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Costly Negligence
OGDCL

Costly Negligence

OGDCL’s weak project management results in huge loss at Makori oilfield

ISLAMABAD: The Oil and Gas Development Company Limited’s (OGDCL) negligence and weak project management has resulted in a loss of Rs314.555 million to the exchequer.

This loss was incurred due to delay in laying a pipeline for supply of water to Makori West oilfield, located in Mardan district of Khyber Pakhtunkhwa (KP) province.

Interestingly, despite completion of the pipeline project, water is still being supplied to the oilfield through water tankers as MOL Pakistan, a Hungarian company which also acts as the field operator at Makori West, wants to accommodate the tanker mafia.

The OGDCL and the Pakistan Petroleum Limited (PPL) each have 27.7632% working shares in the oilfield; followed by the Pakistan Oilfield Limited (POL) with 21.0526% working shares; the Government Holding Private Limited (GHPL) with 15% working share and MOL Pakistan with 8.421% working shares.

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The OGDCL audit report 2018-19 reveals that TAL Block—an oil and gas field located in Kohat District of the KP— produces 4,000 to 5,000 Barrel Per Day (BPD) of water which is transported to Makori West through bowsers. This water, used for subsurface injection at Makori West, cost Rs433.555 million.

In February, 2018 the management approved a project to lay a pipeline for delivery of water to Makori West at a cost of Rs119 million with a completion date of June, 2018.  This showed that a substantial amount— Rs314.555 million—could have been saved if the operator had built the pipeline on time.

The audit report noted that this cost could be avoided and that the OGDL showed “negligence and weak project management. Sources at the oilfield said MOL Pakistan has once again given a contract for water supply to tankers. The oilfield needs around 25 to 30 tankers every day.

They said laying a water pipeline was less expensive but the operating company needed to get permission for that. It also had to supply water to the surrounding villages as part of its corporate social responsibility—something that the company did not want to do. “High officials are also making money by giving contracts to the tanker mafia,” said an official while requesting anonymity.

Commenting on the loss of Rs314.555 million, MOL Pakistan said the Produced Water Treatment and Injection Project (PWTIF) was conceptualized in 2012 considering injection in the Makori West-1 well.

Produced water is a term used in the oil industry to describe water that is produced as a byproduct during the extraction of oil and natural gas, or used as a medium for heat extraction

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During the initial period, the quantity of produced water needed to be injected into the well was not much and hence there was no need for laying a pipeline. Also it was not known as to how much water the well would need at a later stage.

When the production of water grew in quantum, a pilot project based on the rental system was commissioned in 2014 aiming to ascertain the behavior of the water injection to determine whether it would be worthwhile to establish a permanent PWTIF.

After assessing the results of the pilot project, a permanent PWTIF was established and commissioned in 2016.  Behavior of the well in terms of pressure was kept under observation after the commissioning of facilities against enhanced injection rates up to 3000-3500 pound per square inch (psi).

After assessing the behavior of the well and to cater for expected increase in produced water production (up to 6000 bpd), produced water transportation through pipeline was envisaged in order to minimize operational expenditure (Opex) and other hazards related to transportation through bowsers.

Operational expenditure or Opex is the money a company or organization spends on an ongoing, day-to-day basis to run its business.

MOL Pakistan in its response claims that after a thorough working, the project AFE was approved by all JVPs in 2018. In 2018, the cost of the project for laying of pipeline for delivery of water to Makori West was Rs119 million whereas the extra expense for the same purpose was Rs314.555 million.

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When Bol News contacted the OGDCL, it gave the same reply as above whereas the PPL media department did not respond. An earlier fire incident at Makori oilfield in September 2022 resulted in a huge loss in millions of dollars. However, MOL Pakistan is still reluctant to file an FIR of the incident.

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