United Energy plans US$200m Pakistan splurge
United Energy, the oil and gas company controlled by mainland tycoon Zhang Hongwei and backed by a US$5 billion credit facility from China Development Bank, plans to spend US$200 million this year to develop projects in Pakistan.
It aims to boost output at the projects it bought from global energy company BP last year by about 60 per cent in three years, and is seeking to buy more assets in North America, Africa, the Middle East and Asia.
The firm has been eyeing several targets in North America, all of which engage in conventional crude oil exploitation, according to chief financial officer Thomas Pang Pui-yin.
'We have met the would-be seller several times in one of the targets,' Pang said, without elaborating. 'We are also talking to some European firms that have projects in Europe, North Africa and the Middle East.'
United is headed by Zhang (pictured), who owns about 72 per cent of the firm. Zhang's Orient Group is one of the mainland's largest private conglomerates whose businesses span transportation, construction, manufacturing and property.
United, formerly a garment maker and property developer, diversified into the oil sector in 2007 by buying Zhang's interest in an oil production project in Liaoning province.
In September last year, it completed a US$750 million acquisition of various oil and gas projects from BP, as part of the British firm's sale of assets to finance a US$20 billion fund to compensate victims of a major oil spill in the Gulf of Mexico in 2010.
Pang said United was planning to spend US$200 million to boost the average daily output of its Pakistan projects to 27,000 barrels this year from 21,400 last year. BP has cut investment in the fields in the past two years, resulting in a drastic fall in the projects' combined average daily output from a high of 39,000 barrels in 2009.
The output of oilfields decreases over time due to natural depletion unless suitable investment is made to maintain their efficiency.
'By drilling more wells, we hope to be able to boost the output back to the 2009 level in three years,' said Pang.
He said half of the investment would be used to drill 20 wells to boost production at depleting wells and the other half on 13 wells to find and confirm new reserves.
United's average oil and gas selling price last year was US$39.40 a barrel of oil equivalent, much lower than crude oil prices, because more than 70 per cent of its output is natural gas that is sold cheaply under state regulation.
To encourage more investment in the energy sector, the Pakistan government this year is allowing producers to charge US$5.70 per thousand cubic feet for newly discovered gas fields, compared with US$2.20 to US$4 of United's existing fields, according to Pang.
Pakistan's proven oil reserves, in barrels of oil per day, as of last year - the 49th biggest cache in the world