Pakistan wants foreign capital to develop oil and gas and it has improved investment terms to make the offer more inviting for international companies. It has extended the exploration period to 9 years and capped the income tax bite at 40%.

The nation claims an estimated 27 billion bbl of oil and 280 Tcf of gas, but exploration has reached only 3% of the oil and 42% of the gas, G. A. Sabri, director general of Petroleum Concessions for the country's Ministry of Petroleum and Natural Resources told a London audience, according to a Dow Jones report.

It spent US $3.12 billion last year importing 99 million bbl of oil to fill 83% of its domestic needs. It produces about 60,000 b/d, or 22 million bbl a year. That sets a stage for an investment climate that should work well for international companies.

Certainly OMV, the largest foreign gas operator in Pakistan and one of the earlier companies to invest in that country, likes its experience there.

"Pakistan needs hydrocarbons. The country desperately needs energy to raise the living standard," Wolfgang Remp, senior vice president of international E&P for OMV, said.

OMV entered Pakistan in 1990 and found its first gas field, Miano, 3 years later, he said. It started production from that field in 2001. Meanwhile, it picked up other attractive blocks as Pakistan offered them. One of those blocks contained the 1998 Sawan field discovery. That's about three times the size of Miano, and it started producing in 2003, on time and on budget. It has an added advantage, because it is close to pipelines that serve both northern and southern Pakistan.

Field sizes are attractive. Sawan contains 1.5 Tcf in reserves and wells come in with an initial potential of 35 MMcf/d with no fracturing required, he said.

Geologically, that area is a stratigraphic play, he said. The type of play matched OMV's geophysical expertise. That expertise led the company to a production level between 18,000 and 19,000 boe/d, net, and it holds almost 18% of Miano and 20% of Sawan.

"Normally, as the operator, we would like a larger share, but we're able to manage," Remp added.

It has picked up six blocks for exploration and possible development. They're all in the same area and all onshore. This year, OMV will drill two exploratory wells. Although Pakistan provides only 6% of OMV's production, Remp considers it a core area due to its upside potential.

The fields are in Sindh province in the Middle Indus Valley, and they aren't involved in some of the rebel activity that has plagued oil and gas operations in Baluchistan to the west, he added.

OMV also took a participation in a Total well offshore Pakistan, but that test failed to recover commercial hydrocarbons.

Remp said it's easy for a new company to start doing business in Pakistan, but, as in most countries, long-term relationships can make the job of dealing with several government bodies easier. Ideally, a newcomer would team up with companies that have been active in that area for years and understand how the system works.

The work force is well-educated and local service companies provide most of the goods and services the production company needs, but it helps to plan for delivery of needed supplies, Remp said.

OMV has worked hard on good citizenship with a strong community involvement program. The company employs in Pakistan about 500 people, only 12 to 15 of whom are expatriates. In addition, Pakistanis work for OMV in other operations in expert as well as managerial positions.

The gas infrastructure in Pakistan is well established, and OMV can sell all the gas it produces from its fields through the north-south pipeline system. Although the government sets the price for natural gas, the price is reasonable, he said. It's set by a transparent formula linked to the price of heating oil, but with a floor. It has worked well enough to give the company a reasonable rate of return on its investment.

Currency transfer also is easy. All payments are made in US dollars.

Remp said his company is happy with its experience in Pakistan. He intends to keep its holdings there and sees expansion in operations at a reasonable rate of growth.

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