in NA Giligit (NA Admin) DDWP 22.4.2000 Training Programme for systematic prospecting and mine development in small gemstone lease holders of Hazara Division (GONWFP)DDWP 19.06.2003 Training Programme for systematic prospecting and mine development in small gemstone lease holders of Hazara Division. (GONWFP)DDWP Total Cost 3 Total Expenditure By June 2007 4 Allocation for 2007-08 Foreign Rupee Loan 6 7 52.867

Total 5 52.867

126.240

14.924

46.000

0.250

15.000

15.000

95.000

0..587

30.000

30.000

4.

36.170

1.055

9.062

9.062

5.

0.75($)+ Rs. 5.9 126.649 6.135

44.900

39.000

5. 900

60.000

60.000

7 8 9

241.790 23.000 25.300

150.000 18.710

70.000 13.000 6.590

Nil

70.000 13.000 6.590

10

12.395

10.250

2.910

Nil

2.910

11

13.188

10.000

5.000

Nil

5.000

155

19.06.2003 12 i) Oil and Gas Exploration in Balochistan Opening of E&P activities in Tribal Areas of Balochistan ii) i) Project approved by ECNEC on 7-12-2004 Construction of Petroleum House approved by CDWP February, 2007. The completion period is 36 months Upgraduation/Strengthening of Geoscience Advance Research Laboratories, Geological Survey of Pakistan, CDWP approved on 12.05.2005 Accelerated Geological Mapping and Geo-Chemical Exploration of the out Crop Area of Pakistan, CDWP approved on 12.05.2005 Ground Follow-up of Aeromagnetic Anomalies in Chagai District, Balochistan CDWP approved on 18.5.2004. Exporation and Evaluation of Coal Fields of Chamalang-Bala Dhaka, Bahlol (Districts Kohlu, Barkhan and Loralai) and Parts of Ghazij Basin in Balochistan (2007-10) Exploration for Coal in Kotli Area, AJK DDWP approved on 29.9.2004 Capacity Building for Hydrocarbon Research & Development (Approved by CDWP on 09.06.2006 Replacement & Enhancement of DHIP POL Analytical Facilities DDWP approved on 19.04.2005 (To be extended) New Capacity Expansion of HDIP CNG Station Islamabad (To be approved by DDWP) Project Planning Monitoring & Evaluation Cell 450.00 160.131 313.430 313.430

13

452.44

1.193

50.000

14

249.780

88.289

70.180

70.180

15

198.643

79.331

40.000

40.000

16

162.982

91.439

35.000

35.000

17

30.00

11.186

11.186

18

18.255

11.207

4.796

4.796

19

140.00

61.880

64.770

64.77

Nil

20

35.00

30.00

5.00

5.00

Nil

21

10.00

Nil

10.00

10.00

Nil

22

39.626

13.52

13.52

156

23

24

25

26

27

28

29

30 31

Feasibility Study for Development & Exploration of Chichali iron ore and commissioning of steel mill at Kalabagh CDWP 01.02.2005 Geo-Hydrological Exploration for Development of underground water in Strengthening & Capacity Building of Mineral Wing CDWP 28.04.2006 Review/Updation of National Mineral Policy CDWP 18.08.2005 Basic Training for Gemstone cutting Polishing AJK (Muzaffarabad) and NA Admin (Gilgit) 07.03.2004 Establishment of Project Management Unit (PMU) for PHRD Grant CDWP 27.01.2007 Feasibility study on Gasification of Thar Coal/ Approved by CDWP on 04.12.2004 Establishment of Thar Coal Mining Company National Coal Policy of Pakistan

126.240

14.924

52.867

52.867

46.000

0.250

15.000

15.000

95.000

0.587

30.000

0.209

4.500

3.593

36.170

1.055

9.062

9.062

0.75($)+ Rs. 5.9 126.649 6.135

44.900

39.000

5.900

60.000

60.000

241.790 23.000

150.000 -

70.000 13.000

70.000 13.000

157