Technical Assistance Consultant’s Report

PUBLIC

Project Number: 53058-001

July 2022

Islamic Republic of Pakistan: Preparing Sustainable

Energy Projects

Update Techno Economic Feasibility Study (Main Report)

Prepared by Ramboll Danmark A/S, Denmark and Elan Partners (Pvt) Ltd.

For Asian Development Bank

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. All the views expressed herein may not
be incorporated into the proposed project’s design.
UPDATE TECHNO ECONOMIC
FEASIBILITY STUDY

FINAL REPORT
Intended for
Asian Development Bank, ISGS

Document type
Final Report

Date
April 2022
 Revision 7
Date April 29, 2022
Made by Arnfried Lemp, Tim Callan, Uwe Hehmann, Wolfgang
Littmann, Muhammad Umar, Muhammad Ziauddin,
Abdul Razzaq, Muhammad Parvaiz, Shahid Ahmad
Khan, Shujaat Khalid, Shahrukh Munir, Ali Modara
Hansen, Marianne Ellerbek Seefeldt, Per Jørgensen
Checked by Tim Callan
Approved by Arnfried Lemp
Description Final Report

1
 CONTENTS

0. EXECUTIVE SUMMARY 14
1. INTRODUCTION 23
GENERAL 23
OBJECTIVE 24
PROJECT BACKGROUND 24
PURPOSE OF THIS REPORT 25
OFFICAL MEETINGS AND DATA 27
PROJECT VIABILITY 29
ASSUMPTIONS / ANALYSIS 29
2. CONTEXT OF THE PROJECT 32
BACKGROUND 32
GAS STORAGE OPTIONS 33
2.2.1 Underground gas Storage options 33
2.2.1.1 Depleted Fields 34
2.2.1.2 Salt cavities 35
2.2.2 Above Ground Storage 38
2.2.2.1 LNG Storage 38
2.2.2.2 Line packing 39
2.2.2.3 Conclusion 39
3. REVIEW PREVIOUS FEASIBILITY STUDY 41
GAS SUPPLY AND DEMAND 41
SECURITY STORAGE 41
MODULATION STORAGE 42
RESERVOIR ENGINEERING 44
PRE-SELECTION ON KHOREWAH AND BUKHARI 45
SALT CAVERNS 52
SUBSURFACE FACILITIES 52
SURFACE FACILITIES 53
TRANSMISSION PIPELINE 53
COST ESTIMATION 54
INITIAL ENVIRONMENTAL EXAMINATION 55
4. WORK METHODOLOGY 59
5. GAS DEMAND AND SUPPLY 62
UPDATED PROJECTIONS 64
5.1.1 De-Bundling of LNG 65
GAS SUPPLY PROJECTIONS 66
GAS DEMAND PROJECTIONS 68
GAS DEMAND SWINGS & STORAGE REQUIREMENT 76
POTENTIAL EXPANSION MEASURE 81
6. RESERVOIR SELECTION 85
SELECTION CRITERIA 85
6.1.1 Selected Fields 95
6.1.2 Assessment of Khorewah and Bukhari 96
7. RESERVOIR ENGINEERING 103
STRUCTURE OF KHOREWAH 103
PRODUCTION AND INITIAL GAS IN PLACE OF KHOREWAH105
PERMEABILITY 106
2
 WELL TESTS 107
STORAGE WELL INFLOW AND OUTFLOW PERFORMANCE 108
GAS PVT PROPERTIES 109
8. MATERIAL BALANCE SIMULATION 111
PREPARATION OF INPUT DATA 111
HISTORY MATCHING 112
PREDICTIONS 116
CONDENSATE, CO2 AND NITROGEN 119
STORAGE CYCLES 120
9. WELL DESIGN OF STORAGE WELLS 124
GENERAL GENERIC WORK PROGRAM 125
RELEVANT EQUIPMENT AND RSERVICES FOR DRILLING 126
9.2.1 Drilling pad 126
9.2.2 Drilling rig 127
9.2.3 Casing and casing equipment 127
9.2.4 Drilling bits 128
9.2.5 Mud system 128
9.2.6 Mud and cuttings disposal 129
9.2.7 Mud logging 129
9.2.8 Coring 129
9.2.9 Open hole logging program 130
9.2.10 Directional control, surveying 130
9.2.11 Cement properties 130
9.2.12 Cased hole logging program 131
9.2.13 Wellhead and Starter head 131
9.2.14 Fishing service 132
9.2.15 Technical supervision 132
9.2.16 Additional requirements 132
10. WELL COMPLETION DESIGN 133
EQUIPMENT FOR THE UGS WELLS 133
10.1.1 Wellhead and hanger system 133
10.1.2 Tubing or production string 134
10.1.3 Surface controlled subsurface safety valve 135
10.1.4 Packer (incl. tailpipe) 135
10.1.5 Tubing-conveyed perforating (TCP) 137
SPECIAL EQUIPMENT FOR PORE STORAGE APPLICATIONS137
OTHER WELLS 138
10.3.1 Observation Wells 138
10.3.2 Water Disposal Wells 139
SUMMARY OF WELL OPERATION 140
11. SURFACE FACILITY DESIGN 141
PROCESS OPERATING PHILOSOPHY 142
PROCESS EQUIPMENT 150
11.2.1 Inlet/Outlet Facility (Unit 090) 151
11.2.2 Flow Metering (Unit 080) 151
11.2.3 Suction Scrubbers 152
11.2.4 Compressor / Driver (Unit 070) 153
11.2.5 Gas Aftercoolers 153
11.2.6 Flow Control for Wells 154
11.2.7 Withdrawal Separator (Unit 010) 154
11.2.8 Gas conditioning system (Unit 020) 155
11.2.9 Condensate Stabilisation System (Unit 050) 156
11.2.10 Glycol Injection / Hydrate Inhibition System 156
12. PIPELINE AND METERING FACILITIES 157
PIPELINE ROUTING 157
PIPELINE OPERATION AND HYDRAULICS 160
CUSTODY METERING STATION (CMS) 166
SECURITY AND LOGISTICS 167
12.4.1 Logistics 167
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 12.4.2 Security 168
13. FINANCIAL FEASIBILITY 171
VALUE CREATION BY THE UNDERGROUND GAS STORAGES171
COST ESTIMATION 172
14. TRANSACTION STRUCTURE 174
15. CAPITAL COST 176
PROJECT IMPLEMENTATION TIMELINE 180
FIRST GAS FILL 180
CAPEX ASSUMPTIONS 181
LAND COST 186
YEARLY INVESTMENT BREAKDOWN 186
INTEREST DURING CONSTRUCTION 186
16. FINANCING PLAN 187
FINANCING STRUCTURE 187
FINANCING FRAMEWORK 187
EQUITY FINANCING 187
DEBT FINANCING 187
PROJECT DRAWDOWNS 188
WEIGHTED AVERAGE COST OF CAPITAL (WACC) 189
RETURN ON EQUITY (ROE) 189
17. OPERATION COST 191
18. TARIFF REGIME 193
PROJECT NET EARNINGS 194
PROJECT REVENUE ASSUMPTIONS 195
19. FINANCIAL ANALYSIS 196
QUANTITATIVE ASSESSMENT OF THE PROJECT 196
20. FINANCIAL MODEL MANUAL 197
DASHBOARD 198
ASSUMPTIONS 199
PROJECTED FINANCIAL STATEMENTS 202
21. ENVIRONMENTAL SCREENING OF THE PROJECT 205
PURPOSE AND SCOPE 205
ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT 205
ENVIRONMENTAL REGULATIONS 205
PROJECT INTRODUCTION 207
21.4.1 Key Features of the Project 207
BASELINE CONDITIONS 208
21.5.1 Physical Environment 208
21.5.2 Regional Geology 209
21.5.3 Ecological Environment 209
ASSESSMENT OF SOCIO-ECONOMIC IMPACTS 212
PUBLIC CONSULTATION 213
21.7.1 Objectives of Consultation 213
21.7.2 Views of Institutional Stakeholders 213
21.7.3 Community Concerns and Suggestions 215
ENVIRONMENTAL & SOCIAL IMPACTS AND MITIGATION MEASURES
216
ENVIRONMENTAL MANAGEMENT AND MONITORING PLAN217
HSE MANAGEMENT PLAN 217
22. LEGAL AND REGULATORY FRAMEWORK 220
EXISTING FRAMEWORK RELATED TO NATURAL GAS 220
CURRENT STATE OF GAS SECTOR 222
SUGGESTIONS TO DEVELOP GAS STORAGE FRAMEWORK 223
23. RISK CONSIDERATIONS AND MITIGATIONS 225
24. CONTRACTING STRATEGY AND IMPLEMENTATION 231
CONTRACTING PHILOSOPHY 231
RECOMMENDED WORKS PRIOR/DURING FEED DESIGN 233
24.2.1 Exploration Wells 233
24.2.2 Seismic Data Campaign 233
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 CONTRACT PACKAGES 233
24.3.1 Pipeline 234
24.3.2 Sub-surface Facilities 235
24.3.3 Aboveground Facilities 235
24.3.4 Long Lead Items (LLIs) 235
24.3.5 Early Works 235
24.3.6 Power Supply 236
24.3.7 Mechanical Completion, Pre-Commissioning, Commissioning 236
24.3.8 Reservoir 257
24.3.9 Pipeline 257
24.3.10 Surface facilities 258
IMPLEMENTATION AND SCHEDULE 259
BIDDING DOCUMENT / CONTRACTING PHILOSOPHY 259

Appendices

Appendix 1
Well Completion Schematic

Appendix 2
Plot Plan

Appendix 3
Block Diagram

Appendix 4
Process Flow Diagram

Appendix 5
Master Equipment List

Appendix 6
Implementation Schedule

Appendix 7
Brief cost comparison lng versus ugs (INTERIM REPORT)

Appendix 8
Case Studies (INTERIM REPORT)

Appendix 9
Technical Assumptions (Interim Report)

Appendix 10
Reservoir Selection (Interim Report)

Appendix 11
Financial and Economic Analysis (Interim Report)

Appendix 12
Gas Supply Forecast until 2045

5
 FIGURES

Figure 1: Overview map with indication of the salt deposits in Pakistan: Salt Range (Punjab) in
the North and Kohat to the south of it................................................................................ 36
Figure 2: Historic GDP Growth Pakistan (Source: Worldbank) ............................................... 62
Figure 3: Pakistan Gas Demand & Supply, Financial Year 2018/19 [Source: OGRA Report-FY19]
..................................................................................................................................... 63
Figure 4: Pakistan Gas Demand Forecast [Source: State of the Regulated Petroleum Industry
2018-19] ....................................................................................................................... 63
Figure 5: Pakistan Gas Demand Supply Balance Forecast [Source: State of the Regulated
Petroleum Industry 2018-19]............................................................................................ 64
Figure 6: Indigenous Gas Supply Projection Source Wise (Source: PPIS) ................................ 67
Figure 7: Projected GDP Growth Pakistan Post COVID-19 (Source: SSGCPL)........................... 69
Figure 8: Historic Annual Average Gas Consumption Residential ............................................ 70
Figure 9: Power Gas Demand Monthly Spikes 2018-2019 ..................................................... 73
Figure 10: Gas Demand Forecast FY 2019 – FY 3030 (Source: OGRA & Own Assumptions
Consultant) .................................................................................................................... 75
Figure 11: Natural Gas Supply Forecast up to FY 2030 (Source: PPIS, OGRA and own
assumptions) .................................................................................................................. 75
Figure 12: Gas Supply-Demand Forecast in MMcfd based on own assumptions........................ 76
Figure 13: Residential Gas Demand Seasonal Patterns (including gas losses) [Source: Ramboll
calculation.] ................................................................................................................... 78
Figure 14: Storage Requirement Sensitivity [Source: Ramboll calculation] ............................. 79
Figure 15: Storage Requirements and Peak Withdrawal Rate or 100 % [Source: Ramboll
calculation] .................................................................................................................... 80
Figure 16: Storage Requirements and Peak Withdrawal Rate or 25 % [Source: Ramboll
calculation] .................................................................................................................... 80
Figure 17: Gas Demand Forecast Ramboll until FY45 in MMcfd (own assumptions based on OGRA)
..................................................................................................................................... 82
Figure 18: Khorewah structure map. Top Goru A-Sand ...................................................... 104
Figure 19: Composite log of well Khorewah 1. The porosity of the A and B sand is approx. 10 %
................................................................................................................................... 105
Figure 20: Khorewah daily well production rates ............................................................... 106
Figure 21: Khorewah p/z plot ......................................................................................... 106
Figure 22: Cross plot of permeability vs. porosity for Khorewah A and B sands ..................... 107
Figure 23: Inflow and Outflow performance relationship for a Khorewah storage well............. 109
Figure 24: Khorewah field gas production rate in MMscf/d and sm3/h vs. time ...................... 112
Figure 25: History match of gas in place development in Bscf (Markers are measured values) 113
Figure 26: History match of gas in place development in sm3 (Markers are measured values) 113
Figure 27: History match of pressure development in psi (Markers: measured values) ........... 114
Figure 28: History match of pressure development in bar (Markers: measured values) .......... 114
Figure 29: Water production rate in bbl/d......................................................................... 115
Figure 30: Water production rate in L/h ........................................................................... 115
Figure 31: Measured and simulated condensate production in bbb/d.................................... 116
Figure 32: Measured and simulated condensate production in m3/d .................................... 116
Figure 33: Storage Performance Curve – Withdrawal Rate vs. Gas in Place ........................... 117
Figure 34: Storage Performance Curve – Withdrawal Rate vs. Gas in Place ........................... 117
Figure 35: Water Production – Dissolved Water Concentration ............................................ 118
Figure 36: Pressure Hysteresis during a storage cycle in psi ............................................... 119
Figure 37: Pressure Hysteresis during a storage cycle in bar ............................................... 119
Figure 38: Condensate fraction in produced gas – simulated and measured .......................... 120
Figure 39: Withdrawal rates several storage cycles in MMscf/d............................................ 121
Figure 40: Withdrawal rates several storage cycles in sm3/h .............................................. 121
Figure 41: Inventory during storage cycles in Bscf............................................................. 122
Figure 42: Inventory during storage cycles in sm3 ............................................................ 122
Figure 43: Pressure development during storage cycles in psi ............................................. 123
Figure 44: Pressure development during storage cycles in bar ............................................ 123
Figure 45: Example of a wellhead.................................................................................... 134

6
 Figure 46: Example of a TRSV ........................................................................................ 135
Figure 47: Example of a Packer ....................................................................................... 136
Figure 48: Example of a gun charge ................................................................................ 137
Figure 49: Example of Screens ....................................................................................... 138
Figure 50: Injection without compression process path. ..................................................... 143
Figure 51: Injection with compression process path. .......................................................... 144
Figure 52: Gas withdrawal from well. ............................................................................... 145
Figure 53: Gas/condensate/water separation before dew point control. ................................ 146
Figure 54: Gas treatment before metering........................................................................ 146
Figure 55: Gas metering and export. ............................................................................... 147
Figure 56: Gas withdrawal from well. ............................................................................... 148
Figure 57: Gas/condensate/water separation before dew point control. ................................ 149
Figure 58: Gas treatment before metering........................................................................ 149
Figure 59. Gas compression, metering, and export. ........................................................... 150
Figure 60: 1, CPL-2 Overall Route Map (Scale 20km) ......................................................... 157
Figure 61: Injection Case (base case) – Flow from NSGP to Khorewah ................................. 161
Figure 62 Injection Case – Flow from Southern System to Khorewah ................................... 162
Figure 63: Withdrawal Case (base case) – Flow from Khorewah to North South Gas Pipeline .. 163
Figure 64: Withdrawal Case – Flow from Khorewah to Southern System .............................. 164
Figure 65: Future Flow from Bukhari Field. ....................................................................... 165
Figure 66: Location of CMS adjacent to existing SSGC Compressor Station - Hyderabad ........ 166
Figure 67: Vegetation types of Badin District .................................................................... 210
Figure 68: Relevant Institutional Structure of Gas Sector ................................................... 220
Figure 69: Relevant Legal Framework (Oil & Gas) in place .................................................. 221
Figure 70: Gas demand and supply 2017 [Source: Petrobangla] ......................................... 248
Figure 71: Gas demand and indigenous supply (existing discoveries) [Source: Ramboll] ........ 249
Figure 72: Historical End User Gas Prices [Source: Petrobangla] ......................................... 250
Figure 73: UGS versus LNG Case Study Japan (Source: Utilization of Underground Gas Storage in
Japan) ......................................................................................................................... 252
Figure 74: Composite log of well Khorewah 1. The porosity of the A and B sand is approx. 10 %
................................................................................................................................... 265
Figure 75: Typical Porosity-Permeability Crossplot (source: https://wiki.aapg.org/Core-to-
log_transformations_and_porosity-permeability_relationships) ........................................... 266
Figure 76: Porosity- Permeability Crossplot of Rotliegend sandstone in Northern Europe ........ 266
Figure 77: Khorewah structure map. Top Goru A-Sand ...................................................... 267
Figure 78: Khorewah daily well production rates ............................................................... 268
Figure 79: Khorewah p/z plot ......................................................................................... 268
Figure 80: Inflow and Outflow performance relationship for a Khorewah storage well............. 270
Figure 81: Khorewah field gas production rate in sm3/h vs. time ......................................... 273
Figure 82: History match of gas in place development. (Markers are measured values) ......... 274
Figure 83: History match of pressure development (Markers: measured values) ................... 274
Figure 84: Water production rate in Lh............................................................................. 275
Figure 85: Measured and simulated condensate production. ............................................... 276
Figure 86: Storage Performance Curve – Rate vs. Gas in Place ........................................... 277
Figure 87: Water Production rate in L/d ........................................................................... 277
Figure 88: Pressure Hysteresis during a storage cycle. ....................................................... 278
Figure 89: Total Storage Tariffs (EUR/MWh) in Europe in 2014 ........................................... 284
Figure 90: Indicative Project Structure ............................................................................. 292
Figure 91: Gas Supply Forecast Ramboll until FY45 in MMcfd .............................................. 294

TABLES

Table 1: Supply Forecast and Surplus / Shortfall (2005-2025) [Source: Sofregaz] 43

Table 2: Khorewah Field – Anticipated Storage Parameters in Field and Metric Units 48
Table 3: Khorewah Gas Production 48
Table 4: Khorewah Stratigraphy and Reservoir Properties in Field and Metric Units 48
Table 5: Khorewah Field Well Test Results in Field and Metric Units 49
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 Table 6: Bukhari Field – Anticipated Storage Parameters in Field and Metric Units 49
Table 7: Bukhari Gas-In-Place and Recovery in Field and Metric Units 50
Table 8: Bukhari Stratigraphy and Reservoir Properties 50
Table 9: Bukhari Field Well Test Results in Field and Metric Units 50
Table 10: Gas Composition of Khorewah and Bukhari in mol% 51
Table 11: Condensate Composition of Khorewah and Bukhari 51
Table 12: Strategic Storage Requirements horizon year 2020 53
Table 13: Summary of potential Khorewah and Bukhari UGS performance 53
Table 14: Badin fields anticipated supply in MMcfd 54
Table 15: LNG Notified Prices in USD/MMBTU (Source: OGRA Monthly LNG Price Notifications) 66
Table 16: Anticipated Gas Infrastructure Project Gas Supply in MMCFD (Source: ISGS and OGRA
Report-FY19) 67
Table 17: Peak and Baseload Capacity of LNG infrastructure Projects 68
Table 18: Net Gas Consumption in MMcfd by Region (Source: Energy Yearbook Pakistan 2019) 69
Table 19: Number of Customers by Region in 1000 (Source: Energy Yearbook Pakistan 2019) 69
Table 20: Anticipated Net Gas Consumption Residential Forecast Consultant 71
Table 21: Overall Power Generation in GWh (Source: NEPRA and IGCEP) 72
Table 22: Minimum requirements for gas storage 85
Table 23: Reservoir data for all fields 87
Table 24: Short list of fields after ranking with respect to optimum depth and size 95
Table 25: Khorewah Field – Anticipated Storage Parameters in Field and Metric Units 98
Table 26: Khorewah Gas Production 99
Table 27: Khorewah Stratigraphy and Reservoir Properties in Field and Metric Units 99
Table 28: Khorewah Field Well Test Results in Field and Metric Units 100
Table 29: Bukhari Field – Anticipated Storage Parameters in Field and Metric Units 101
Table 30: Bukhari Gas-In-Place and Recovery in Field and Metric Units 101
Table 31: Bukhari Stratigraphy and Reservoir Properties 101
Table 32: Bukhari Field Well Test Results in Field and Metric Units 102
Table 33: Khorewah Field Well Test Results in Field and Metric Units 107
Table 34: Khorewah reservoir parameter (ref. well #1) 108
Table 35: Parameter for Calculation of Inflow and Outflow Performance Relationship (IPR) 108
Table 36: Khorewah Gas Composition in mole % 109
Table 37: Condensate Composition of Khorewah Field 110
Table 38: Composition of extracted gas 110
Table 39: Khorewah field production data 111
Table 40: Key figures of Khorewah Gas storage 118
Table 41: Khorewah Gas Composition in mole % 120
Table 42: General Casing Design 125
Table 43: Drilling Bit Dimensions 128
Table 44: Summary of Well Operation 140
Table 45: Design Data for Flow Metering 151
Table 46: Technical Data Suction Scrubbers 153
Table 47: Technical Data Gas Aftercoolers 154
Table 48: Technical Data Withdrawal Separator 155
Table 49: Pipeline Operation 160
Table 50: Capital Expenditure excluding cushion gas are estimated to be 426.25 Million USD. 172
Table 51: Total Project – OPEX 173
Table 52: Total Project Cost Estimate 177
Table 53: Total Project Infrastructure Cost Estimate bifurcated into EPC and Non-EPC Cost 178
Table 54: Pipelines Capital Cost Estimate 178
Table 55: UGS Sub-Surface Facilities Capital Cost Estimate 179
Table 56: UGS Aboveground facilities (including Long Lead Items) Capital Cost Estimate 180
Table 57: Basic Comparison Khorewah, Bukhari and Turk field 182
Table 58: Pipeline length for Khorewah, Bukhari and Turk fields 183
Table 59: Relative comparison most promising fields 184
Table 61: Yearly Investment Breakdown 186
Table 62: Interest During Construction (IDC) 186
Table 63: Financing Structure 187
Table 64: Details of Debt Financing 188
8
 Table 65: Weighted Average Capital Cost (WACC) 189
Table 66: Operating Cost Estimate 191
Table 67: OPEX Assumptions 191
Table 68: Total Variable and Fixed O&M 192
Table 69: Tariff Calculation 193
Table 70: Projected Income Statement 194
Table 71: Revenue Assumptions 195
Table 72: Key Financial Indicators (Project) 196
Table 73: Livestock population in Badin district 211
Table 74: Views of Institutional Stakeholders 214
Table 75: Estimates Cost for the Implementation of Health Safety Engineering Plan for under gas
storage Project 219
Table 76:CAPEX and OPEX of UGS Storage Facility Example 244
Table 77: CAPEX and OPEX of LNG Storage Facility Example 245
Table 78: Japan Gas Storage (Source: METI’s Report, 2012) 251
Table 79: Strategic Storage Considerations 254
Table 80: Composition of gas from Pakistan network and LNG from Qatar 258
Table 81: Short list of screened fields in the Sofregaz study from 2007 262
Table 82 Additional reviewed fields (via TeamViewer Sessions) 263
Table 83: Final selection of depleted gas reservoirs considered for gas storage 264
Table 84: Khorewah Field Well Test Results in Field and Metric Units 269
Table 85: Parameter for Calculation of Inflow and Outflow Performance Relationship (IPR) 269
Table 86: Khorewah Gas Composition in mole l% 271
Table 87: Condensate Composition of Khorewah Field 271
Table 88: Composition of extracted gas 271
Table 89: Khorewah field production data 273
Table 90: Cost allocation for Each User Type 283
Table 91: Project Financing and Ownership Options (high-level illustration) 286
Table 92: Key Potential Benefits and Risks of PPP. 288

9
 ABBREVIATIONS

Abbreviation Full Wording

ADB Asian Development Bank

AGA American Gas Association

ANSI American National Standards Institute

API American Petroleum Institute

ATEX ATmospheres EXplosible

BAT Best Available Technology

BHFP Bottom Hole Flowing Pressure

BHP Bottom Hole Pressure

BTC Buttress Connections

CAPEX Capital Expenditure

CBL Cement Bond Log

CCR Central Control Room

CGV Cushion Gas Volume

CMS Custody Metering Station

CP Cathodic Protection

CPL Connecting Pipeline

CS Compressor Station

CTA Custody Transfer Agreement

DCS Distributed Control System

DECT Digital enhanced cordless telecommunications

DP Design Pressure or Drill Pipe (relative to the Content)

EIA Environmental Impact Assessment

EMMP Environmental Monitoring and Management Plan

EPC Engineering, Procurement, and Construction

ESD Emergency Shutdown

F&G Fire and Gas

FEED Front End Engineering Design

FIT Formation Integrity Test

FOC Fibre Optic Cable

GHV Gross Heating Value

GOP Government of Pakistan

GOR Gas Oil Ratio

10
 GSA Gas Supply Agreement

HAC Hazardous Area Classification

HIPPS High Integrity Pressure Protection

HVAC Heating Ventilation Air Conditioning

IA Instrument Air

IEC International Electrotechnical Commission

IED Industrial Emission Directive

IEE Initial Environmental Examination

IGCEP Indicative Generation Capacity Expansion Plan

IS Intrinsic Safety

ISGS Inter State Gas Systems Ltd

JT Joule Thomson

LAN Local Area Network

LCM Lost Circulation Material

LDS Leak Detection System

LLI Long Lead Items

LNG Liquefied Natural Gas

LOT Leak of Test

MAOP Maximum Allowable Operating Pressure

MEG Mono-Ethylene Glycol

NEPRA National Electric Power Regulatory Authority

OGDCL Oil & Gas Development Company Ltd

OHSA Occupational Health and Safety Act

OPEX Operational Expenditure

P&ID Piping and Instrumentation Diagram

PA Plant Air

PFD Process Flow Diagram

PGC Process Gas Chromatograph

PLC Programmable Logic Controller

PMDC Pakistan Mineral Development Corporation

PPIS Pakistan Petroleum Information Service

PTZ Pressure Temperature Compression Factor Conversion

QRA Quantitative Risk Assessment

RLNG Regasified Liquefied Natural Gas

SCS Station Control system

11
 SHA Shareholder Agreement

SIL Safety Integrity Level

SNGPL Sui Northern Gas Pipelines Ltd

SPA Sales and Purchase Agreement

SPV Special Purpose Vehicle

SSA Storage Service Agreement

SSGCL Sui South Gas Company Ltd

SSO Storage System Operator

TA Technical Assistance

TCP Tubing Conveyed Tubing

TD Total Depth

TUCO Turbine-Compressor

TVD True Vertical Depth

UCS Unit System Control

UGS Underground Gas Storage

UPS Uninterruptible Power System

VDL Variable Density Log

WGV Working Gas Volume

WHFP Well Head Flowing Pressure

WHP Well Head Pressure

WI Wobbe Index

12
 GLOSSARY

Glossary Description

AQUIFER Reservoir, group of reservoirs, or part thereof that is fully water-bearing

volume of gas intended as permanent inventory in the storage facility to

CUSHION GAS
maintain adequate operating pressure.

amount of gas that can be injected into a storage facility on a daily basis,
expressed in millions of cubic metres per day (mcm/day), or the equivalent heat
INJECTION content of the gas withdrawn from the facility, most often expressed in
CAPACITY OR kWh/day.
INJECTION
RATE The injection capacity of a given storage facility is variable and depends
inversely on the total amount of gas in storage: it is lowest when the reservoir
is most full and increases as working gas is withdrawn.

PERMEABILITY Capacity of a rock to allow fluids to flow through its pores.

Volume of the pore space (voids) within a formation expressed as a percentage

POROSITY
of the total volume of the material containing the pores.

Porous and permeable rock in the subsurface having area and depth-related
RESERVOIR boundaries based on physical and geological factors. It contains fluids which are
internally in pressure communication.

STORAGE
storage working capacity, i.e. the capacity taken by the working gas.
CAPACITY

SWING
Ratio of maximum daily production and average daily production.
FACTOR

TOTAL
maximum volume of natural gas that can be stored in a storage facility (working
STORAGE
gas plus cushion gas).
CAPACITY

amount of gas that can be withdrawn from a storage facility, expressed in

millions of cubic metres per day (mcm/day), or the equivalent heat content of
the gas withdrawn from the facility, most often expressed in kWh/day. This is
WITHDRAWAL also referred to as the deliverability or the deliverability rate.
CAPACITY
The withdrawal capacity of a given storage facility is variable and depends
directly on the total amount of gas in the reservoir at a given time: it is highest
when the reservoir is most full and declines as working gas is withdrawn.

WORKING GAS volume of gas in the storage facility above the cushion gas.

SWING The ratio of peak offtake over annual average offtake is referred to as the swing
FACTOR factor

13
0. EXECUTIVE SUMMARY

The objective of the technical assistance includes the update/revision of the techno-economic
feasibility study of the Project previously conducted in 2005-2007 by Sofregaz. The previous
Feasibility Study conducted by Sofregaz was aimed assessing the potential Underground Gas
Storage sites for modulation purposes (Northern Pakistan) and the potential Underground Gas
Storage sites for security of supply for the whole country.

This report is the continuation of the assessments and results of the framework conditions from
the interim report. The interim report concludes on the reservoir selection based on the gas
supply/demand analysis and the associated technical parameters.

There are several methods of underground natural gas storage all with distinct economic and
physical characteristics relating to their suitability from a commercial perspective and from an
operational perspective.

Based on available information from the previous feasibility study and the availability of depleted
gas fields, it was observed that depleted gas/condensate fields are only relevant for the present
development in Pakistan. The assessment criteria for suitable locations are given in a qualitative
table below:

Storage Peak Seasonal

Deliverability CAPEX OPEX
Volume Shaving Demand

Aquifer Storage +++ + + +++ ++ ++

Salt Caverns ++ +++ +++ ++ ++ ++

Depleted Oil/Gas Fields +++ + + +++ ++ ++

Linepipe/Linepacking + ++ ++ + + +

Rock Caverns + +++ +++ + +++ ++

Liquefied Natural Gas

++ +++ +++ ++ +++ ++
(regasification)

"+" small impact/value

'"++" medium impact/value

'"+++" large impact/value

Based on the conclusion set out in the Gas Supply Demand Analysis, the minimum requirements
for gas storage were set as are following:

14
 Capacity Volume

Minimum Working Gas Capacity: 44 Bscf (1 232 Mio. sm3)

Peak Withdrawal Capacity: 792 MMscf/d (924 000 sm3/h)

Minimum Injection Capacity: 396 MMscf/d (462 000 sm3/h)

Based on a comprehensive list of reservoir data Consultant provided a screening based on following
criteria:
• The maximum possible pressure is mainly given by the depth of the reservoir and is
taken in this study as the initial pressure of the gas fields considered
• With respect to surface facilities the maximum pressure at the well should be 3000 psi
(207 bar).
• The next well head strength e.g., is 5000 psi (345bar) which will be oversized for
ordinary gas storage and will unnecessarily augment storage cost.
• The minimum well head pressure is usually about 60 bars (870 psi), a value still high
enough to ensure gas flow into to the distribution grid.
• The lowest “maximum” storage pressure however should be in the range of 140 bar
(2,000 psi), as at lower storage pressures the ratio of working gas volume (WGV) to
cushion gas volume (CGV) becomes unfavourable. This determines a desirable depth
range of fields promising for gas storage which is between 1600 and 3000 m (5000 –
9800 ft).
• The requirement of the minimum WGV leads to a minimum reservoir size of 80 Bscf
assuming a WGV of 55 %.
• The maximum storage size is about three times the value of 44 Bscf. For the screening a
maximum size of 300 Bscf of initial gas inn place was taken. If the field size is much
higher the storage of a limited and well determined amount of gas may become
impossible, as gas may migrate into other parts of the field or storage pressure must be
set too low.

At the end Khorewah is selected as the most favourable field for gas storage operation
Neverthless it shall be noted that other fields assessed as candidates (Bukhari and Turk) for gas
storage are similar with respect to size, depth, and pressure. For all three above mentioned fields
the reservoir is in the Lower Goru Sandstone. So, all further reservoir engineering can be
considered similar.

Based on predefined withdrawal and injection rates a prediction scenario regarding storage
operation was calculated using the material balance model. The simulation started with a 1st gas
fill from an initial reservoir pressure of 20 bar (290 psi). The withdrawal periods started Nov. 1st
and ended March 1st. Then with a short delay of about 10 day the re-injection period stated until
the maximum pressure was reached Nov 1st and the new withdrawal period began. The material
balance showed that is possible to maintain the maximum required rate almost over the whole
withdrawal period.

15
 The current degree of detail of the project, all new wells (storage wells as well as observation and
water disposal storage wells) are planned as vertical wells. The final depth of the storage wells is
at approximately 1,900 m true vertical depth (TVD) with target in the Lower Goru sandstone
formation. The storage wells are to be equipped with a 7" cemented and perforated liner in the
Lower Goru formation. To ensure the well integrity during drilling and operation, an additional 13
⅜” intermediate and a 9 ⅝” production casing is planned. For the observation and water disposal
wells correspondingly smaller well and casing diameters are required. Before start of the drilling
operations, a drilling site including an 18 ⅝” conductor pipe has to be constructed and all
necessary drilling services must be procured and ordered. In principle, all assumptions made for
the drilling planning need be checked and adjusted at a later detailed design phase or during a
corresponding FEED, respectively.

To make a well ready for commercial operation, the installation of different downhole components
needs to be performed to allow a safe and state-of-the-art storage operation. The completion is
usually installed after finalization of the drilling operation and after installation of the last
cemented casing. The well completion consists of different sealing and safety devices to allow a
safe and effective operation of the gas storage facility. Correspondingly, a borehole completion in
accordance with the current state of the art is considered. The main parts of the well completion
are:
• Wellhead and hanger system.
• Tubing string for production and injection.
• A Sub Surface Safety Valve (SSSV) to shut in the well in case of an emergency.
• A production packer to anchor the tubing string and create an annulus between tubing
and last cemented casing. This annulus can be pressure controlled and protects the last
cemented casing.
• Perforations

With respect to the reservoir simulation the basic requirements and assumption for storage wells
as well as for relevant other wells (observation wells and water disposal wells were determined
In this context, the corresponding design parameters for drilling and completion are subjects of
change regarding a change in the state of knowledge in later project phases. The outcome of the
investigation is following

Production
Target
Number of /
Type of Well Orientation Depth Basic Parameters
Wells Injection
(TVD)
Tubing

Max. Production Rate:

42,000m3(Vn)/h
1,900
Storage Well 22 Vertical 4 1/2” Perforation Length:
m
3 to 5 Sections with Total Length of
approx. 35 m per Well

16
 Observation 2,000
Approx. 3 Vertical 3 1/2” For Pressure Observations
Well m

Water Disposal Approx. 3 to 2,000 Max. Injection Rate:

Vertical 2 7/8”
Well 5 m Approx. 250m3 / day

The surface facilities are categorised into the two main operating modes: injection and
withdrawal. Some of the process units included in the facilities are usable in both operating
modes while the rest will be exclusive to either injection or withdrawal. The gas to be injected
into the storage will first be measured by custody flow metering equipment positioned upstream
the UGS plant. This equipment operates bi-directionally since it is also used for the withdrawal
process. The actual volume flow will be converted into standard volume flow using a gas
chromatograph.

An ultrasonic flowmeter will also be installed at the entry UGS plant to measure the arrival and
export flow. Thereafter, solid particles and liquids, which may be present within the gas, will be
removed on the suction side of the compressor using a scrubber. To increase the gas pressure
from pipeline conditions to cavern conditions, a 2-stage compressor with gas turbine driver will
be provided. The maximum flow rate will be achieved by 3 parallel operated compressors. By
means of after-coolers, the process gas will be cooled down to approximately 50°C before it
enters approximately 2-5 km long flow line headers (to be determined once well drilling locations
are known) which lead to the central areas where the new wells will be constructed.

There will be a central distribution manifold for each area, from which subsidiary flowlines will be
arranged in star-configuration to the respective well heads (approximately 5 wells fed from each
manifold. The gas flow will be distributed to the different wells using flow control valves installed
in the well supply lines / Christmas-tree

The injection flow control valves will also be used for the flow control during the gas withdrawal
process before the gas is fed into 3 withdrawal trains. Each train is designed for 33% of the
withdrawal capacity and consists of a separation and gas cooling and reducing system and the
gas conditioning. The gas pressure reducing system will also be used for the control of the gas
flow rate. After conditioning the gas can be compressed if required or fed directly via the
metering system into the pipeline.

The selected route corridor for the pipeline is based on desktop study of available maps, as well
as latest Google Earth images. No site visit or ground investigations have been carried out. Based
on current project status, the identified corridors are expected to have +/- 5km accuracy. Total
pipeline length may vary +20%, considering potential re-routings due to localised requirements
(e.g., land ownership, ground characteristics, protection areas, existing infrastructure, etc).
Tow pipeline segments are identified:

17
 • CPL-1: 93km, 36” Pipeline running mainly north-south, connecting new Custody Metering
Station (CMS) located adjacent to existing SSGC Compressor Station at Hyderabad to the
new UGS at Khorewah
• CPL-2: 15.7km, 36” Pipeline running mainly east-west, CMS located adjacent to existing
SSGC Compressor Station at Hyderabad to the new North-South Pipeline Compressor
Station (or BVS), which will be constructed west of the Indus River at approximate KP125
of the new 48” North South Pipeline.

Cost Estimation is based on (i) the recommended practice of AACE International (IR-97), which
provides guidelines for applying general principles of estimate classifications to project cost
estimates; (ii) in-house data from previous projects and (iii) current commodities cost for
materials

This guideline reflects generally accepted cost engineering practices and is based upon
methodologies of a wide range of companies in the process industries around the world, as well
as published references and standards.

Within the scope of the work, the current stage of design and the time involved into the CAPEX
estimate, Class 3 is chosen for the best fit for the proposed scope of work as per AACE standard.

Capital Expenditure excluding cushion gas are estimated to be 426.25 Million USD.

Summary – Total Project Capex

Pipeline CPL-1 87.11 Mio. USD

Pipeline CPL-2 21.45 Mio. USD

UGS Sub-Surface Facilities 158.56 Mio. USD

UGS Aboveground facilities (including Long Lead Items) 159.13 Mio. USD

TOTAL COSTS 426.25 Mio. USD

Cushion Gas to be purchased will remain one of the biggest cost drivers for the UGS. Natural gas
can be either purchased via LNG or from domestic fields. The amount of cushion gas needed is
2,398 Million sm3 or 84 Bscf. It is the understanding of the Consultant that LNG will be used as
Cushion Gas due to the limited supply of indigenous resources.

Operating Expenditures are divided for the different lots (pipeline, subsurface and UGS Plant) in
variable and fixed OPEX. For Pipelines and associated facilities (pig stations, block valves,
metering), OPEX is assumed to be 1.0% of CAPEX in line with best practice and similar projects,
i.e., 1,085,000 USD per year. In addition, Consultant estimates that every 7-10 years a pigging
operation for the pipeline shall be performed. Cost range around 100,000 USD. For subsurface
facilities there will be no cost for re-completion. It is assumed that the wells are newly drilled and
therefore within the lifetime of the project no re-completion is required. OPEX will be limited to
logging and workover which are variable, but a provision shall include in the order of 200,000
18
 USD per year. Operating expenditures (OPEX) for the UGS are divided into the annual variable
energy cost for injection and withdrawal (3.532 Million USD per year and fixed cost related to
e.g., O&M and Personnel (1.583 Million USD)

Summary – Total Project OPEX

Pipeline Fixed Cost (includes Pigging cost every 7-10 years with 15.000
1.1 Mio. USD
USD yearly provision)

UGS Sub-Surface Facilities Fixed/Variable Cost 0.2 Mio. USD

UGS Facilities Fixed Cost 3.53 Mio. USD

UGS Facilities Variable Cost 1.58 Mio. USD

TOTAL COSTS (on average) 6.41 Mio. USD

The Environmental and Social Impact Assessment (ESIA) report for the proposed UGS project has
been carried out as part of feasibility study of the project. Detailed ESIA report has been submitted
along with the main feasibility report. The ESIA study has been conducted in accordance with the
Guidelines of Sindh Environmental Protection Agency (SEPA), National Environmental Quality
Standards (NEQS) and other regional and international environmental legislation and guidelines
including those of Asian Development Bank and World Bank etc.

Based on the findings of ESIA report, most of the adverse impacts of the proposed Underground
Gas Storage Project fall under the Low to medium significance in the absence of appropriate
mitigation actions. However, if proper mitigation measures suggested in ESIA report are adopted
during the project implementation, impact significance is likely to shift towards lower range to
positive impacts. These medium significant negative impacts include, community disturbance and
nuisance, demographic changes and threat to worker’s health and safety. Possible aspects of the
project which may cause the impacts include gas leaks from gathering pipelines, broken junctions
between wells, leaks from cap rock faults, fires and explosions, over-pressure, and other
operational failures. Agricultural fields and lives of the commons are on stake if any unfortunate
events occur.

Hence, development of this project in Khorewah has neither resulted into unacceptable impacts on
environment during construction phase nor will impose any threat to environment in subsequent
operation phase, therefore its execution is viable from environmental perspective. The proposed
Underground Gas Storage Project lies in the Zone 2A. Pakistan Zone 2A has an associated ground
acceleration of 0.08g to 0.16g; this categorization is equivalent to Modified Mercalli intensity scale
of between MM_VII and MM_VIII. The climate of most parts of the project area is Mediterranean
characterized by four seasons in a year. The maximum temperature in summer reaches 45°C
whereas during the winter’s minimum is 10°C. The mean maximum and minimum temperatures in
summer are 45°C and 25°C; and in winter 30°C and 10°C respectively. In a year, the rainfall is
highly erratic average of which is 170 mm. The summer season starts from March and continues
till October. April, May, June are the hottest months. The winter season on the other hand starts

19
 from November and continues to February. The rainy season starts in July and ends in September.
Rainfall is highly unpredictable, and many years go by without rain as well.

According to the socioeconomic survey results, population of the study area is about 5,260.
Average household size in the area is about six persons per household. The highest percentage of
the total population is included in age group <19-40 (46%), with the second highest percentage
being the age group of <18 years (36%). Similar trends in population distribution are also observed
among male and female population. In the project area the average household income is in the
range of about 15 to 20 thousand rupees per month per household. The nearby areas of project
area have few agricultural lands where wheat, Barley, Rice, Tomatoes, Sunflower and Mustard are
the main crops in the area. These crops are grown for domestic and commercial use. Animal fodder
has also been grown in the area for livestock. Based on identified environmental and social impacts
in the ESIA report, following recommendations have been made to ensure the environmental and
social sustainability of the proposed Under Ground Gas Storage Project:

• Environmental and social considerations as discussed in ESIA report and EMMP should be
duly taken into consideration during all phases of the proposed project.
• Environmental and social mitigation actions proposed in EMMP should be strictly adhered
to during all project works including pre-construction, construction and post developmental
stages of the project.
• Institutional and implementation arrangements required by ISGS should be followed in
accordance with the recommendations made in EMMP; It is also recommended that if
required, institutional and implementation arrangements may be modified in accordance
with the actual site conditions at the time of project implementation.
• Environmental audits and reviews as proposed in EMMP should be strictly conducted to
ensure effective environmental monitoring of the project. This is required to ensure the
proper implementation and to verify the effectiveness of mitigation measures proposed in
ESIA report and EMMP; and
• Project related environmental management should be among the top priorities of ISGS and
chain of responsibility should move from top management to bottom level employees and
workers.

To identify and analyze risk related aspects and to develop a mitigation strategy, a risk
identification sheet was prepared in a qualitative form. The risk sheet shall be updated and
further refined throughout the project. The risk sheet cancan be obtained from Chapter 23 of this
report.

One major concern addressed by Government of Pakistan is the non-availability as Underground

Gas Facility as the Khorewah Mining Lease is still valid and producing (expiry date of the Lease is
December 17, 2024). The field is still producing, however at very low rates. In August 2020 the
field was producing 0.106 MMscf/d of gas, 0.81 bbl/d of oil/condensate and 2.35 bbl/d of water.
In December 2020 all rates were zero. As a compensation for the loss of production a prediction
for the possible production until expiry of lease can be made e.g., by a decline curve and the

20
 value of the according amount of oil and gas can be paid by the storage operator. Further
condensate will be produced in the first storage cycles. This condensate could be assigned to the
former operator as a compensation.

Currently the operator of the field is drilling a new exploration well, namely Mulaki West-1 in the
field. Further concern was raised that no activity or operation which could impact the E&P
operations can be carried out without the consent of the Petroleum right holders. Neverthless it
shall be mentioned that the gas storage is planned in the depleted upper Guru sandstone. The
storage operation will not interfere with any activities above and beneath the assigned layer for
the storage as long as it is guaranteed that the wells are completed according to the state of the
art and have no connections to the storage layer. It has to be granted that the wells are properly
cemented and tight in the cap rock. This, however, applies also to the storage wells.

For a project with such complexity, to award EPC Contract(s) and Long-Lead Item (LLI)
procurement packages based on the update of a techno-economic feasibility study may face
some challenges, both technical and commercial nature. The technical dossier from the Feasibility
Study, while significantly improving the level of technical definition for the Project, still contains
items to be resolved and still includes a certain level of uncertainty regarding potential
modifications and variations throughout project execution. Therefore, it is strongly recommended
to carry out a FEED Phase for the project. The current implementation foresees ready for
operation early 2027.

The following Contracting Strategy is proposed:

• Procurement of time-critical LLI’s shall be initiated in the FEED phase for subsequent free-
issue (novation) to EPC Contractors. It shall be considered whether strategic procurement
packages (SPPs) shall also be procured by ISGS
• Proposed EPC Contracts are as follows:
o Pipelines (CPL-1, CLP-2), including pigging stations, BVS’s and CMS
o Indus Crossing (specialist HDD-Contractor)
o Sub-surface Facilities (including wellhead facilities)
o UGS Aboveground Facilities, including field flow lines
o Power Supply (cross-country HV overhead lines, including HV switchgear at grid
interconnection)
It should be noted that an ‘Early Works’ package, such as access roads, site grading, is
currently not required according to Implementation Schedule, but could be investigated
as part of overall schedule optimization.
• EPC Pipeline Contractor shall receive overall route drawings 1:25000 showing route corridor
+/- 200m, and shall prepare all further documents suitable for construction, i.e., Alignment
Sheets, crossing construction drawings, etc. and obtain all necessary additional permits,
right-of-way, etc.
• EPC Contractor for UGS Aboveground Facilities shall carry out detailed engineering and
procurement activities to develop the FEED documents into construction documents, and
shall be overall responsible for system performance, as well as incorporate LLI and SPP-

21
 vendor data, integrate and coordinate the interfaces to EPC Pipeline Contractor, EPC Sub-
Surface Facilities Contractor, and other critical sub-contractors (e.g., SCADA / Telecom)

Apart from the contracting strategy proposed, it may be advisable to also look at additional gas
supply by constructing LNG storage facilities near the existing LNG infrastructure and adjacent to
the tie-in of the future North-South Gas Pipeline in addition to the construction of a UGS in
Khorewah. Apart from providing flexibility, there might be additional benefit to have LNG storage
capacity in place to provide some gas supply to the southern area during winter periods, while
the UGS storage will be primary used to provide natural gas to the northern region of Pakistan.
This has the advantage that the gas can be directly supplied from the LNG storage facility instead
of regasifying the LNG, send it to north-east to the UGS facility and later send it back to the
south during high demand. Further, based on the timeline currently envisaged for construction of
a UGS, the construction of LNG storage tanks can be achieved quicker and therefore can
contribute to providing gas supply to the system sooner.

The final feasibility study and its associated documentation shows that the project is viable and
feasible and shall be brought forward to the next design phase.

22
1. INTRODUCTION

This report has been prepared by Ramboll Danmark A/S, Denmark [CMS No. 009862] in
association with DEEP KBB GmbH, Germany [CMS No. 032749] and Elan Partners (Pvt) Ltd.,
Pakistan [CM No. 017401] within the framework of technical assistance of the TA-9756 PAK:
Preparing Sustainable Energy Projects – 53058-001 Consultant (gas storage systems) for gas
development project (53058-001) by an agreement executed between the Government of
Pakistan and Asian Development Bank on July 26, 2019.

The counterpart body representing the Government of Pakistan is Inter State Gas Systems
(Private) Limited (ISGS) ISGS is a private limited Company incorporated under the Companies
Ordinance, 1984 (Now Companies Act, 2017) and a wholly owned subsidiary of Government
Holding (Pvt) Ltd. It is mandated to oversee the import of transnational gas pipelines into the
country and make improvements in Pakistan’s strategic Oil and Gas infrastructure development.

The study commenced on September 08, 2020 with a subsequent Kick off Meeting with ADB and
the Government of Pakistan in the form of Inter State Gas Systems (Private) Limited (ISGS), a
subsidiary of Government Holdings Private Limited (GHPL) working under the auspices of the
Ministry Energy`s Petroleum Division, Government of Pakistan.

The work of the project shall be completed by November 30, 2021 with the delivery of the Final
Bankable Report. A bankable Feasibility study by its nature means a report providing commercial,
technical and environmental feasibility of injecting and withdrawal of natural gas within a
depleted gas reservoir in Pakistan. The study is a bankable and meets acceptable standards of
financing & banking institutions. However, it is pertinent to mention that given the high capital
cost and complexity of the project, financing guidelines and rules may differ for each
bank/financing institution.

GENERAL

To maintain accelerated growth momentum, the Pakistan economy needs reliable, uninterrupted
and affordable supply of energy, of which natural gas supply is a significant component. Local gas
production is declining, and further significant local discoveries are expected to be limited.
Projects to import gas via international pipeline interconnections include Iran - Pakistan (IP) and
Turkmenistan Afghanistan Pakistan India Pipeline (TAPI), however, both projects are subject to
uncertain delivery completion. LNG is currently imported via FSRUs at 1,200 mmcfd via ‘Take or
Pay’ agreements. Further expansion of LNG import capacity is planned, however, despite long
term contracts, LNG supply is also subject to supply capacity and contractual fluctuations.

Considering the above-mentioned demand and supply constraints, it is now the aim of the
Government of Pakistan to construct an Underground Gas Storage. Ramboll Danmark A/S,
Denmark, in association with DEEP KBB GmbH, Germany, and Elan Partners (Pvt) Ltd., Pakistan,
have been commissioned within the framework of technical assistance of the TA-9756 PAK:

23
 Preparing Sustainable Energy Projects – 53058-001 Consultant (gas storage systems) for gas
development project (53058-001). The counterpart body representing the Government of
Pakistan is Inter State Gas Systems (Private) Limited (ISGS). ISGS is a private limited Company,
being a wholly owned subsidiary of Government Holding (Pvt) Ltd, and is mandated to oversee
the realisation of transnational gas pipelines into the country and make improvements in
Pakistan’s strategic Oil and Gas infrastructure development.

OBJECTIVE

The objective of the technical assistance includes the update/revision of the techno-economic
feasibility study of the Project previously conducted in 2005-2007 by Sofregaz, recommend
additional gas storage options in view of the new developments and emerging technologies
globally including implications and risks associated with the growing interdependence of
electricity and gas markets.

The scope also includes preparing bidding documents, following the ADB’s Standard Bidding
Documents Template, for development and implementation of the Gas Systems and Storage
Project.

In outline, the scope of work includes considering the factors, circumstances, conditions coming
about after the previous feasibility study of the project with an aim to identify and incorporate
required changes in the technical, economic, financial and environmental aspects of the Project to
identify the options of under and above ground storages.

PROJECT BACKGROUND

To maintain accelerated growth momentum, the Pakistan economy needs reliable, uninterrupted
and affordable supply of energy. In Pakistan, Local gas production is about 4 BCFT per day which
is going down and is expected to decline further in a matter of next 10 years. Prospects of new
discoveries are seen to be limited as there has not been a significant discovery (1 TCF or more)
for the last three decades. However, recently one field of 1 TCF has been discovered by Pakistan
Petroleum Limited (PPL) in Baluchistan. Pakistan may have found one of the largest hydrocarbon
reserves, with potential deposits of one trillion cubic feet, in Balochistan’s Margand block
(according to tribune.com.pk) For practical purposes, local gas is “being projected” to be depleted
by 2030 and the OGRA forecast of supply-demand has been based on this assumption. Local gas,
due to its relatively cheaper price, has been reserved for the Tier 1 customers (T1) which
includes residential, commercial, industrial and fertilizer sector while the Tier 2 customers (T-2)
which covers the Power, CNG and other ancillary sectors for which supply is presently more
focused through LNG. It should be noted here that lately, all domestic sector T-1 customers have
also been supplied with LNG with a resultant circular debt creation of RS.200 billion. The cause
for this is the under-writing sovereign commitments for capacity utilization on a take or pay
which has ultimately started causing the increasing gas circular debt position. For this reason, the
new gas supply infrastructure being developed is moving towards merchant system in which such

24
 commitments are being avoided. Also, LNG which is currently ring-fenced and excluded from the
gas pricing basket is now being considered to be included to provide a more rational pricing
arrangement.

Given that LNG seems now to be the focus of enabling a better meeting of demand, the drive is
towards making the LNG flow more effective. This has become very evident when the recent
shipments of LNG were delayed causing a major issue in the gas supply with serious implications
both political and commercial. At present, the current import level of LNG is 1,200 MMCFD.
All the FSRUs currently in use are owned by private companies and have supply contracts with
SSGC (Engro) and Pakistan Gas Port Pvt. Ltd - PLGPL (PLTL). These are “Take or Pay” contracts
under sovereign guarantees; Gas is procured by PSO (long term contract with Qatar gas) and is
handled by Engro FSRU. Pakistan LNG Terminal Ltd (PLTL), another 100% government owned
company, procures gas from spot market under frequent international tenders. Apart from this,
there are other small term contracts of 5 years as well which will expire soon.

Two additional Floating Storage Regasification Units (FSRUs) are being actively considered which
are expected to be commissioned in the next two years one of which is by Mitsubishi (Tabeer
Energy) with a capacity of 750-1,000 MMCFD. Further OGRA has granted “provisional licences” to
two virtual pipeline companies. The licences will be valid for one year and will be first of its kind
projects in Pakistan to facilitate the supply of natural gas mainly to off-grid consumers. The
provisional licenses issued by OGRA as of January 12, 2021 allow the owners to import LNG.
Notwithstanding that, practically, all new gas supply will be Spot LNG. It is noteworthy here
though that some shorter-term contracts may also come up, but they are expected to have a
cost-structure like the Spot Prices.

With regard to the consideration on reliance for import of gas through pipeline arrangements
there are currently 2 imported gas pipeline projects: a) Iran - Pakistan (IP) with Iran and b)
Turkmenistan Afghanistan Pakistan India Pipeline (TAPI) with Turkmenistan, both having a
capacity of 1200 MMCFD. IP has poor prospects and may be realised only when Iran-U.S. political
difficulties are resolved, and Iran comes out of the political isolation. TAPI on the other hand, has
remained unimplemented due to conflict in Afghanistan; Afghanistan is a partner in the gas
contract and the pipeline passes through Afghanistan but due to political improvements in
Afghanistan, the prospects on TAPI have increased, although the recent announcement of
withdrawal of international peacekeeping forces may change this outlook. Considering the above
uncertainties, it is now the aim of the Government of Pakistan to construct an Underground Gas
Storage.

PURPOSE OF THIS REPORT

The report continues to set the framework conditions already laid out in interim report.
Consultant has undertaken the update of the Feasibility Study. Whereas the interim report laid
out the main design parameters gained from the gas supply/demand analysis resulting in needed

25
 gas storage volume and the withdrawal/injection capacity, draft final report provides the
reservoir selection process and the associated engineering.

The final report is divided into the following chapters:

• Chapter 3 - Review previous Feasibility Study: Here the previous Feasibility Study
conducted in 2005-2007 by Sofregaz is reviewed. Key issues will be addressed
• Chapter 4 - Proposed Methodology: The proposed methodology is shown in a simple flow
chart. The strategic requirements will be discussed in the subsequent chapter
• Chapter 5 - Gas Demand and Supply: This chapter will base its assessment of needs for
the demand and supply data. Special attention will be placed on seasonal swings and the
additional winter demand (AWD).
• Chapter 6 – Reservoir Selection: The selection criteria are described and based on the
available data a reservoir is selected
• Chapter 7 – Reservoir Engineering: the selected field is assessed from a reservoir
engineering perspective
• Chapter 8 – Material Balance Simulation: A material balance describes the gas field as a
tank and provides a prediction scenario regarding storage operations
• Chapter 9 – Well Design of Storage Wells: This chapter describes the planning of the
storage wells as vertical wells.
• Chapter 10 – Well Completion Design: The well completion process making a well ready
for commercial operation is described.
• Chapter 11: Surface Facility Design: The surface facilities describing the main operating
modes: injection and withdrawal are described.
• Chapter 12 – Pipeline and Metering Facilities: Here the pipeline routing from UGS to the
Tie-in(s) are described including the pipeline design and requirements for CMS.
• Chapter 13 – Financial Feasibility: This financial feasibility forms part of an
update/revision of the techno-economic feasibility study of the Project previously
conducted in 2005-2007 by Sofregaz. This is explained in the chapter
• Chapter 14 – Transaction Structure: This chapter determining the optimal transaction
structure, the full range of options has been considered right from the prospect of the
project being implemented by the public sector itself right up to the possibility of it being
carried out through private sector intervention
• Chapter 15 – Capital Cost: Cost Estimation is based on (i) the recommended practice of
AACE International (IR-97), which provides guidelines for applying general principles of
estimate classifications
• Chapter 16 - Financing Plan: The Project is proposed to be financed through a
combination of debt and equity with the expectation of a debt-to-equity ratio of 80:20
• Chapter 17 - Operating Cist: This chapter describes the operating cost
• Chapter 18 – Tariff Regime Various tariff options were considered at the interim stage of
this feasibility. Amongst all, Cost-plus regime was selected to be the most preferred
option

26
 • Chapter 19 – Financial Analysis: In this section, a comprehensive analysis has been
carried out of the Project to assess its economic and financial viability and to determine
its feasibility with reference to various risks present and mitigation of such risks thereof.
• Chapter 20 –Financial Model Manual: This chapter describes how to operate the financial
model.
• Chapter 21 – Environmental Screening of the Project: Here the main findings of the ESIA
report are laid out
• Chapter 22 – Legal and Regulatory Framework: A short overview of the framework is
given with the institutional structure and the legal framework in place
• Chapter 23 – Risk Considerations and Mitigations: Relevant risks for the UGS are
identified and mitigation measures are proposed
• Chapter 24 – Contracting Strategy and Implementation: Contracting strategy and
associated implementation schedule is given.

OFFICAL MEETINGS AND DATA

Meetings Date

Commencement Date September 08,2020

Kick-off Meeting September 28, 2020

Data Collection Strategy Meeting October 13, 2020

Inception Report Meeting November 26, 2020

Data Management Meeting December 14, 2020

Progress Report Meeting January 29, 2021

Interim Report Meeting February 17, 2021

Progress Report Meeting March 22, 2021

Final Report Meeting May 05, 2021

Final Report Meeting Update August 06, 2021

Final Report Meeting Update September 27, 2021

Final Report Meeting Update November 22, 2021

Following data were provided:

Data/Information Date Received

Gas Supply Forecast Upcoming Pipeline Projects October 22, 2020

Presentation Energas Project Overview November 03, 2020

Presentation of North South Gas Pipeline November 03, 2020

Yearly Oil and Gas field wise production for last six years
November 23, 2020
obtained from PPIS/LMKR

Yearly Field wise projections of gas up to 2034 obtained

November 23, 2020
from PPIS/LMKR

27
 New wells drilled in last six years obtained from
November 23, 2020
PPIS/LMKR

Pakistan Gas Reserves as of June 2020 obtained from

December 01, 2020
PPIS/LMKR

Pakistan Oil Reserves as of June 2020 obtained from

December 01, 2020
PPIS/LMKR

Submission Sheets to OGRA from SSGCL/SNGPL for

December 01, 2020
FY20-21

Historical five year monthly daily average gas

consumption of SNGPL and SSGC system obtained from December 09, 2020
OGRA

Current main pipeline infrastructure, capacity and

utilization percentage and future expansion (from December 09, 2020
SSGCL)

Gas demand projection on two systems with

December 09, 2020
regional/seasonal breakup (from SSGCL)

Brief on Gas Sector Reforms (from SSGCL) December 09, 2020

Well Wise/Field wise oil & gas production data for the
month of July 2020 from PPIS for OGDCL, PPL, POL, December 11, 2020
MOL, ENI, OPL, UEPL

Interim Report (RPT-TA-6153-REG) Sofregaz including

December 30, 2020
Annexes

Sui Northern Gas Pipelines Current Gas Pipeline

Infrastructure, Capacity and Utilization%; Future
January 05, 2021
Expansion Projects and Projected Sector Gas Demand
/Supply

Brief on LNG Sector of Pakistan, Long Term Contract

January 06, 2021
details and individual brief on new LNG terminals

Dataset for Kadanwari Field from ENI January 08. 2021

Dataset UEP Gas Fields (Khorewah, Khorewah Deep and

January 19, 2021
Liari Deep)

Route Alignment Map for NSGP and key parameters March 03, 2021

Khorewah and Khorewah Deep Wells Permeability and

March 08, 2021
Mobility Data

RLNG Composition Data from Qatar dated February 25-

March 10, 2021
26, 2021

Produced Water Analysis Data from Khorewah March 16, 2021

Turk – Golarchi Schematic View March 16, 2021

Updated Field Data from OGDCL, PPL and UEP, ENI, MPCL;
March 17, 2021
OPI and POL

Field data from 24 reservoirs under operation from UEP March 23, 2021

28
 Updated Field data from PGDCL, PPL and UEP March 23, 2021

Reservoir Information from Bhangali, Dhurnal and Tatana

April 06, 2021
Field

PROJECT VIABILITY

Viability for a project refers to the assessment of whether the project has the capacity to meet
the defined objectives and in addition to generate significant financial and economic gains to the
Government of Pakistan and to the economy in general.

Financial and economic viability are not the overriding criteria for approval of all projects. Other
factors to be considered include riskiness of technical, social and institutional factors or negative
impacts on the environment.

Project viability depends on several factors in addition to economic ones and the decision to go
ahead with a project or not will depend on multiple criteria. The appraisal of project viability must
seek to identify cases where investments of scarce resources are likely to lead to actual net
losses and avoid these projects. In designing a project, planners must have established the
social, legal, financial and economic viability

To determine the project viability in the context of this project, Consultant set up a Financial
Model that calculates the required tariff of the project considering Return on Equity (RoE)
requirements of ISGS. It will provide indicators for the financial viability of the project and
assesses the impact of different parameters on the financial performance. The Financial Model
therefore serves as a solid indicator for the assessment of the financial viability of the project.
The analysis of the financial viability and calculation of the Tariff is interdependent and uses
technical, financial, cost and commercial data as input. The financial model calculates relevant
financial covenants for various sensitivities

ASSUMPTIONS / ANALYSIS

The previous Feasibility Study conducted by Sofregaz was aimed at assessing the potential
Underground Gas Storage sites for modulation purposes (Northern Pakistan) and the potential
Underground Gas Storage sites for security of supply for the whole country. To define the
selection for the UGS, 4 risk cases were developed in line with ISGS scenarios. Once the main
selection criteria were defined, e.g., withdrawal rate, working gas volume, an analytical study
was conducted, assessing 107 fields with the outcome that Bukhari and Khorewah condensate
fields were selected. The methodology used was quite straight forward and Ramboll agrees in
principle with the approach. In addition to the selection of the UGS facilities matching agreed
principles, an infrastructure assessment was made. Infrastructure assessment includes the site-
specific criteria like above ground facilities including pipeline. In section 4 of the Sofregaz report
a Master plan was evaluated which mainly focused on cost and environmental issues.

29
 Following Assumption are made:

Item Comment

Based on the conclusion set out in the interim report, the minimum
requirements for gas storage are following
Minimum Requirements for Gas
• Minimum Working Gas Capacity = 44 Bscf (1232 Mio. Sm3)
Storage
• Peak Withdrawal Capacity = 792 MMscf/d (924000 sm3/h)
• Minimum Injection Capacity = 396 MMscf/d (462 000 sn3/h)
• The maximum pressure is mainly given by the depth of the
reservoir and is taken in this study as the initial pressure of
the gas fields considered
• With respect to surface facilities the maximum pressure at
the well should be 3000 psi (207 bar).
• The next well head strength e.g., is 5000 psi (345bar) which
will be oversized for ordinary gas storage and will
unnecessarily augment storage cost.
• The minimum well head pressure is usually about 60 bars
(870 psi), a value still high enough to ensure gas flow into to
the distribution grid.
• The lowest “maximum” storage pressure however should be
Selection Criteria Reservoir in the range of 140 bar (2 000 psi), as at lower storage
pressures the ratio of working gas volume (WGV) to cushion
gas volume (CGV) becomes unfavourable. This determines a
desirable depth range of fields promising for gas storage
which is between 1600 and 3000 m (5000 – 9800 ft).
• The requirement of the minimum WGV leads to a minimum
reservoir size of 80 Bscf assuming a WGV of 55 %.
• The maximum storage size is about three times the value of
44 Bscf. For the screening a maximum size of 300 Bscf of
initial gas inn place was taken. If the field size is much higher
the storage of a limited and well determined amount of gas
may become impossible, as gas may migrate into other parts
of the field or storage pressure must be set too low.
• Imported gas is primarily landing in the Karachi area and can
be considered as imported LNG (considering 4 terminals in
operation)
• The Indus Left Bank Pipeline System can be used to transport
imported gas to the north
• The North-South Gas Pipeline Project (48/56 inch is a 1044
km high pressure gas transmission pipeline from Port Qasim,
Infrastructure
Karachi to Kasur in Punjab province. It will be operational
within schedule (as of November 2020 known as Pakistan
Stream Gas Pipeline) and has sufficient capacity
• The gas connection pipeline from the Underground Gas
Storage Facility to the Main Transmission Tie-in point
(preferable to the North-South Gas Pipeline) shall be below
150 km.

30
 • Underground Gas Storage will mainly inject regasified LNG in
the summer and use the working gas for peak shaving in the
winter
• Consultant considers that the existing and future gas
infrastructure network will be sufficiently sized and operated
to allow injection of required volumes into the transmission
network. Potential network augmentation might be required
but is not considered in this analysis.

For a project with such complexity, the above contracting strategy to

award an EPC contractor based on the update of a techno-economic
feasibility study may face some challenges, both technical and
commercial nature. The technical dossier from the Feasibility Study
Contracting Strategy
will deliver too much tolerance for modifications and variations
throughout project execution to support project development though
to final completion. The design shall further mature prior tendering
for EPC, preferably via a FEED phase

To predict a storage, cycle a material balance will be performed.

Following was applied:
• The input data for the simulation were obtained from the
start of production in 1993 until end of 2020.
• Historical pressures were taken from the p/z plot
• A match of the historical data was performed with respect to
Material Balance pressure development, water production and condensate
production.
• The simulation was performed with an initial gas in place of
5.579E+09 sm3, an initial pressure of 218 bar and a
reservoir permeability of 30 mD
• The reservoir temperature was 100 °C and the reservoir net
thickness 55 m

31
2. CONTEXT OF THE PROJECT

BACKGROUND

Pakistan is an energy deficit country. Historically energy demand gap is met mainly through oil
imports and partially through coal imports. At present, the country is primarily focusing on
imported gas to bridge the shortfall due to declining indigenous gas resources. Pakistan's natural
gas production reached a peak of 4.2 billion cubic feet (Bcf) per day in 2012. Since then,
production is slowly declining. Recent small natural gas discoveries have not been able to offset
production declines. Of the existing gas reserves, 7% is depleting every year on average.
Pakistan holds sizeable shale gas reserves of 105 trillion cubic feet (Tcf), according to the EIA's
Technically Recoverable Shale Oil and Shale Gas Resources report published in 2013. These shale
gas prospects will remain untapped due to a) these are in deeper formation more than 3000 feet
as compared to the successful USA shallow shale resources, b) non-availability and experience of
fracking technology and c) lack of shale production policy and incentives. Several small natural
gas fields have been discovered in Pakistan since mid-2015 and are being further examined and
appraised and production from these fields will marginally lower the current decline of indigenous
gas. In 2019 the structure of the Margand blocks revealed that this block has one trillion cubic
feet of natural gas reserves (according to tribune.com.pk), which is substantial and could, if
coming on stream, contribute significantly to the gas supply of Pakistan.

At the time of writing, t is anticipated that this winter the gas shortage in the Sui Southern Gas
Company Limited (SSGCL) network, which serves Sindh and Balochistan, will be 250 million cubic
feet per day (mmcfd) 1. Also, the Sui Northern Gas Pipelines Limited (SNGPL) network which
serves Punjab and Khyber Pakhtunkhwa will experience a severe gap between gas supply and
demand in the order of magnitude of around 370 mmcfd 2.
The gap between gas supply and demand was analysed in the interim report. Total needed
working capacity needed to meet 100 % of the excess gas demand in FY30 based on the demand
analysis performed is equal to 176 bcf. The associated peak withdrawal capacity is 3166 mmcfd.
Consultant acknowledges that the construction of gas storage facilities will take time and are very
ambitious. Consultant proposes therefore to focus in an initial step to have at least a minimum
25 % of the excess gas demand and associated withdrawal/injection rate.

In order to meet the growing energy demands, the government of Pakistan is pushing the
implementation of various gas import projects such as TAPI, Offshore Gas Pipeline Project (OGPP)
etc. Currently, the growing energy demands of Pakistan are partially met through import of LNG.
Pakistan commissioned its first regasification terminal, the Engro Elengy floating, storage, and
regasification unit (FSRU), at Port Qasim, in 2015. The government of Pakistan initiated a second
LNG project, commissioned in 2018/2019, which supplies LNG for three new gas-fired power
plants-totalling 3.6 GW in Punjab province to resolve the longstanding power crisis in the
northern part of Pakistan. LNG is considered to improve energy economics and sustainability of

1
According to Minister for Petroleum Division Omar Ayub (https://www.dawn.com/news/1586167)
2
According to Minister for Petroleum Division Omar Ayub (https://www.dawn.com/news/1586167)
32
 supply for domestic and industrial consumers. Nevertheless, due to storage constraints of the
existing and of the upcoming LNG projects which are limited to the storage capacity of the FSRU,
the Government of Pakistan is looking into the opportunity to store natural gas in underground
gas storages to offset the gas shortages which are especially evident in the winter. It is assumed
that imported gas will be primarily landing in Karachi and imported LNG (considering 4 terminals
in operation) will be available as the source for the underground storage.

GAS STORAGE OPTIONS

2.2.1 Underground gas Storage options

There are several methods of underground natural gas storage all with distinct economic and
physical characteristics relating to their suitability from a commercial perspective and from an
operational perspective.

• Depleted Fields (Gas, Oil, Condensate)

• Salt Cavities
• Aquifer storage
• Rock caverns
• Line Pipe
• Liquefied Natural Gas (LNG)

Based on available information from the previous feasibility study and the availability of depleted
gas fields, we find that only the depleted gas/condensate fields and salt caverns are relevant for
the present development in Pakistan.

Gas storage in aquifer structures is a common method and state of the art.
As it requires exploration effort to characterize such structures in addition to the general known
geological knowledge it is not considered in this study. Further the suitability of an aquifer
structure must be proven by exploration wells and its tightness must be evaluated.

Rock caverns are constructed in suitable geological formations by using conventional mining
techniques, which is complex and cost intensive. Consequently, only a few rock caverns have
been used to store natural gas to date. The geometrical volume of known rock caverns is usually
in the range of several 10,000 m³, although there are also exceptions of up to a few 100,000m3.
However, the associated working gas capacity is relatively low compared to other underground
gas storages, amongst others due to (very) limited pressure ranges applicable in rock caverns.
Another critical point is the tightness of rock caverns: solid rock is not impervious with respect to
liquids, and especially gases, because of fractures within the rock mass. The sealing therefore
must be achieved and ensured by additional, complex, and elaborate engineering measures. In
summary, of all common underground storage options, rock caverns are usually accompanied by
the most serious technical challenges. Therefore, rock caverns are considered not suitable for this
project

33
 The various technical characteristics of the above-mentioned storage methods can lead to their
utilisation for different operational functions, for example salt cavity storage can provide high
withdrawal and injection rates but offer less impressive volume capacities whilst depleted
reservoirs will provide significant volume capacities but poorer withdrawal rates. To generate an
appropriate perspective of both alternatives it is necessary to be aware of any advantages and
disadvantages that are associated with each type of storage.

2.2.1.1 Depleted Fields

Depleted fields are the most used method of storage on a worldwide level. Depleted Reservoirs
are natural formations that have already dissipated their recoverable natural gas reserves. The
gas is stored in porous rock and is contained by water pressure from beneath. Such a form of
storage has a number of attractive qualities, of principal note is the comparatively low economic
cost of such storage units and for this reason depleted fields remain the most ubiquitous form of
storage. Although certifying whether a structure is suitable for gas storage is an often-complex
process involving seismic exploration and geo statistics, depleted reservoir formations will
provide greater confidence in their geological formations and suitability as containers for natural
gas than other methods of storage, as having previously contained hydrocarbons the possibility
of leaks is likely to be less. Depleted fields also commonly have an advantage regarding reduced
capital costs through technology such as existing wells and pipeline connections often remaining
in place from the conversion from a producing to a storage field. Depleted fields are also often
characterised by larger storage capacities than alternative methods of storage.

Depleted fields are however limited by several negative aspects which while perhaps not as
fundamental as the flaws of other forms of storage exhibit should still be reviewed. Depleted
fields could be hindered as an investment through the substantial initial investment needed in
cushion gas that is required in order for them to maintain functionality. On average cushion gas
contributes to around 50% of the total capacity depending on the price of the gas contributes a
significant part of the overall investment. Depleted fields are characterised by lower deliverability
and injection rates thus making them less feasible for dealing with short-term shifts in demand
than gas storage in salt caverns. The relative speed of withdrawal and injection tends to be slow.
The advantage of depleted gas fields as gas storage is that existing wells and process facilities
may be used for development of the storage hence reducing the investment and time for
implementation.

Depleted fields for gas storage mean in general depleted gas fields. Within this group also
different reservoirs facies are present. In general sandstone reservoirs are preferred, as
sandstones may have high permeabilities and are in general more homogeneous as limestone
reservoirs. Also fractured reservoirs may exhibit a high deliverability but fractured reservoirs are
very often complicated and gas flow within the reservoir is not easy to be controlled.

Depleted oil fields can also be used for gas storage however the presence of oil will lead to
condensate production and the flow of oil and gas will reduce deliverability. The gas wis also
dissolved in the oil up to the saturation pressure and this will require a higher cushion gas

34
 amount. Also, partial blocking of gas flow by oil and oil precipitates has been observed. Depleted
oil fields should only be an option, if no other choice is available.

2.2.1.2 Salt cavities

This form of gas storage is comparatively more recent in its adoption and has several qualities
making it specifically suited to dealing with short-peak deliverability and injection. The
development process is detailed as follows; salt is dissolved by leaching with freshwater and
removing brine through an exit well, ensuring the salt is eventually dissolved and forms an
underground cavity with walls that are impermeable thus reducing the risk of leaks. The principal
advantage of this type of storage is the attractive injection and withdrawal rates such storages
can facilitate. Rates of withdrawal and injection provide more technical dexterity as gas is
compressed directly into a large cavity in the salt layer rather than porous rock as in a depleted
field or aquifer. The result is a typical cycle period of 10-30 days which is significantly less than
that of a depleted field. The salt cavity method is often attractive to investors seeking to exploit
short-term price gains and has become more popular in liberalised markets where there is
opportunity to exploit spot prices. The cushion gas requirements of such storages are another
positive aspect of salt cavities as the ratio of cushion to working gas ratio is at approximately
20%, significantly less than that of depleted reservoirs and provides good working-capital
economics.

Salt cavities do however have a few drawbacks meaning they are specific in their capabilities and
subsequently only suitable for certain tasks. The volume capacities of salt cavities are
significantly less than that of depleted field reservoirs and aquifers, and they are often required
to be close to significant volumes of water to be economically feasible as vast volumes are
needed to leach initial cavities. The development and maintenance of salt cavities can be more
costly than other forms of storage due to the expensive leaching process and the corrosive
environment salt presents. However, the attraction of their multi-cycle options can reduce per
unit costs of a given volume of gas injected. Salt cavity storage is also dependent on a number of
geographical criteria being satisfied and reliant on finding areas where the salt is significantly
thick in order to create the initial cavities. Finally, the operational costs of such forms of storage
are generally high due to a number of factors including the higher pressure that such storage
operates at, the corrosive environment that the cavities function in and the increased
environmental regulation that such storage is exposed to.

Some of the main drawbacks of salt caverns are the need for leaching of the caverns and
disposal of the salt brine. Different solutions are used depending on location. In case of location
close to sea, it may be possible to dispose the brine directly to the sea, while a location inland
will require production of salt e.g., for commercial purposes if the quality of the salt allows this.
Experience from Europe shows that it may be difficult to obtain environmental permissions for
leaching of salt caverns.
There are currently two salt deposits in Pakistan: Salt Range (Punjap) and Kohat.

35
 Figure 1: Overview map with indication of the salt deposits in Pakistan: Salt Range (Punjab) in the North
and Kohat to the south of it.

SALT RANGE (PUNJAP)

Rock salt in Pakistan is assumed to be of Precambrian/Cambrian age in the Salt Range of the
Punjab. Bore holes and mines explored many salt domes with a salt thickness of 150 - 2,600 m
(490 - 8,530 ft) throughout the Salt Range. The salt of the Salt Range area is rose red and
contains impurities of sulfates and marls. The observed structures are interpreted as remnants of
diapirs and salt walls. The various boreholes drilled in the Salt Range Formation have entered
massive salt after a 15 - 60 m (50 - 197 ft) zone of either loose rubbly soil or a caprock
consisting of anhydrite, gypsum and marl.
The depositional thickness of the Salt Range Formation is estimated with approx. 1,000 m (3,280
ft).

KOHAT
In the Kohat area of the North-West Frontier Province salt deposits probably of Eocene age are
known. The Kohat Salt occurs in tightly folded anticlines as more or less vertical walls which in
general are 300 - 600 m (985 - 1,970 ft) across and 3 - 32 km (1.70 - 20 mi) in length. The
colour of this salt is white grey.

In this context, the descriptions, findings, and conclusions of the Interims Report of the Sofregaz
Study (Nov. 2004) can generally be confirmed: “Confirmation of the feasibility would necessitate
to proceed to further exploratory works to delineate the necessary salt area and evaluate in
detail the horizontal and vertical extension of the salt, its composition and its geo-mechanical
characteristics.”

36
 In order to assess in more detail if a salt deposit could possibly be considered for construction
gas storage caverns.
As also already concluded by Sofregaz in 2004, the two most important aspects regarding a
feasibility of developing gas storage caverns – in addition to a sufficient salt quantity and quality
in an appropriate depth – are:
• Availability of (fresh) water in sufficient quantity
• Possibility to dispose corresponding quantities of brine

Finally, it needs to be considered that a cavern building project would take also a long time (in
total maybe 7-8 years from pre-feasibility to gas operation). Especially the leaching process
alone will last several months to years. In addition, it has to be considered that a corresponding
quantity of single caverns would be required in order to reach a very large storage volume.

In this context Consultant has contacted the mineral section in the Petroleum division, which is
headed by Director General of Mineral, under the Petroleum Division. Mining however remains a
provincial subject. A virtual meeting was held with Director General Mineral where provincial
representatives of the mineral departments, representatives of geological survey of Pakistan, and
representatives of PMDC were present. DG (mineral) briefed about the current status of salt
mining in Pakistan. He confirmed the above and it was concluded that there is no prospective
cavern at this point suitable for the project.

Data required to evaluate a salt deposit technically/geologically with regard to suitability for
cavern storage:

• Borehole data of exploration wells (if existent):

o Lithology,
o Geophysical logs (e.g., Gamma Ray, Density, Sonic, Caliper)
o Drill core description / core photos
o Mineralogical analysis of salt (e.g., NaCl, KCl, MgCl2, CaSO4, MgSO4, K2SO4,
Insolubles)
• Geological cross-sections
• Interpreted seismic lines
• Distribution and thickness maps for salt (e.g. contour maps)

Additional data regarding regulatory/environmental feasibility:

• Permit law and authority requirements regarding disposal of brine / waste management

In general, the following requirements regarding cavern construction need to be met:

Rock mechanical and geological requirements:

• Cavern depths: 400 – 2,000 m (top of salt e.g., 300 m minimum) - the deeper the
cavern, the higher the storage pressure and thus the amount of stored gas
• Thickness of salt: minimum 70-100 m, optimum: from 300 m upwards

37
 • Composition of salt: content of insoluble (e.g., anhydrite, mudstones etc.) <20 % (halite
>80%) - as the content of insoluble components increases, the useful storage volume of
the caverns decreases
• At best, no occurrence of potassium and magnesium salts within the salt deposit as these
minerals lead to the formation of irregular cavern shapes
• Distance to faults 200 m

Environmental aspects:
• Sufficient water supply
• Corresponding possibilities to dispose high quantities of brine

2.2.2 Above Ground Storage

There are two principal methods of aboveground natural gas storage to be considered:
• Natural Gas through LNG (FSRU versus Land based storage)
• Natural Gas storage through line-packing

2.2.2.1 LNG Storage

The main purpose of this section is to compare and provide key aspects of the two different LNG
Import infrastructures, FSRU and Land based LNG terminal. It is understood that Pakistan
currently has two existing LNG projects on stream and within the near future there will be two
more FSRU projects. Also, there are considerations to implement a land-based LNG project. It is
essential to note that each method has its own features and advantages.

FSRUs are based on LNG tankers and use essentially the same technology as onshore terminals.
The only real difference is that the equipment is engineered to be suitable for shipyard
construction and marine operation. For a new build, the equipment is normally integrated into
the vessel. For a conversion, the equipment is normally built as a separate module or modules
and retrofitted to the LNG vessel in a shipyard to minimise time.

LNG loading to FSRU is carried out by STS (ship to ship transfer). To supply 500MMCFD of gas,
more than 60 shipments would be required in a year. The construction of an FSRU is almost the
same as that of LNG tanker. Old LNG tankers can be remodelled as FSRU to save construction
cost.

Operation of FSRU in general is vulnerable to weather condition and emergency evacuations plan
must be in place if it is operating in the cyclone prone area. Land based LNG Terminal on the
other hand requires a larger onshore footprint. In order to minimise investment to the
infrastructure and also to secure freedom to construct additional tanks to meet the incremental
demand, the space required for such a land-based LNG regasification plant is considered
conservative.

38
 Many of the original FSRUs were based on Moss or Membrane LNG tanker conversions. The
recent trend has been to construct new-build vessels with typically around 170,000 m3 geometric
storage and a 600-750 MMscfd send out rate. However, it is interesting to note that Höegh LNG
has just placed an order with Maritime (engineering) and Wärtsila Oil and Gas for the conversion
of an existing Moss tanker. It appears that the order is for the engineering and procurement of
the long delivery equipment items only, to enable physical conversion work to be completed in
just 12 months, rather than the normal 18 months if the equipment had to be ordered. Both
conversion options are less than the 27-36 months required to construct a new vessel.

Onshore LNG tanks are typically full containment tanks with a typical size up to 200,000 m3,
corresponding to 120,000 Nm3 natural gas. In countries with difficulties to establish underground
gas storage or where the internal gas system is not well integrated, like Spain and Japan, the use
of onshore LNG storage has been the main gas storage option.

2.2.2.2 Line packing

This method is already practiced in Pakistan. Line packing is a method for storing gas in pipe
because of compressibility of the gas. It is a method used for providing short-term gas storage in
which natural gas is compressed in a transmission line, providing additional amounts of gas to
meet limited peak demand. Therefore, by using line packing technique, the sustainability of gas
supply to consumers can be ensured if there is an increase in gas demand.

Line pack capacity can be increased by building larger pipeline dimensions than needed for pure
flow reasons. As the marginal cost of selecting a larger diameter pipeline is small and prepares
for future increase in flow the line pack is a good solution in particular for very short supply
peaks as for peak load power supply during few hours.

To determine line pack, a transient analysis would need to be conducted to determine the volume
available based on the operating philosophy of the system operator. Additionally, it is common to
incorporate the result of the line pack calculation into a probabilistic model in form of a Monte
Carlo simulation.

The accuracy of the line pack calculation depends mainly on the gas composition (gas density,
compressibility) and the distribution of pressure and temperature along the pipeline segments.

Line packing is based on the operational strategy of the transmission system operator. Mainly line
packing is used for intraday smoothing of supply and demand and not for longer peak shaving as
envisaged by the UGS.

2.2.2.3 Conclusion
In the previous chapter, Consultant has provided some overview on the different aspects on
storing natural gas.

39
 According to the storage needs identified in this study the use of a depleted gas field id
recommended. The assessment criteria for suitable locations are given in a qualitative table
below:

Storage Peak Seasonal

Deliverability CAPEX OPEX
Volume Shaving Demand

Aquifer Storage +++ + + +++ ++ ++

Salt Caverns ++ +++ +++ ++ ++ ++

Depleted Oil/Gas Fields +++ + + +++ ++ ++

Linepipe/Linepacking + ++ ++ + + +

Rock Caverns + +++ +++ + +++ ++

Liquefied Natural Gas

++ +++ +++ ++ +++ ++
(regasification)

"+" small impact/value

'"++" medium impact/value
'"+++" large impact/value

40
3. REVIEW PREVIOUS FEASIBILITY STUDY

GAS SUPPLY AND DEMAND

The previous Feasibility Study based its assessment on the new demand and supply data
provided by ISGS (called in this report "Revised ISGS Projections") dated November 2004. It is
understood that this projection is a data set which itself is based on the demand and supply
projections carried out by Hagler Bailly Pakistan (HBP).

Within the last 15 years the gas supply demand data and the projections made at the time of
writing are outdated and therefore the design parameters need to be revised accordingly. It is
fair to assume the baseline condition that Pakistan is or will become gas deficit country mainly
due to declining indigenous production which cannot be offset by import solutions.

The gas consumption in Pakistan was stagnating for the decade from publishing the feasibility
study until LNG import was initiated. The feasibility study was focusing on new import pipelines
which have not been constructed.

As a first approach Consultant will base its Supply-Demand Analysis for natural gas on the “State
of the Regulated Petroleum Industry” report for fiscal year 2018-19 in pursuance of Section 20
(1) (b) of the OGRA Ordinance.

SECURITY STORAGE

The security storage defines the supply risk to be addressed. Within the Feasibility Study four
scenarios are defined to address the requirements to be set out for the security storage with
respect to certain risk scenarios (technical, political and legal risks)

Scenario Description

Due to the failure of a major outside source of supply, the security storage should provide 3 BCFD. This
S1
figure corresponds to the envisaged capacity of the TAP pipeline.

S2 The security storage should ensure the security of supply of the whole captive market.

S3 The security storage should be able to substitute for all the gas imported

The security storage should ensure the security of supply of the part of the captive market that is
S4
imported

The scenarios were based upon the estimation:

• Gas demand will grow from 2.6 BFCD in 2004 to 10.2 BCFD in 2025 considering a
moderate scenario;
• Natural gas will become the primary energy consumed with approximately 50 % by 2009
with increasing presence in power generation and usage as motor fuel;
• Depletion of indigenous resources with peak production in 2009;
41
 • Offsetting the anticipated shortfall through natural gas projects from the Gulf and from
Central Asia (TAP importing up to 3 BCFD from Turkmenistan through Afghanistan
• Residential sector uses a significant amount of natural gas for space heating. It is
anticipated that the additional winter demand (AWD) exceeds the average for 28 % of
the overall gas consumed by households.

In addition to the risk scenarios and the associated scenarios, the withdrawal capacity of the
security storage shall consider the likelihood of occurrence during the summer and winter season.
Here the peak withdrawal capacity shall be based on the coldest day of the year. Peak to average
withdrawal ration gives a value of approximately 1.2. Another important consideration from
Sofregaz is that indigenous productions sources will be able to increase their average production
level by 10 % during interruption.

As the outcome of the evaluation following strategic baseline conditions shall be met for the
security storage to be constructed:

Type Amount

Working Gas 66.3. Bscf

Withdrawal Peak Demand 4.7 Bscf/d

It is the understanding of the Consultant that the scenarios elaborated within the previous
Feasibility study were defined by the Pakistan Authorities based on the knowledge of 2004.
Within the last 15 years most of the assumptions made at the time of writing are outdated and
therefore the design parameters need to be revised accordingly. Following needs/assumptions to
be accounted for and defined based on 2020 figures:

• Gas Demand from 2020 with forecast

• Indigenous production outlook
• Upcoming and existing infrastructure projects (LNG and pipeline)
• Updated Peak to Average ratio
• Evaluation of design data for “coldest day” (if available)
• Evaluation of considering temporary indigenous production increase

Based on the design data to be defined, it is essential to re-evaluate how to define Security of
Supply Storage. With LNG facilities online and future LNG projects in the pipeline, the
strengthening of the existing domestic transmission system, the risk that the security storage is
required for remedy will need to be redefined.

MODULATION STORAGE

To determine the need for additional winter demand the previous Feasibility Study reviewed the
monthly consumption tables established by SNGPL and SSGC for the gas regions respective the
gas units of both TSOs. It was concluded that in nine out of eleven gas areas the overall gas
42
 demand is significantly higher in the winter than the summer. The winter climate conditions
affect residential domestic demand and increases as the outside temperature decrease. The
heating demand starts to increase starting from November through March with the main core
winter months from December through February. In short, the excess gas demand occurs one
quarter of the time throughout the whole year.

It is common practice that the additional winter demand for heating purposes is balanced by
making use of interruptible contracts. As of 2004 the interruptible consumers were enough to
make up for the additional winter demand.

One important aspect of the Feasibility study was to link the additional winter demand to the
mean monthly minimum temperature over a period of three years for each gas region and looked
at the variation from the standard threshold temperature. The standard threshold temperature is
known as the outside temperature below which households starting using gas for heating.

Another aspect Sofregaz emphasizes is the growing role of gas import to cover the gas
supply/demand gap. Within the study declining indigenous sources will be partially offset with
pipeline capacity.

Table 1: Supply Forecast and Surplus / Shortfall (2005-2025) [Source: Sofregaz]

MMCFD 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Existing Sources 2,984 3,064 3,103 3,180 3,051 2,932 2,720 2,501 2,151 1,985 1822

Anticipated
0 0 97 193 290 387 483 580 677 774 870
Supply

Total Domestic
2,984 3,064 3,200 3,373 3,341 3,319 3,203 3,081 2,828 2,759 2692
Supply

Total Pipeline
2,711 2,872 2,986 3,139 3,350 3,648 3,812 4,176 4,488 4,839 5167
Demand

Surplus/(Shortfa - -
273 192 214 234 -9 -329 -609 -2,080 -2475
ll) 1,095 1,660

MMCFD 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Existing Sources 1,638 1,468 1,093 1,006 904 788 560 490 455 420 n.a

Anticipated
967 1,064 1,160 1,257 1,354 1,450 1,547 1,644 1,655 1,644 n.a
Supply

Total Domestic
2,605 2,532 2,253 2,263 2,258 2,238 2,107 2,134 2,110 2,064 n.a
Supply

Total Pipeline
5,483 5,799 6,138 6,539 6,995 7,470 8,000 8,375 8,914 9,530 n.a
Demand

Surplus/(Shortfa - - - - - -
2,878 4,737 -5,232 -7,466 n.a
ll) 3,267 3,885 4,276 5,893 6,241 6,804

Consultant in principle agrees with the analysis previously made, nevertheless this approach does
not account for:

1) The significance of LNG which is something not considered previously. LNG will play a
vital and significant role for the future energy supply within Pakistan. LNG offer more
import flexibility than pipelines

43
 2) Additional winter demand when it is colder, and potentially more natural gas is required.
It might be advisable to evaluate based on design data for “coldest day” within a given
period (1 in 20 years). Generally, energy consumption and temperature can be correlated
based on a linear regression function. Restriction to this approach is the maximum
capacity of the boiler installed in the household.
3) The previous study considered only 20 years forecast which does not reflect the lifetime
of the project. It is the understanding of the Consultant that the lifetime of the project
shall be 20 years operation which does not include the period to set up the project and to
construct the facilities. This will amount to 26 years from now. 6 additional years will
have a significant impact on the design of the storage project due to the compounding
growth of gas demand.

RESERVOIR ENGINEERING

From a reservoir engineering point of view, the review of the feasibility study (SOFREGAZ, 2007)
and the assessment of the derived suitability of the most promising candidates could only be
performed regarding the criteria applied at that time.

In general, the pre-selection and the resulting ranking performed by SOFREGAZ in 2007 can be
assumed reasonable, in case the conditions assumed, and the relevant input data and key
parameters applied are correct. Especially, the accuracy of the assumptions made as well as the
correctness of the assumed input parameters and the results derived from that are decisive in
this respect.

In this context, quality and plausibility checks carried out during the review of the study have
raised a few questions and apparently revealed some ambiguities or inconsistencies. This does
not necessarily imply that the key parameters assumed in the feasibility study – essentially
porosities, permeabilities and corresponding production rates – are incorrect. But it is therefore
highly recommended to investigate in detail the correctness of the applied key parameters in a
next further step.

For this exercise, the availability of further information and data, like original production data,
well logs, well test data etc., are essential.

In addition, reservoir engineering results and corresponding conclusions strongly depend on

performance-specific requirements, like Working Gas Volume (WGV), withdrawal capacity,
injection capacity, or operational scenarios, respectively.

Accordingly, regarding an update of the feasibility study, this means that such an update would
make sense only by updating the requirements and criteria to be applied. The more precise these
specifications are, the more reliably the corresponding suitability of a storage facility can be
examined and checked in further work.

44
 PRE-SELECTION ON KHOREWAH AND BUKHARI

PRE-SELECTION OF CANDIDATES
As already stated above, generally, the pre-selection and the resulting ranking performed by
Sofregaz in 2007 can be assumed reasonable, in case the conditions assumed, and the relevant
input data and key parameters applied are correct.

However, regarding the pre-selection it should be re-considered whether a high portion of N2

and/or CO2 within the gas really represents an exclusion criterion. Compared to the geological
setting, gas can be purified in corresponding surface facilities, whereas a natural, geology-
dependent capacity of a reservoir cannot be changed.

Therefore, this means that if capacity would be considered more important than necessary gas
purification measures, this might result in a comprehensive revision of the pre-selection process.

STRUCTURE
The gas condensate fields Khorewah and Bukhari were selected as best candidates for gas
storage in the feasibility study. Both reservoirs are in the sandstones in the Lower Goru
formation. Both reservoirs consist of three sand layers (A, B, and C) and the top depths are
approx. between 5,500 ft and 6,000 ft (around 1,800 m). The initial reservoir pressures were
given to 2,916 psi in a depth of 5,891 ft (201.2 bar at 1,796 m) in Khorewah and to 2,819 psi
(194.5 bar) for Bukhari. These are favorable data for gas storage with respect to a possible
pressure regime for a potential storage.

The closure for Khorewah was given with a depth of 800 ft (244 m) and similar for Bukhari (200
ft to 800 ft). The two upper sands in both reservoirs are gas saturated, whereas the C-sand is
almost 100 % water saturated. In addition, the North Block in the Bukhari field is oil saturated in
the B-sand.

A verification of this description and the data was not possible because both, the structure maps
and the well logs given in the report, are not readable. However, there is no evidence to mistrust
the data.

As a first assumption the initial Gas-in-Place of both fields can be taken as storage volumes. In
both fields the Lower Goru sands have more than 2,000 ft of Marl/Clay/Shale as cap rock. So, in
a later stage, when having core samples to prove the tightness of the cap rock (capillary
threshold pressure) and of the structure, it may be considered to raise the operating pressure for
gas storage to increase the working gas volume.

GAS-IN-PLACE / VOLUMETRICS
In the feasibility study, the initial Gas-in-Place was determined by a volumetric Monte-Carlo
simulation and from p/z calculations. The Monto-Carlo simulations could not be retraced because
of missing data and due to some contradictions in the parameters used. For example, in a Table
on page 135 e.g., in the Sofregaz report the minimum porosity is given as 0.112 and the

45
 maximum porosity as 0.138. This corresponds to the stated average porosities derived from the
interpretation of the logs of the corresponding wells. However, an average porosity of 0.2 was
used as input for the Monte-Carlo simulation, which is larger than the stated maximum porosity.
For the Khorewah field the porosities taken were much higher than the log porosities. According
to SOFREGAZ, this was done to adjust the Monte-Carlo results to the p/z analysis. The porosities
derived from the logs for the “B” sand range from 10.1 % to 11.7 % (see Table on page 94),
whereas the minimum and maximum porosities used for the Monte-Carlo simulation are 11.5 %
(minimum porosity) and 22.5 % (maximum porosity).
This procedure gives some evidence that geological description of the fields may not be entirely
correct or that the geological setting is not yet correctly understood.

In addition, the porosity values given in different sections of the study are not consistent. For the
Bukhari field for example, the porosities derived from the well logs are given to 11.2 % to 13.8
% for the “A” sand and to 11.1 % to 13.7 % for the “B” sand. In a later section the porosities are
stated with 15 to 20%. Finally, in the corresponding concluding section, different porosity values
are given again (12 to 18%).

POROSITY AND PERMEABILITY

In the final report of the feasibility study high permeabilities of generally more than 100 mD are
mentioned at low porosities of approx. 11 to 14 % for the Bukhari field and approx. 8 to 12 % for
Khorewah. According to our experience, it is unusual to find such high permeabilities at such
relatively low porosities. However, these permeabilities are reported quite frequently and should
be realistic. Nevertheless, the reason for this ‘unusual’ behavior should be clarified as it will be
essential for the derivation of a later storage performance.

Although the headers of the well logs shown in the report are not readable, the above stated
porosities can be confirmed, if a standard notation is assumed. Corresponding separations in
resistivity logs also show that the sands seem to have a good permeability.

A correlation between porosity and permeability given in the report for Khorewah is:

𝐿𝐿𝐿𝐿𝐿𝐿(𝑘𝑘) = 0.2525𝜑𝜑 − 1.7487

(Units were not given, consequently percent and mD were reasonably assumed)

This correlation also does not reflect the permeabilities given in the report. Also, the results of
the well tests indicate that the permeability of the Lower Goru sand in these two fields may be
smaller.

Furthermore, the well test interpretation in the feasibility study cannot be retraced. For example,
a well test in well #1 of the Khorewah field (page 95 of the Sofregaz report) determined a flow
rate of 15.5 MMscf/d at a well head flowing pressure (FWHP) of 1,800 psi and at a shut-in well
head pressure (SIWHP) of 2,480 psi. But with the constants of the A&B equation given on page
96 of the mentioned report, the rate Q would be approx. 82,276.45 Mscf/d. Additionally, by
calculating the well head pressures to sand face pressures, the shut-in pressure at reservoir
46
 depth (5,900 ft) would result in pr=2,884 psi and in pwf=2,086 psi. In this case the resulting flow
rate necessary to fulfil the equation would be approx. 101,720 Mscf/d, which is even higher than
the measured rate.

Anyway, the permeability, however, is the basis for the deliverability calculation of gas storage
wells. To verify the permeabilities, it is important to have a comprehensive set of petrophysical
laboratory data and well logs (as LAS files or at least in a readable format). In addition, existing
well test data are required and e.g., well flowing head pressure and production rates for gas,
water, and condensate/oil.

PRODUCTION – KHOREWAH FIELD

According to the SOFREGAZ report, the Khorewah field had a cumulative gas production of
approx. 120 Bscf (approx. 3,360 Mio. sm3) down to a reservoir pressure of approx. 1,200 psi
(approx. 83 bar). The total required storage working gas volume (WGV) was anticipated in the
report from 2007 to be 42 Bscf with a cushion gas volume (CGV) of 144 Bscf.

The total required withdrawal rates were given as 1,487 MMscf/d at minimum pressure and 2,205
MMscf/d at maximum storage pressure.

With regard to the number of planned wells this would result in approx. 60 MMscf/d for the A-
sand and approx. 90 MMscf/d for the B-sand per well.

The corresponding field specific data are summarized in the Tables below. In addition, the data
are given in metric units for means of comparison for usual gas storage figures in Europe.
Performed well tests gave production rates of 10 – 22 MMscf/d for both sands. The peak
production rates of the wells were 15.5 MMscf/d. An interpretation of these tests results would
lead to permeabilities of below 10 mD.

This underlines the importance to have reliable test data and data for the permeabilities and
other properties of the sands.

For the further work of the current project, it is recommended to consider building a numerical
reservoir simulation model to study the well performance and the use of horizontal or slanted
wells as well as appropriate well stimulations measures.

Again, the Upper Goru sands have more than 2,000 ft of Marl/Clay/shale as cap rock so that in a
later stage, when having core samples to prove the tightness of the cap rock (capillary threshold
pressure) and of the structure, it may be considered to increase the maximum permitted
pressure for gas storage operations.

47
 Table 2: Khorewah Field – Anticipated Storage Parameters in Field and Metric Units

Deliverability per
Operating Pressure Deliverability
No. Well
Sand WGV CGV
Wells
Psi MMscf/d MMscf/d

Pmin Pmax Bscf Bscf - at Pmin at Pmax at Pmin at Pmax

A 2,2 2,82 9.60 45.05 6 366 509 61 85

B 2,17 2,82 32.42 99.09 12 1,121 1,696 93 141

Total 42.02 144.14 18 1,49 2,205

Deliverability per
Operating Pressure Deliverability
No. Well
Sand WGV CGV
Wells
Bar Msm3/h Msm3/h

Pmin Pmax Mio. sm3 Mio. sm3 - at Pmin at Pmax at Pmin at Pmax

A 151.8 194.6 268 1,261 6 427 594 71 99

B 149.7 194.6 907 2,774 12 1,308 1,979 109 169

Total 1,176 4,035 18 1,74 2,573

Table 3: Khorewah Gas Production

Production*
Well Sand
BCF Mio. sm3
1 B 43.37 1 214
2 B 31.35 878
3 A 17.45 489
4 A 30.07 2 581
* at 1,200 psi or 83 bar reservoir pressure

Table 4: Khorewah Stratigraphy and Reservoir Properties in Field and Metric Units

Sand / Well Bottom Top Gross Net PHI Sw

A ft ss ft ss ft ft % %
Well 1 5,859 6,09 231 42.0 N/A N/A
Well 2 5,992 6,194 202 43.0 N/A N/A
Well 3 6,201 6,389 188 15.5 N/A N/A
Well 4 5,861 6,064 203 48.0 N/A N/A
B ft ss ft ss ft ft % %
Well 1 6,131 6,247 116 47.0 N/A N/A
Well 2 6,35 6,487 137 57.5 N/A N/A
Well 3 6,431 6,526 95 0.0 N/A N/A
Well 4 6,116 6,225 109 55.5 N/A N/A

Sand / Well Bottom Top Gross Net PHI Sw

A m ss m ss m m % %
Well 1 1,787.0 1,857.5 70.5 12.8 9.2 13.7
Well 2 1,827.6 1,889.2 61.6 13.1 8.1 22.4
Well 3 1,891.3 1,948.6 57.3 4.7 7.9 23.0
Well 4 1,787.6 1,849.5 61.9 14.6 7.7 15.7

B m ss m ss m m % %
Well 1 1,870.0 1,905.3 35.4 14.3 10.1 22.2
Well 2 1,936.8 1,978.5 41.8 17.5 11.7 30.5
Well 3 1,961.5 1,990.4 29.0 0.0 N/A 100.0
Well 4 1,865.4 1,898.6 33.2 16.9 10.4 14.9

48
 Table 5: Khorewah Field Well Test Results in Field and Metric Units

Well (Sand) WHFP in psi BHFP in psi WHP in psi BHP in psi Q in MMscf/d

#1 (B) 1,8 2,48 15.5

1,585 2,825 22.7

#2 (B) 2,08 2,922 11.3

#3 (A) 1,63 13.9

Well (Sand) WHFP in bar BHFP in bar WHP in bar BHP in bar Q in sm3/h

#1 (B) 124.2 171.1 18,083.3

109.4 194.9 171.1 26,436.7

#2 (B) 143.5 201.6 201.6 13,160.0

#3 (A) 112.5 201.6 16,216.7

PRODUCTION – BUKHARI FIELD

The Bukhari field had a cumulative gas production of approx. 86 Bscf (approx. 2,400 Mio. sm3)
down to a reservoir pressure of approx. 300 psi (approx. 21 bar).

The total required storage WGV was anticipated in the report from 2007 to be 18 Bscf with a CGV
of 74 Bscf.

The total required withdrawal rates were given as 670 MMscf/d at minimum pressure and 960
MMscf/d at maximum storage pressure. With the number of planned wells this would results in
approx. 44 MMscf/d for the A-sand and approx. 50 MMscf/d for the B-sand per well at minimum
pressure, and 73 in MMscf/d and 66 MMscf/d at maximum pressure, respectively.

The corresponding field specific data are summarized in the tables below. In addition, the data
are given in metric units for means of comparison for usual gas storage figures in Europe.

Performed well tests resulted in production rates of 11 – 17 MMscf/d for both sands. The peak
production rates of the wells were 25 MMscf/d. Again, this underlines the importance to have
reliable test data and other required data to be able to verify the permeabilities and other stated
properties of the sands.

Also, for Bukhari it should be considered to build a numerical reservoir simulation model to study
and investigate a possible increase of the maximum permitted operational storage pressure or to
use an improved well design.

Table 6: Bukhari Field – Anticipated Storage Parameters in Field and Metric Units

Deliverability per
Operating Pressure Deliverability
Well
Sand WGV CGV No. Wells
Psi MMscf/d MMscf/d

Pmin Pmax Bscf Bscf - at Pmin at Pmax at Pmin at Pmax

A 1,975 2,8 6.50 19.50 5 220 365 44 73

B 2,26 2,8 11.45 55.05 9 450 595 50 66

49
 Total 17.95 74.55 14 670 960

Deliverability per
Operating Pressure Deliverability
Well
Sand WGV CGV No. Wells
Bar Msm3/h Msm3/h

Pmin Pmax Mio. sm3 Mio. sm3 - at Pmin at Pmax at Pmin at Pmax

A 136.3 193.2 182 546 5 257 426 51 85

B 155.9 193.2 320 1,541 9 525 694 58 77

Total 502 2,087 14 782 1,120

Table 7: Bukhari Gas-In-Place and Recovery in Field and Metric Units

Volumetrics Gas Reserves at

Material Balance
Sand Central Block North Block
1,200 psi 500 psi
BCF BCF BCF

A 29.48 27.68 2.86 17.5 24.8

B 62.69 54.09 1.87 37.2 52.7

C 6.24

Total 92.17 88.01 4.73 54.75 77.5

Volumetrics Gas Reserves at

Material Balance
Sand Central Block North Block
82.8 bar 34.5 bar
Mio. sm3 Mio. sm3 Mio. sm3

A 825 775 80 490 694

B 1,755 1,515 52 1,043 1,476

C 175

Total 2,581 2,464 132 1,533 2,171

Table 8: Bukhari Stratigraphy and Reservoir Properties

Sand / Well Top Top Net Net PHI Sw

A ft ss m ss ft m % %

Well 1 5,673 1,730.3 30 9.2 13.8 21.5

Well 2 5,723 1,745.5 50 15.3 11.8 19.8

Well 3 5,799 1,768.7 25 7.6 12.0 24.1

Well 4 5,92 1,805.6 20 6.1 11.2 18.6

B ft ss m ss ft m % %

Well 1 5,852 1,784.9 82 25.0 13.7 20.0

Well 2 5,92 1,805.6 100 30.5 12.8 22.8

Well 3 6,011 1,833.4 71 21.7 11.5 25.2

Well 4 6,065 1,849.8 38 11.6 11.1 34.9

Table 9: Bukhari Field Well Test Results in Field and Metric Units

Well (Sand) WHFP in psi BHFP in psi WHP in psi BHP in psi Q in MMscf/d

#1 (B) 1,28 2,48 11.27

#2 (B) 1,082 2,48 16.95

#3 (A) 1,48 2,48 13.9

Well (Sand) WHFP in bar BHFP in bar WHP in bar BHP in bar Q in sm3/h

50
 #1 (B) 88.3 171.1 13,148.3

#2 (B) 74.7 171.1 19,775.0

#3 (A) 102.1 171.1 16,216.7

GAS AND CONDENSATE PROPERTIES

In Table 10 and Table 11 the gas and condensate compositions of Khorewah and Bukhari are
given. The compositions for both fields are rather similar.

For any reservoir simulation using either a material balance or numerical simulation model, it will
be important to calculate the produced condensate during withdrawal. This will be important for
the reservoir and well performance as well as for the planning of the surface facilities.

The estimated composition of the extracted gas (storage gas plus condensate) as given on page
184 in the report can be well reproduced using the Soave-Redlich-Kwong equation of state.
Consequently, the derived composition can be verified or confirmed, respectively.

Table 10: Gas Composition of Khorewah and Bukhari in mol%

Field C1 C2 C3 N2 CO2

Khorewah 82.5 5.88 2.17 4.8 1.9

Bukhari 75.4 9.96 5.04 2.4 1.9

Table 11: Condensate Composition of Khorewah and Bukhari

Khorewah Bukhari
Component
Conc. mol% Conc. mol%

N2 0.35 0.05

CO2 0.64 0.52

C1 14.58 9.51

C2 4.1 5.8

C3 4.25 7.19

iC4 1.44 3.2

nC4 3.48 6.99

iC5 2.57 4.28

nC5 3.01 4.59

C6 6.93 9.27

C7 12.57 12.29

C8 12.56 12.11

C9 9.2 6.91

C10 6.31 5.66

C10-C12 3.68 4.32

C12+ 11.35 6.77

51
 SALT CAVERNS

In the feasibility study from Sofregaz it is mentioned that the feasibility of construction of salt
caverns for gas storage was also investigated. In this context the study refers to Chapter 6 of a
“Interim Report” from Sofregaz. The available information, though limited, concluded that there
might be two favourable elements for the storage of salt cavern
• The proximity of the salt massif and of gas transmission pipelines in the Khewra are
• Possibility to find a salt formation in a 2,500 to 5,000 feet depth range with the required
characteristics to construct caverns for gas storage.

In this context Consultant has contacted the mineral section in the Petroleum Division which is
headed by Director General of Mineral, under the Petroleum Division. Mining however remains a
provincial subject.

The biggest salt mine in Pakistan is the Khewra Salt Mine located in Jhelum District, Punjab
Region, Pakistan. The mine is in the Salt Range, Potohar plateau, which rises from the Indo-
Gangetic Plain, and is the second largest in the world. The history of mining date back to
Alexander’s time. The mine is currently operated by Pakistan Mineral Development Corporation
(PMDC). The mine is the largest source of salt in the country, producing more than 350,000 tons
per annum. The main composition of the deposit is NaCl with estimated of about 99% pure
halite.

A virtual meeting was held with Director General Mineral where provincial representatives of the
mineral departments, representatives of geological survey of Pakistan, and representatives of
PMDC were present. DG (mineral) briefed about the status of salt mining in Pakistan. Reference
to use of salt caverns as gas storage facility, further stating that primitive methods mainly using
the explosive material like dynamite are excessively used in Pakistan. It was observed that for
use of a salt cavern for gas storage, a detailed analysis and methodology need to be adopted
from the start of the exploitation and production of salt. All actively percolated in the discussion.
Eventually, it was concluded that there is no prospective cavern at this point suitable for the
project.

SUBSURFACE FACILITIES

Requirements regarding subsurface facilities also strongly depend on corresponding operational

requirements and demands. Therefore, the number of necessary storage wells will change
according to operational requirements.

About the subsurface facilities as described in the feasibility study, it must be mentioned that
only storage wells were considered. However, a conversion of a depleted field into an
underground gas storage also requires related observation wells and formation water disposal
wells. These additional wells need to be considered also, especially considering the corresponding
costs impact.

52
 SURFACE FACILITIES

The surface facilities were based on the selection of Khorewah and Bukhari fields in the previous
study.

Table 12: Strategic Storage Requirements horizon year 2020

Year 2020 Scenario 3A Scenario 3B

Bcf Bcm Bcf Bcm

Working gas required 66.3 1.9 26.7 0.8

Withdrawal requirements MMcfd MMcmd MMcfd MMcmd

Average 4,700 133.1 1,900 53.8

Peak 5,900 167.1 2,500 70.8

The strategic storage requirements from the Sofregaz report were in the close match with respect
to working gas of two selected fields but the peak withdrawal rates were less than the required.

Table 13: Summary of potential Khorewah and Bukhari UGS performance

Khorewah Bukhari Total

Bcf Bcm Bcf Bcm Bcf Bcm

Storage working volume 42 1.2 18 0.5 60 1.7

Volume of pipeline gas to be injected for cushion

109 3.1 83 2.4 192 5.4
gas and first stock

Maximum withdrawal flow rate MMcfd MMcmd MMcfd MMcmd MMcfd MMcmd

At beginning of withdrawal 2,205 62.4 960 27.2 3,165 89.6

At the end of withdrawal 1,487 42.1 670 19.0 2,157 61.1

Average 1,846 52.3 815 23.1 2,661 75.4

It is observed that the design data is aligned with the current working standards of SNGPL and
SSGCL. The lower withdrawal rates, mentioned in the report, in our view were good compromise
in the context to optimize the capital cost of facilities. A review of these facilities and respective
selection of various parameters, basic engineering design of surface facilities was found in line
with the standard engineering practices.

TRANSMISSION PIPELINE

The report included a map showing the gas transmission grid of the Sui Southern Gas Co. Ltd.
(SSGCL).

Since the submission of the Sofregaz report, the pipeline Transmission network of two gas
companies SNGPL and SSGCL has undergone a substantial expansion under GIDP (Gas

53
 Infrastructure Development Program). This expansion was necessitated for the transmission of
gas from new indigenous discoveries, as well as import and addition of LNG, in order to meet the
ever-increasing demand of gas within Pakistan. The updated detail of existing transmission
pipeline system will be tabulated and illustrated as the information is available.

It is noteworthy that in view of new discoveries of oil and gas during first decade (2000-2010),
substantial augmentation was done on SNGPL and SSGCL systems in terms of pipeline and
compression etc but now most of the gas sources have seen their peak and after covering the
plateau, are on sharp decline which in turn has left the transmission system stranded. Therefore,
quite a fair amount of system capacity would be available to cater the additional volumes of gas
coming from any source including the imported gas. The details of this aspect will be covered
accordingly.

In this regard, the previous study included an analysis of Badin Pipeline and Indus Left Bank
Pipeline However, it appears that analysis of SNGPL were not included in the study. This may be
due to the assumption that Multan being terminating point of TAP, the augmentation of SNPGL
system was part of that project.

BADIN PIPELINE
In previous study highlighted the declining gas production trend from the Badin area as shown
below:

Table 14: Badin fields anticipated supply in MMcfd

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Badin 256 258 236 215 186 163 139 117 97 74 49 31 28 11 17

As projected, the gas production from the Badin area is at decline; actual rate may be different
than the assumed in the study and will be verified through current data.

INDUS LEFT BANK PIPELINE

The ILBP system comprises several pipelines laid in parallel. The study estimated that the overall
transmission capacity will be augmented to around 930 MMcfd with the then existing pipeline
configuration and inclusion compression power at Hyderabad raising the pressure at 75barg. The
study concluded that the capacity of existing pipelines does not match the capacity required to
transport the high flow rates delivered by strategic UGS. A complete review of this analysis will
be carried out based on current ILBP configuration and future SSGCL projects.

COST ESTIMATION

The cost estimate for the conversion of Khorewah and Bukhari fields in underground gas storage
has been prepared within an accuracy of +/- 30 %.

54
 Unit cost for each item were based on recent quotations for similar equipment Construction cost
were based on ratios from experience on similar projects but no allowance was considered to
special works such as piles. For all manhours, in-house statistics have been used.

Contingencies have been assumed 10 % of the price equipment, materials, construction and
project services have added to both the pipeline and surface facilities. For sub-surface facilities,
the same contingency has been applied for all equipment, except for well drilling, where 20 % is
applied to take technical risk in account.

In general Consultant agrees with the approach of the cost estimate performed by Sofregaz
within the previous Feasibility Study. Nevertheless, the cost estimate is not complete and as
certain items like taxes and duties or land acquisition, which are clearly related to the project
have not been taken into consideration.

Further the anticipated accuracy of +/- 30 is misleading. According to the American Association
of Cost Engineers (AACE) IR-97 a range of +30 %/-20 % normally used for budget authorization
or control with a maturity level between 10 % and 40 %. The project development level of a
feasibility study will be in the order of 10-15 % maturity and therefore it is closer to a Class 4
estimate in accordance with the American Association of Cost Engineers (AACE). If most recent
budget inquiries are used, this of course improves the accuracy of the estimate, but for most of
the project equipment factoring and/or parametric models are used, which have an expected
accuracy range of – 30 % to 50 % with a typical confidence interval of 80 %.

Operating expenditure (OPEX) are assumed to be a percentage of the overall investment cost.
The percentage assumed are in line with common industry practice. Figures assumed might be
subject to small adjustment based on the most recent project experience in Pakistan.

INITIAL ENVIRONMENTAL EXAMINATION

Initial Environmental Examination (IEE) of the Underground Gas Storage (UGS) project was
prepared in 2008 as part of feasibility study by Engconsult Ltd., Canada in association with
Sofregaz, France. The project was proposed to convert two depleted oil/gas fields into UGS
reservoirs i.e., Khorewah and Bukhari gas fields located in Hyderabad – Badin basin of Sindh
province. It was planned to laydown transmission pipeline of 85 km from Hyderabad to the
proposed UGS sites and injection of high-pressure gas through a few wells. Khorewah alone could
cope with 77% of needs for deliverability peak demand in 2007, the Consultant adopted realistic
approach to firstly construct Khorewah UGS facility, and then, in a second step, to build (if
required) Bukhari UGS facility. In addition, socio economic and environmental baseline conditions
were suitable to carry out the project. No natural forests and protected areas were located within
30 km of the proposed project facilities.

Recently, Pakistan has decided to undertake the project as Asian Development Bank (ADB) had
already extended its Technical Assistance (TA). However, the IEE report was prepared in 2008

55
 and ground realities i.e., socioeconomic, environmental, physical baselines, gas demands and
legislations have changed. Therefore, this review is prepared to highlight the gaps in previous IEE
report based on current regulatory requirements. Identified gaps if addressed appropriately,
would support feasibility of the proposed project. Followings are the details of IEE obligations,
gaps identified and additional work requisites.

IEE/EIA CLEARANCE REQUIREMENTS

Under clause B (5) of schedule I of IEE/ EIA regulations 1997 the gas storage projects require
IEE irrespective of their capacity. However, if the location of the project remains the same then it
will be required to bridge the gaps identified. However, if there is any change in location then
according to clause 17(4) paragraph 2 IEE/EIA review regulation 1997 fresh IEE must be
conducted. Prepared IEE report will be submitted to the respective department for approval as
environment is provincial subject after 18th amendment in the constitution of Pakistan in 2010.

GAPS IN THE EXISITNG IEE REPORT

The gaps identified in this section are missing and needed to be added to enhance the validity of
the report.

Legislative Framework

Legislative framework provides an ephemeral elucidation of the national/provincial legislative,

regulatory, and institutional frameworks relevant to the environmental and social aspects of the
project. The section is present in the IEE report of Turkmenistan-Afghanistan-Pakistan Natural
Gas Pipeline Project II-TA N° 6153-REG as per requirements of the feasibility report submitted in
2007. However, after 18th Amendment in the Constitution of Pakistan in 2010, powers have been
delegated to provinces i.e., provinces are independent to make their environmental decisions.
Hence, this section of report requires review and modification according to the current regulatory
requirements.

Analysis of Alternatives

Alternative layout analysis involves the consideration of technical, managerial and environmental
aspect of project. Final layout selection includes multidisciplinary field and desk studies of the
project area such as topography, geology, seismicity, hydrology and environmental issues.
Coupled with these aforementioned aspects is engineering and cost effectiveness that determines
the project layout. A number of alternates seems feasible technically but only one will be
economically, environmentally and socially viable. Identified most feasible option ensures the
smooth operation and implementation of the project. It is a mandatory requirement of IEE report
under clauses 2.3(C) bullet three and 2.6 of ’Guidelines for the preparation and review of
Environmental Reports’. Therefore, analysis of alternatives needs to be added in the report.

56
 Socioeconomic Baseline

Two locations finalized for the under-ground storage of the gas i.e., Khorewah gas field in
Khorewah village of Badin District and Bukhari gas field in Qasimabad Taluka of Hyderabad
District, Sindh Province. Socioeconomic baseline of the project location is important to identify
disturbance to existing services; education, health, electricity, water supply, beside this,
aggravation of any disputes on land ownership and water supply network. This way foreseeable
future impacts of the project can be identified and consequently mitigated in Environmental
Monitoring and Management Plan (EMMP).

Socioeconomic Survey previously conducted in 2006 and baseline data i.e. Population dynamics
and other socioeconomic parameters must have changed in 15 years. According to the recent
census report of Pakistan Bureau of Statistics 2017, country’s population has almost doubled in
twenty years. Fresh survey is required to be conducted to get most recent figures of population
growth, major economic activities and dependency on agriculture in both districts Badin and
Hyderabad. The views and concerns of locals highlighted from community consultation should be
incorporated in the report.

As far as institutional consultation is concerned it does not require to be carried out again.
However, proponent and key stakeholders will need to be visited for consultation.

Physical Baseline

The description of physical baseline of the area helps to interpret and identify the potential
impacts of proposed project on the ambient and physical environment. Environmental baseline
i.e., lands resources, water resources, air, noise and climate vary with the passage of time.
Therefore, recently collected data on environmental parameters is required to be collected for
analysis.

As Badin and Hyderabad districts are located in Indus River Basin with no major rivers or stream
flow. However, there is a possibility of the presence of fresh water if river or its tributaries
changed its course along the years. Therefore, water resource data of the districts including
depth of water table and its salinity should be updated.

According to Southern Sui Gas Company (SSGC) Environmental Activity Report 2005, air quality
and noise level of these districts were in permissible limits of international standards. The most
recent figures are required to be added to enhance validity of the report. Soil test, ground and
surface water test also need to be conducted to get acquaintance with the latest situation of the
physical parameters.

Ecological Baseline

Quantitative and Qualitative assessment of species both at inside or at the surroundings of

Project Area and survey of agricultural fields to identify the crops and horticulture (fruit) plants is
required. As area under cultivation, major crops and production estimates are from Bureau of
Statistics Sindh, Karachi/Office of the Director Agricultural Extension, Hyderabad 1997-1998.
Moreover, livestock population census in the Badin district is gathered in 2007. It is required to
update afore mentioned data.

57
 Impact Mitigation Measures and EMMP

Analysis of impacts and their proposed mitigation measures require a review as socio economic
and environmental profile must have changed. Environmental monitoring and management plan
(EMMP) also need to be revised and updated as accountabilities have been shifted after 18th
amendment in the constitution of Pakistan in 2010.

Environmental cost estimates

A lump sum budget allocated in the environmental mitigation to cover monitoring cost and
Environmental reporting requirements is inefficient as the dollar rates doubled in these years.
Environmental cost estimates need to be updated according to the current scenario.

58
4. WORK METHODOLOGY

59
 After commencement of the work, a KOM was held September 28, 2020 to as to meet project
participants, streamline expectations and to discuss the way forward. A timeline was with agreed
deliverables was agreed and submitted. The agreed schedule can be divided in 4 main
deliverables which are:

• Inception Report (November 24, 2020) and Final Inception report on December 21, 2020
• Interim Report (due February 08, 2021)
• Draft Final Report (due April 20, 2021)
• Final Report (due May 04, 2021) and final revision 06 on November 29, 2021

For the inception report phase, the Consultant reviewed mainly the existing Feasibility Study
done by Sofregaz in 2007 and publicly available information. Request for information were
submitted to relevant stakeholders and it was expected that required information will be available
latest December 31, 2020. A table of requests made can be obtained from Section 1 of this
report.

To facilitate the process of data management our local sub-consultant is in close contact with the
relevant stakeholders. Further it is envisaged to have meetings scheduled with the different DGs
to discuss our information requests directly. as well appraise about the study. Therefore, soon
after the submission of the inception report requests for the virtual meetings were sent to the
DG’s but only meeting with the DG (minerals) and related stakeholders was materialised.

Further it was is the purpose of the inception report, in line with the agreed Scope of Work to set
the design conditions for the subsequent phases. This is especially true for two important
parameters: Peak Withdrawal Rate and Working Gas Volume. Both values will determine the
outcome of the study significantly, both commercial and technical.

The above parameters, therefore, have been concluded during the inception report phase. This
report (interim report) will mainly determine the reservoir selection process based on the
available information. This process follows strictly technical aspects. With more data becoming
available, the gas demand and supply will be refined accordingly. This might have some impact
on the working gas volume and the peak withdrawal capacity. The already identified candidates
from the previous feasibility study will be re-evaluated based on the new design factors and
compared to other candidates (previously a review of 107 fields was made). The review will be
done through verification of the reservoir properties using production data, core data, test data,
and well logs. If the resulting reservoir performance would not be satisfactory, consideration of
stimulation methods as improved well design or fracking. Neverthless, it is important to
acknowledge that a change in parameters will change the selection process. Once the reservoir
candidates have been identified and confirmed, a material balance model and match historical
production using reasonable data for the well deliverability will be set up. Also match water and
condensate production to make predictions for anticipated storage scenarios.

60
 The outcome of this simulation will help to make the determine the technical setup for the
pipeline, the above ground facilities and the finalisation of the sub-surface design. Especially the
pipeline and the above ground facilities can only be sized once the reservoir has been selected
and modelled.

Also, once the location of the underground gas storage is known environmental part of the study
can be performed. A site visit is required where Consultant will travel to site for field work
For the socioeconomic survey Also water collection and soil samples will be taken.
Further it must be note that existing IEE report requires amendments subject to the condition
that locations for UGS remains same. If the project location changes, new IEE will be required. If
newly proposed locations are in two different provinces then as per 18th amendment in the
constitution of Pakistan in 2010, two independent EIA studies will be prepared for every site
selected. Moreover, these reports will be separately submitted to respective provincial
departments as environment is now a provincial subject.

Once the technical aspects of the study are finalized the CAPEX/OPEX estimate will be done
based on the construction and operational period of the project. Based on the cost, the tariff will
also be determining which will be one main output of the economic model. The model will be
submitted in editable format to the Client.

Finally, Consultant will provide technical input to the tender documents for the next design
phase. A contracting strategy is proposed by the Consultant.

61
5. GAS DEMAND AND SUPPLY

According to the Census 2017 data Pakistan is the world`s fifth biggest economy in terms of
population with over 220 million inhabitants Data from ADB in their Basic 2020 Statistics
published April 2020 shows that the average annual population growth rate between 2014 –
2019 was approximately 3 %. In term of GDP Pakistan is the 42nd largest economy with an
estimated of 283.3 Billion USD. Data from World Bank (World Development Indicators as of Q4
2020) shows an average of 3.85 % GDP growth over an annual basis. The drop in 2019 was due
to the fiscal tightening and not due to any COVID-19 spreads.

7,00

6,00
GDP GROWTH (ANNUAL %)

5,00

4,00

3,00

2,00

1,00

0,00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
YEAR

Figure 2: Historic GDP Growth Pakistan (Source: Worldbank)

In order to determine the working gas capacity and the withdrawal rate of the potential
underground gas storage, an analysis of natural gas which is a major contributing fuel in
Pakistan’s energy mix is taken. The current status and future projections of the gas sector have
been well described by the Oil & Gas Regulatory Authority (OGRA) in their report: “State of the
Regulated Petroleum Industry 2018-19”, hereinafter called “OGRA Report-FY19”.

In particular, the total gas consumption (incl. losses) in Pakistan reached an average of 4,351
mmcfd in the financial year 2018/19 (abbreviated as FY19). The power sector accounted the
biggest share of the total gas consumption (35%), followed by the residential sector (20%), the
fertilizer sector (15%), industry sector (8%), captive power (7%), transport & commercial &
cement sectors (6%), while the gas allocated to own use & losses was at a significant level of
9%. See figure below.

62
 Pakistan Gas Demand by Sector, FY18 Pakistan Gas Supply by Source, FY18
(mmcfd, % of total) (mmcfd, % of total)

Own Us e &
Los s es, 382, 9%
LNG, 901,
Tra ns port, 178,
Res idential, 21%
4%
856, 20%

Commerci al, 87,

2%
Total Demand Total Supply
Industry, 355,
4351 mmcfd 8%
4320 mmcfd Utility
Companies,
Independent
2379, 55%
Systems,
Power, 1519,
35% Ferti lizer, 652, 1040, 24%
15%

Ca pti ve Power, 321, Cement, 1,

7% 0%

Figure 3: Pakistan Gas Demand & Supply, Financial Year 2018/19 [Source: OGRA Report-FY19]

Meanwhile, the total supply of gas during the year was 4,319 mmcfd on average, of which gas
utility companies supplied 55%, Independent Systems 24%, and the remaining 21% through
imported LNG.

Going forward, the gas demand in Pakistan is projected to grow steadily overtime, rising from
just under 5,000 mmcfd in FY19 to around 7,000 mmcfd in FY30. As shown in Figure 4, the key
drivers of the future demand increases are the residential sector and the industry sector with a
growth rate over this period of 77% and 139% respectively. Meanwhile, the power sector
demand will grow by a significant volume of 300 mmcfd, although it may appear small in
percentage terms (18%).

In contrast, the committed and anticipated indigenous gas supplies (by utility companies and
independent system) will peak at 3,840 mmcfd in FY20, and declines thereafter, creating a
potential supply gap as large as 5,390 mmcfd by FY30 (see Figure 5). Various measures have
been initiated by Government of Pakistan to bridge such supply gap, notable options include LNG,
Iran-Pakistan Pipeline and the TAPI pipeline.

8000
mmcfd

7000
Own Use & Losses
6000 Transportation

5000 Power
4000 Captive Power
Cement
3000 Fertilizer
Industry
2000
Commercial
1000
Residential
0
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Figure 4: Pakistan Gas Demand Forecast [Source: State of the Regulated Petroleum Industry 2018-19]

63
 8000
mmcfd

7000

6000

5000
1582 1769 2180 2679 3221 3685 4129
4000 1440 4477 4797 5104 5390 Supply Gap

3000

2000

1000 Independent Systems

0 Utility Companies
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Figure 5: Pakistan Gas Demand Supply Balance Forecast [Source: State of the Regulated Petroleum
Industry 2018-19]

UPDATED PROJECTIONS

The projections made by OGRA are based on existing conditions from 2019 which are subject to
change due to the COVID-19 situation. Further it remains uncertain to which extent the
renewable energy policy was considered. According to the plans solar and wind power should be
urgently expanded to at least 30 percentage of Pakistan`s total electricity generation capacity by
2030, equivalent to around 24,000 Megawatts. Another aspect with the potential to change the
supply-demand patterns is the introduction of weighted average cost of gas (WACOG). This
concept will introduce RLNG into the WACOG formula for determination of the tariff of natural
gas, resulting in increased cost for certain sectors. It remains unclear if the concept of WACOG
with RLNG will become reality as of now the import of RLNG is solely for Tier-II category of
natural gas consumers under the ring-fenced tariff arrangement.

The updated projections for gas supply and demand do not consider any price elasticity. Price
elasticity can be defined as a measure on how reactive the natural gas market is to a change in
price for natural gas. Consultant does not consider this mechanism in place due to the pricing
mechanism. Currently the consumer prices of natural gas notified by the GOP is the price at
which the consumer can buy the natural gas from gas companies. SNGPL and SSGC are
supplying gas to consumers in their operational area and are not required to provide a
breakdown of costs of delivery for different segments of the system or to different consumers.
All consumers within the same category pay a uniform price regardless of the difference in cost
due to location. Also, history does not fully support the conventional wisdom based notion that
gas consumption declines with price hike. Contrary to that whenever the gas price is raised, for
a very short period, the consumption shows a little dip but due to non-availability of any low
priced neat and clean fuel alternative and that too available at doorstep, the consumption hits
back on the same level. That is also substantiated by the fact that per year increase in

64
 consumption remains almost the same despite price hike. However, this is fact that increase in
price prompts pilferage in the distribution system.

Of course, it shall be noted that long term price effects may trigger alternative power solution
with more favourable impact (e.g., planning and construction of renewable energies and/or
construction of alternative power plants …)

That said, Consultant suggest that a more comprehensive price elasticity study shall be part of
the next design phase.

The price for indigenous production is being determine and notified as per Petroleum Concession
Agreements in accordance with the applicable policies, while the price of imported LNG is being
determined by OGRA. the currently the consumer price of natural gas in Pakistan is comprised of
a (i) prescribed price and (ii) gas development surcharge.

Especially the price elasticity of demand as a measure of change in consumption of natural gas
because of a change shall be evaluated separately to consider to which extend it will have an
impact on supply.

5.1.1 De-Bundling of LNG

In the meeting held November 26, 2020, it was appraised that the government in next six (6) to
twelve (12) months would implement a change in gas pricing mechanism. Currently price and
supply of imported LNG price is bundled. This would be replaced by the weighted average cost of
gas and would include the indigenous gas production which is cheaper. This would result in
increase in the price for domestic consumers with a decrease in current LNG power and industrial
consumers. It was further stated that indigenous gas would be made available to domestic sector
for the three winter months’ period making it affordable. The price of gas for power and industrial
sector will go up in winter months. Moreover, new power plants would be peaking units, and not
base load plants. All the above factors might change the demand pattern which should be
accounted while making projections for future years.

Consultant considers that this pricing issue is a complex issue and involves many aspects in
determining the corresponding price decrease or increase in various sectors.

• The prescribed gas price for the utilities is based on the weighted average cost of gas
plus operating costs and allowable rate of return to the utilities; determined currently at
Rs 824 per MMbtu. This weighted average cost is determined annually based on the bi-
annual change in the wellhead prices. This prescribed price is determined irrespective of
gas supply from the main system or through distribution network.
• The sale prices on the utilities system are fixed till the next notification without fixing any
time frame or next change.
• Slab system is applicable in the domestic sector where 1st slab for consumption of gas up
to 1.6 Mcf (0.5 Hm3) per month is priced at Rs.110 per MMbtu, at about 13% of

65
 prescribed price and last slab of consumption above 14 Mcf (4 Hm3) is priced at Rs.1468
per MMbtu. 168% of the prescribed.
• The prescribed price for LNG is determined monthly and separately for the consumers on
the main transmission line and for the consumers supplied through the distribution
network. The prescribed priced for LNG is determined separately for power being on the
main transmission line and for general industry which lies on the distribution system. at
random.

All the above make it difficult project the consumer prices. Nevertheless, one-time change is
estimated as an indicative of de-bundling impact. Taking the average prescribed price of Rs.
1439 Rs./MMbtu for the period Jan 2020 to June 2020 for LNG consumers (see below) and Rs.
824 per MMbtu for utilities system with a quantum of 30% LNG imports and 70 % indigenous
supplies to the utilities, the prescribed price based on weighted average cost of gas without
bundling is estimated at Rs.1013 per MMbtu; an increase of 23% in the prescribed price of
utilities.

Table 15: LNG Notified Prices in USD/MMBTU (Source: OGRA Monthly LNG Price Notifications)

2020 January February March April May June July

USD/MMBTU 10.482 11.975 11.367 9.587 7.150 6.128 6.670

Rs. /USD 154 154 154 166 164 164 164

Rs. /MMBTU 1614 1844 1751 1591 1173 1005 1094

In conclusion the gas demand with respect to inflation adjusted price variation can be viewed as
following
• Gas demand for the residential sector is not sensitive to the price increase as this is
mainly used for cooking and in winter cold months for space and water heating.
• Demand of gas being the preferred fuel in the commercial and general industry is
considered not too sensitive to price fluctuation as gas is being the preferred fuel.
• LNG will be available to fertilizer industry as the supply from the dedicated fields is at
decline. The demand of the sector remains unchanged as it is mainly capacity driven No
significant capacity addition is being envisaged in this sector.
• Power units based on the LNG use are ensured capacity utilization.

GAS SUPPLY PROJECTIONS

General speaking the supply projections are not subject to any deviation from GDP growth as the
gas supply is far from enough in meeting the requirements for Pakistan.

The market is dominated by state-owned companies (Oil and Gas Development Company Ltd,
Pakistan Petroleum Limited, Mari Petroleum Co. Ltd.) which take between 60-65 % of the supply
in the country. This percentage will decrease for mainly two reasons:

• Pakistan is exploring opportunities to supply the country through RLNG and Pipeline
Natural Gas

66
 • Indigenous gas supply is declining steadily since 2012 when gas producing fields peaked
at around 4.2 BCFD. New discoveries cannot offset the production decline of existing
fields.

All indigenous gas produced is supplied either to the SNGPL System, the SSGCL System or
through independent networks.

Consultant has analysed data provided by the Pakistan Petroleum Information Service (PPIS)
received November 23, 2020 to verify the figures stipulated in OGRA Report-FY19. The figures
provided show field wise gas projections from 2020 until 2033 onwards. To compare the figures,
all graphs are plotted until 2030.
MMCDF

FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30
New Discoveries 0 0 118 155 186 202 166 132 204 219
Independent 1251 1305 1302 1258 1191 1124 1067 1016 968 918
SNGPL 1059 1014 1038 943 871 789 692 616 552 504
SSGCL 1196 1283 1167 988 847 683 545 443 369 321

Figure 6: Indigenous Gas Supply Projection Source Wise (Source: PPIS)

Comparing OGRA Report-FY19 and PPIS figures, one can clear see that the trend is similar and
that the figures do not significantly deviate from each other. To have the most recent data set,
consultant will continue to use the figures provided by PPIS in his analysis.

In addition to the indigenous supply, there are various projects targeted to increase supply via
infrastructure projects. Approximately 4 MMSCFD will need to be supplied that way to offset the
gap in supply and demand. That figure is only indicative and may change depending on the year
which is considered as reference.

Following project are already materialized or are subject to potential implementation

Table 16: Anticipated Gas Infrastructure Project Gas Supply in MMCFD (Source: ISGS and OGRA Report-
FY19)

Description FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

LNG Supply 969 1002 1035 1067 1100 1133 1166 1199 1232 1265 1299

IP Pipelines 0 0 0 0 0 263 750 750 750 750 750

67
 TAPI Pipeline 0 0 0 971 1236 1342 1342 1342 1342

TOTAL 969 1002 1035 2038 2336 2738 3258 3291 3324 3357 3391

Consultant has no objection regarding the above Infrastructure Projects and the associated
amount of gas supply. Nevertheless, it is the opinion of the Consultant that the LNG Supply is
slightly underestimated and can be boosted to higher import figures, presuming there is an
incentive. The following table below provides the maximum capacity of the LNG import facilities
already implemented or subject to implementation. The table below lists the reported peak
withdrawal capacity for the two existing LNG import facilities (Engro and PGPL) and the foreseen
capacity of the projects starting construction soon (Energas and Tabeer). Since Peak
Regasification is not the normal operation mode for the FSRU, Consultant has anticipated the
“baseload” regasification capacity in their projections. The “baseload” regasification capacity in
the projections does not only consider the anticipated import capacities in place, but it also
accounts for future potential demand which is currently not in place. An example is the import of
LNG through the licensee of virtual pipelines.

Table 17: Peak and Baseload Capacity of LNG infrastructure Projects

LNG Project FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Engro (Peak
690 690 690 690 690 690 690 690 690 690 690
Capacity)

PGPL (Peak
750 750 750 750 750 750 750 750 750 750 750
Capacity)

Energas (Peak
250 690 690 690 690 690 690 690 690
Capacity)

Tabeer (Peak
500 1000 1000 1000 1000 1000 1000 1000
Capacity)

Engro
500 500 500 500 500 500 500 500 500 500 500
(anticipated)

PGPL
600 600 600 600 600 600 600 600 600 600 600
(anticipated)

Energas
125 500 500 500 500 500 500 500 500
(anticipated)

Tabeer
375 750 750 750 750 750 750 750
(anticipated)

GAS DEMAND PROJECTIONS

Based on the sector wise gas consumption published by OGRA Report-FY19, Consultant will follow
split and comment on the different sectors which are following:
• Residential
• Commercial, General Industry, Cement and Transport Sector
• Fertilizer
• Captive Power
• Power

68
 Since the OGRA Report-FY19 provides only a forecast scenario, Consultant has further used the
information from the Pakistan Energy Yearbook 2019 published by Hydrocarbon Development
Institute of Pakistan

Further to the above, Consultant will use the revised GDP forecast from SSGCL which is in line
with the latest figures from World Bank for 2021 until 2030 illustrated below.

6,0%
CAGR IN GDP

5,0%

4,0%

3,0%

2,0%

1,0%

0,0%
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

YEAR

Figure 7: Projected GDP Growth Pakistan Post COVID-19 (Source: SSGCPL)

RESIDENTIAL SECTOR

Most important aspect of this study is the seasonality. With this regard Consultant reviewed the
historic province wise domestic consumption, number of total gas consumers and average
consumption per consumer since FY11 to FY19. Country wide a 35% increase in gas consumption
is observed in the domestic sector from FY11 to FY19 increasing to about 700 MMcfd.

Table 18: Net Gas Consumption in MMcfd by Region (Source: Energy Yearbook Pakistan 2019)

Provinces FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Punjab 355 398 428 436 430 427 446 418 489
KPK 60 71 73 78 81 85 82 89 104
Sindh 195 221 262 197 219 206 238 235 228
Baluchistan 25 28 36 26 32 26 31 37 35
Total 635 718 799 737 762 744 797 779 856

Table 19: Number of Customers by Region in 1000 (Source: Energy Yearbook Pakistan 2019)

Provinces FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Punjab 3,421 3,631 3,836 4,077 4,297 4,523 4,887 5,402 5,824

KPK 481 521 548 589 625 660 717 804 877

Sindh 2,128 2,238 2,317 2,379 2,435 2,493 2,553 2,621 2,762

Baluchistan 211 222 229 240 248 253 259 266 280

Total 6,241 6,612 6,930 7,285 7,605 7,929 8,416 9,093 9,743

Over the period consumer base increased from 6.24 million to 9.74 million. As the gas is mainly
used for cooking, followed by water and space heating purposes, the average gas consumption

69
 per consumer, on this account, is highest in the province of Baluchistan, followed by KPK and
Punjab, lowest being in Sindh.

This trend is in line with the winter gas demands in these provinces, severe winter being in
Quetta, Baluchistan, next followed by KPK and Punjab respectively and lowest in Sindh where the
moderate winter weather is observed.

Another aspect of historic gas consumption is that on average about 350,000 new consumers
were added in the first six years increasing to 468,000 in 2017 and about 650,000 in the years
2018 and 2019. This increase in the number of new consumers in the later years is attributed to
the shift in government policy where the ban imposed on new applicants, a policy which is never
fully implemented, was lifted. The gas network has been well developed with the access of gas to
main cities creating a large cliental. Thus, there is more demand both with respect to existing
customers and new applicants. In this context the number of consumers increased by 56%. The
corresponding increase in gas consumption of 35% in the same period is not aligned resulting in
decreased annual average gas consumption per consumer as illustrated below.

900 140
800
120
700

Cubib Feet per Day

100
600
MMCFD

500 80

400 60
300
40
200
20
100
Consumption Consumption per Customer
0 0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Figure 8: Historic Annual Average Gas Consumption Residential

The decrease in gas consumption rate in domestic is well explained since the gas consumption in
Pakistan is mainly supply driven, and not demand driven.

Gas utilization is being prioritized since mid-nineties, industries outside the residential sector are
connected on nine-month basis where gas connections are disconnected during winter months,
cement industry gas is supplied as and when available. Indigenous gas production is at decline
and only partially compensated with imported LNG as the price of LNG is bundled and is not a
preferred fuel. During winter months households in many areas are having limited supplies due
to decreased system pressure and the supply to tail-end consumers is limited to only late-night
hours during the cold days.

Domestic gas tariff is slab based where first two slabs are fixed well below the cost of gas. Gas
consumers, irrespective of the paying capacity of a consumer, is subsidized for 8-9 low
consumption months and mostly only wealthy ones consume gas in higher tariffs slabs during

70
 winter. The gas consumption is not sensitive to price in this sector. The de-bundling of gas LNG
price and corresponding increase in gas tariff will reduce gas consumption by some consumers
but this saved gas supply will be used by the household which have currently reduced supplies.

Considering the above situation, domestic sector gas demand is carried out on the following
assumptions.

• No impact on COVID-19 expected as drop in GDP will not impact the residential sector.
Natural Gas is mainly used for heating and cooking within the residential sector and that
basic needs will continue, regardless of GDP growth. ADB anticipates that COVID will
rather impact commercial and general industry
• 650,000 consumers will be added in the system: a continuation of recent practice
• Average annual consumption per consumer based on historic 10 years consumption.

Both these assumptions are justified; higher additional consumers base and current
government’s incentives provided to housing industry while a bit higher rate of 10-year average
consumption on account that increased consumption by the low pressure and tail-end consumers
will be somewhat balanced by marginal decrease in gas consumption falling in the higher tariff
slabs only during winter months.

Trend line of Ramboll domestic sector projections is like the OGRA Report throughout Y21 to
FY30, while our projected demand is about12% higher than the OGRA Report-19, starting from
120 mmcfd in FY21 increasing to 165 mmcfd by FY30 against the demand of 1,686 mmcfd. We
are of the view that our projections account both addition of consumers as well as the unmet
demand due to supply shortages if solved.

Table 20: Anticipated Net Gas Consumption Residential Forecast Consultant

Provinces FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY2030

Punjab 614 659 704 748 793 838 883 928 973 1,018 1,063

KPK 120 130 140 150 160 170 180 190 200 210 220

Sindh 262 271 280 290 299 308 317 326 335 345 354

Baluchistan 36 38 39 40 41 43 44 45 46 48 49

Total 1,032 1,098 1,163 1,228 1,293 1,359 1,424 1,489 1,554 1,621 1,686

POWER SECTOR (GENERAL)

The power sector analysis is considering the historical power generation for the years FY17 to
FY20 actual as reported in the “State of industry Report 2020”; where projected GWh Generation
in IGCEP is adjusted for 2020 GDP growth as Economic Survey Report for 2020.

For future projections, World bank has projected the Pakistan’s GDP covering the impact of the
Covid19 but slowly recovering. After full recovery the GDP is projected to be 5% per annum (as
already illustrated above)

71
 Pakistan has recently started implementing a progressive renewable energy policy. The overall
power generation from renewable and thermal can be seen from below.

Table 21: Overall Power Generation in GWh (Source: NEPRA and IGCEP)

Solar and Wind

Thermal Gas LNG
(Renewables)
Actual (NEPRA State of Industry Report)
2017 2.950 78.819 38.288 658
2018 3.097 92.011 29.666 21.174
2019 4.879 89.402 28.010 30.813
2020 4.304 81.554 20.615 26.816
Projected (IGCEP 2020-2047) Adjusted
2021 4.304 81.554 20.615 26.816
2022 4.304 81.554 20.615 26.816
2023 8.649 81.554 25.345 26.816
2024 11.799 86.284 25.345 26.816
2025 14.512 86.284 25.345 26.816
2026 16.747 86.284 25.345 26.816
2027 18.192 86.284 25.345 26.816
2028 20.486 86.284 25.345 26.816
2029 23.299 86.284 25.345 26.816
2030 26.800 86.284 25.345 26.816

Following is concluded:

• Renewable Energy addition in the System is taken as 50% of planned addition in IGCEP
form 2021 and thereafter.
• 900 MW CCGT is under construction in K-Electric system and expected to be
commissioned in early 2023.
• Additional gas consumption of about 90 MMSCFD is calculated at 60% efficiency of the
plant in K-Electric System.
• Existing LNG plant will be dispatched till 2032 at least at 66% plant factor under the
contract. This will consume 600 MMSCFD gas.

Gas sector power demand on the above projected gas-based generation is estimated based on
historic average thermal efficiency for old plants and recently observed gas consumption pattern
for LNG plants.

One quite interesting aspect, which to be looked at is the monthly power generation from gas
fired power plants. These spikes, however, do not result in gas significant variation as compared
to average annual consumption as illustrated below.

72
 Power Sector Gas Demand (incl. losses)

1.600
mmcfd

1.400
1.200
1.000
800
600
400
200 Gas Demand Variation
-
(200)
(400)
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Deviation form Yearly Average Demand

Figure 9: Power Gas Demand Monthly Spikes 2018-2019

The gas demand variations as obtained from the above Figure are in line with expectations.
During the winter period there is a negative deviation from the yearly average. Gas Operators
balance the additional winter demand for residential customers to meet space heating
requirements through curtailment on interruptible customers.

FERTILIZER SECTOR

Fertilizer sector gas demand is based on the operational capacity of the installed units. Most
fertilizer units are supplied gas from the Mari gas field, the most suitable gas for fertiliser stock.
These units are located near the field. Further gas is supplied to one of the units at Multan is
supplied gas from the Mari field and SNGPL only acts as a transporter. Only one unit of FFCBL is
supplied gas from the main SSGCL system. The demand of these units remains constant
throughout the year except when any of these goes off or under maintenance.

The demand of gas is not sensitive to GDP or price of gas; gas prices for the sector are regulated
with an aim to supply maximum locally produced fertilizer at cheaper or equivalent to imported
fertilizers whereby maximum utilization of available capacity is ensured. Ramboll therefore has
based the gas demand figures, for this sector based on the allocation and historic use of gas –
same as projected by the OGRA Report-FY19.

73
 COMMERCIAL, GENERAL INDUSTRY AND TRANSPORT SECTOR

The gas demand in these sectors is linked with the sectoral growth rates in line with GDP growth
projections; decrease or increase in the GDP will result a corresponding increase or decrease in
the GDP projections. Currently only 12% of the gas is used by these sectors. Gas to all these
sectors, more specifically to cement, is supplied as available. Further this demand, however,
remains constant year around. The gas demand figures projected by ORGA in these sectors are
reviewed in the light of current World bank GDP projections.

CONCLUSION
Based on the above Consultant has deemed it necessary to make small adjustments to the
forecast projected by the OGRA Report-FY19 to reflect the most recent data and assumptions.

Consultant high level analysis is only indicative and may be considered with caution. This analysis
does not replace an in-deep gas supply and demand analysis.

For the different sectors we have performed adjustments based on three parameters which are
(i) revised GDP projections which impact the commercial sector, general industry, cement and
transport, (ii) historical growth projections which are applicable to the residential sector and (iii)
Renewed Renewable Energy Policy which impact the Power sector. For the Fertilizer sector
Consultant does not foresee any adjustments.

Adjustments Made

Historical Renewable
Sector GDP Growth Growth Energy Comment
Projections Policy

Residential  Increase of Forecast

Commercial, General Industry,

Cement  Reduction of Forecast
and Transport

No change in
Fertilizer
forecast

Power  Reduction of Forecast

74
 Consultant Forecast OGRA Forecast
7500

7000

6500
mmcfd

6000

5500

5000

4500
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30

Figure 10: Gas Demand Forecast FY 2019 – FY 3030 (Source: OGRA & Own Assumptions Consultant)

As can be seen from the above chart, our forecast moderately deviates from the OGRA figures
from 2019. In 2019 the anticipated gas demand including losses is close to 5,000 mmcfd. Main
negative driver for a slow growth is the reduction in GDP which mainly affects business. From
FY2021 the demand already picks up due to an increase in GDP figures slowly approaching 5 %
growth. From FY2023 OGRA and Consultant forecast run in parallel. This effect is mainly caused
by an increased demand from the residential sector which is offset by lower consumption from
the power sector. At the end of the reporting period in FY2030 Consultant forecasts a slightly
lower Gas Demand (6,777 mmcfd) than anticipated by OGRA (6,938 mmcfd). This amounts to
approximately 3 % less consumption that OGRA forecasts.
From a supply perspective, the current supply will remain around 5,000 mmcfd for the next
couple of years.

Figure 11: Natural Gas Supply Forecast up to FY 2030 (Source: PPIS, OGRA and own assumptions)

75
 With the completion of two new LNG import facilities in 2023/2024 (Tabeer and Energas), LNG
import capacity will be more than double. Further, the construction of TAPI and IP pipeline
project will add further import capacity to Pakistan. It is anticipated that this measure will offset
the decline of indigenous production short term. On the long-term basis, further measures are
needed to ensure gas supply.

Combining the supply and demand curve in one graph shows that Pakistan will be able to close
its supply gap in near term, considering timely completion of all infrastructure measures, both
pipeline and LNG. On the long term, gas demand, mainly driven by GDP growth and associated
residential consumption coupled with a rapid decline of indigenous production, further
investments to import gas or enhance local production are needed. The above-mentioned
statement is only true considering a static approach of supply and demand. Demand and Supply
are by nature not static and subject to a lot of variables which require a more comprehensive
study. It shall be noted that in our analysis we consider the supply of LNG with baseload. The
supply for LNG can be managed in a flexible manner, which means in case of surplus the import
of LNG can be reduced.

Figure 12: Gas Supply-Demand Forecast in MMcfd based on own assumptions.

GAS DEMAND SWINGS & STORAGE REQUIREMENT

How gas demand in Pakistan swings through seasons is a key consideration for understanding
the Underground Gas Storage needs of Pakistan, and appropriate technical and commercial
designs are required to reflect such seasonal patterns.

76
 Ramboll has generated a set of high-level assumptions, to produce results on storage
requirement for Pakistan. These results were indicative in nature, they are meant to provide a
basis for further discussion with Client and confirmed throughout the study.

SEASONAL SWINGS IN GAS DEMAND

In analysing the seasonal patterns in the gas demand of Pakistan, Consultant assumes the
following:

• Gas Operators balance the additional winter demand to meet space heating
requirements, by calling on interruptible consumers like cement industry, power
generation.
• Residential consumers will be supplied with indigenous production throughout the winter
months and can be considered as protected customers
• Commercial Clients who have a regular load curve throughout the whole year are also
considered as protected customers. Nevertheless, their impact on overall gas
consumptions remains small and contributes 2 % of the overall gas consumption for
2018.
• Since Pakistan is gas-deficit country, all additional winter demand consumed by the
residential sector will be taken from interruptible consumers, which shall source their gas
consumption from the Underground Gas Storage.

To understand the natural gas demand for the interruptible consumers, it is essential to
understand the additional gas demand during the winter period for the protected customers
(residential sector). Knowing the additional demand for the residential sector will imply the
demand for all other sectors; in short: Whatever the residential sector consumes during the
winter months needs to be replaced by the underground gas storage. The specific demand
pattern is underpinned by the swing factors: defined as the ratio of Peak Daily Demand / Average
Daily Demand over a year. Consultant assumes that SNGPL area has a swing factor of 2.9 and
the SSGCL area has a swing factor of 2.1; the country-level residential gas demand seasonal
pattern can then be derived accordingly.

As shown below the Residential sector gas demand peaks during the Winter season (from
December to February), and the height of the peak increases as the overall Residential demand
increases in the future. Take FY20 for example, the Residential demand (including assumed
losses of 9%) is calculated to be at its bottom of 585 mmcfd in July and climbs to the peak of
3,027 mmcfd in January. Similarly, the bottom and peak for FY25 is 764 mmcfd and 4,023
mmcfd respectively.

77
 Figure 13: Residential Gas Demand Seasonal Patterns (including gas losses) [Source: Ramboll
calculation.]

Furthermore, the deviations of monthly demand from the annual average can also be calculated
based on the seasonal patterns. For example, the demand above annual average is 1,893 mmcfd
in January for FY20.

STORAGE REQUIREMENTS

As discussed in this report, there are two types of storages: strategic and commercial. The
strategic storage is considered as an insurance against unexpected disruptions, the capacity
allocation to strategic storage tends to be a subjective choice as a percentage (can be zero) of
the annual gas demand. The focus of this section is the calculation of commercial storage
requirement, reflecting the seasonal swings of gas demand.

Consultant assumes the commercial storage will be used to supply initially between 25-75 % of
the excess gas demand (the portion of gas demand that is above the annual average). For
example, as shown below, the excess gas demand for FY20 is 799 mmcfd in December 1,893
mmcfd in January and 799 mmcfd again in February. This is equivalent to 106 bcf of gas over the
3 months period. The storage requirement for FY20 would be 26 bcf, if 25% of the excess gas
demand is to be supplied by the storage while the rest to be arranged through gas imports. In
this case, the peak withdrawal rate of the storage would be equivalent to 473 mmcfd (i.e., 25%
of 1,893 mmcfd).

78
 The same logic can be used to calculate the storage requirement in future years under different
assumptions. For example, as shown in the figure below, if 25% of the excess gas demand is to
be supplied by the storage, the capacity requirement will increase from 26 bcf in FY20 to 35 bcf
in FY25 and then 44 bcf in FY30.

Figure 14: Storage Requirement Sensitivity [Source: Ramboll calculation]

While the accuracy of storage requirement forecast can be improved if better input data is made
available, the policy decision on the size of the UGS is an art as much as it is a science. Such
decision will be influenced by many variables: e.g., Government of Pakistan fiscal conditions,
logistical constraints, overall gas sector development plans etc. Nevertheless, the intuition for the
UGS decision may be like that of LNG import terminals.

For example, if less than 50% of the excess gas demand is to be supplied the UGS – the UGS will
not only be able to cover the storage requirement for the period before FY25, but it will also have
spare capacity which may be left idle or used for strategic storage. Meanwhile, new investments
may be needed for additional UGS capacities (either through expansions of the first UGS or a
second UGS) if the storage requirement continuously rises beyond FY25.

Consultant proposes in a first step to size the underground gas storage for not less than 25 % of
the excess gas demand until FY30 and with 100 % of the required peak withdrawal capacity for
FY30. The analysis of the required working gas storage shall not be final and subject to a
reservoir analysis. Following parameters shall be applicable therefore:

Total working capacity needed to meet 100 % of the excess gas demand in FY30 based on the
demand analysis performed is equal to 176 bcf. The associated peak withdrawal capacity is
3,166 mmcfd. Injection period shall be limited to spring and autumn, which is six (6) months.
During the summer, it is assumed that the power industry consumption will be higher and

79
 therefore injection is anticipated. Based on this statement the injection rate shall be half of the
peak withdrawal rate: 1,583 mmcfd.
Consultant acknowledges that the construction of gas storage facilities will take time and are very
ambitious. Consultant proposes therefore to focus on an initial step to have 25 % of the
excess gas demand and associated withdrawal/injection rate.

• Working Gas Capacity: minimum 44 bcf

• Peak Withdrawal Capacity: minimum 792 mmcfd
• Injection Capacity: minimum 396 mmcfd

Figure 15: Storage Requirements and Peak Withdrawal Rate or 100 % [Source: Ramboll calculation]

Figure 16: Storage Requirements and Peak Withdrawal Rate or 25 % [Source: Ramboll calculation]
80
 POTENTIAL EXPANSION MEASURE

The reservoir selection process is based on the requirement to size the underground gas storage
for not less than 25 % of the excess gas demand until FY30

The selection of the reservoir and the associate withdrawal and injection capacities are therefore
based on following parameters.

• Working Gas Capacity: minimum 44 bcf

• Peak Withdrawal Capacity: minimum 792 mmcfd
• Injection Capacity: minimum 396 mmcfd

Consultant acknowledges that the project life bases on common practice shall minimum 20 years,
therefore the gas supply and demand projections are extrapolated to understand a possible
scenario for the gas supply/demand forecast until FY45 as agreed with the beneficiary of the study.
The methodology applied for this scenario are described in the previous chapters where for the
residential sector historical growth figures are assessed, for commercial, industry and transport,
the anticipated GDP growth is used and for the power sector, the assumptions from the upcoming
renewable energy policy are considered.

As already mentioned previously, the key is to understand the natural gas demand for the
interruptible consumers, it is essential to understand the additional gas demand during the winter
period for the protected customers (residential sector). For his analysis Consultant has included
9% losses but understands that this percentage will improve over the next couple of years due
efforts of the government to minimize gas losses. Keeping the 9 % losses throughout FY45 can
be considered as a conservative approach with potential upside

As can be seen from the figure below the overall residential gas demand the residential annual
average demand for the residential sector increases from 1,686 mmcfd in FY30 to 2,658 mmcfd
in FY45 This is an increase of around 58 %.

81
 Figure 17: Gas Demand Forecast Ramboll until FY45 in MMcfd (own assumptions based on OGRA)

82
 As shown below, and analogue to the methodology applied, the residential sector gas demand
peaks during the Winter season (from December to February), and the height of the peak
increases as the overall residential demand increases in the future. Consultant has plotted FY30
as reference and two other moments in time (FY40 and FY45), whereas FY45 will be considered
as expansion case.

In FY45 the Residential demand (including assumed losses of 9%) is calculated to be at its
bottom of 1403 mmcfd in July and climbs to the peak of 4,825 mmcfd in January. Similarly, the
bottom and peak for FY40 is 1,232 mmcfd and 4,235 mmcfd respectively.

Total working capacity needed to meet 100 % of the excess gas demand in FY45 based on the
demand analysis performed will increase from 176 bcf (FY30) to 271 bcf in FY45. The associated
peak withdrawal capacity is 4,825 mmcfd. Injection period shall be limited to spring and
autumn, which is 6 months. During the summer, it is assumed that the power industry
consumption will be higher and therefore injection is anticipated. Based on this statement the
injection rate shall be half of the peak withdrawal rate: 2,412 mmcfd.

As the reservoir selection process is based on the requirement to size the underground gas
storage for not less than 25 % of the excess gas demand until FY30, the same shall apply for
potential expansion for FY45.

83
 The expansion of the reservoir and the associate withdrawal and injection capacities are therefore
based on following parameters.

• Working Gas Capacity: minimum 68 bcf

• Peak Withdrawal Capacity: minimum 1206 mmcfd
• Injection Capacity: minimum 603 mmcfd

As the Consultant was asked to provide the analysis for the required working gas capacity and
associated withdrawal/injection capacity after submission of the reservoir selection process, it
shall be evaluated whether the infrastructure assessed, and the selected reservoir can provide
these additional capacities as calculated.

The following table shows the comparisons between figures calculated for FY30 and figures
calculated for FY45

FY30 FY45 Relative increase (%)

Working Gas Capacity in

44 68 56
bcf

Peak Withdrawal Capacity

792 1206
in mmcfd
52
Injection Capacity in
396 603
mmcfd

As can be seen from the table above, the capacity increases slightly more than 50% in absolute
figures and will not change the choice of selected reservoir. Khorewah has a possible working gas
volume of around 104 Bscf and can therefore accommodate the increase of working gas from
initial 44 to 68 Bcf. Further the pipeline size of 36” is chosen in the way to accommodate higher
flows of 50%, therefore no expansion measures need to be foreseen. Only the increase of the
injection/withdrawal capacity will impact the above ground installations in line with the
deliverability of the wells.

To accommodate this, the underground gas storage shall foresee some space and already
provide the connections for potential future expansion measures. Also, to increase
withdrawal/injection capacity additional wells need to be drilled to increase the deliverability of
the reservoir. Within the next design phase, it is recommended to provide engineering solutions
considering a potential expansion of the facility. This is both true for the above ground
installations as well as the reservoir study which will determine the location of the potential wells.

84
6. RESERVOIR SELECTION
SELECTION CRITERIA

Based on the conclusion set out in the interim report, the minimum requirements for gas storage
were set as shown in Table 22. The working gas volume of a gas storage is determined by the
minimum and maximum pressure. The maximum pressure is mainly given by the depth of the
reservoir and is taken in this study as the initial pressure of the gas fields considered. With
respect to surface facilities the maximum pressure at the well should be 3,000 psi (207 bar). The
next well head strength e.g., is 5,000 psi (345bar) which would be oversized for ordinary gas
storage and unnecessarily augment storage cost.

The minimum well head pressure is usually about 60 bars (870 psi), a value still high enough to
ensure gas flow into to the distribution grid (value can be lower considering operation of injection
compressors in reverse direction).

The lowest “maximum” storage pressure however should be in the range of 140 bar (2,000 psi),
as at lower storage pressures the ratio of working gas volume (WGV) to cushion gas volume
(CGV) becomes unfavourable. This determines a desirable depth range of fields promising for gas
storage which is between 1,600 and 3,000 m (5,000 – 9,800 ft).
The requirement of the minimum WGV leads to a minimum reservoir size of 80 Bscf assuming a
WGV of 55 %.

The maximum storage size (approximately 106 Bscf) is about three times the value of the
required minimum working gas capacity of 44 Bscf. For the screening a maximum size of 300
Bscf of initial gas in place was taken. If the field size is much higher the storage of a limited and
well determined amount of gas may become impossible, as gas may migrate into other parts of
the field or storage pressure must be set too low.

Table 22: Minimum requirements for gas storage

Capacity Volume

Minimum Working Gas Capacity: 44 Bscf (1 232 Mio. sm3)

Peak Withdrawal Capacity: 792 MMscf/d (924,000 sm3/h)

Minimum Injection Capacity: 396 MMscf/d (462,000 sm3/h)

As compared to a regular gas field operation, the production time is much shorter for a gas
storage. For example, usually from common gas field is produced within a time frame of 20 – 30
years, but the same amount of gas is withdrawn during gas storage operation in a few months
and at an average up-time of 1,000 hours.

To produce gas at high rates under storage conditions, a high reservoir pressure is favourable.
However, the operating pressure should not be too high, as this requires more effort with respect
to surface facilities. To achieve high production rates, the permeability of the reservoir should be
85
 high. If this is not given, a large net thickness of the reservoir may compensate unfavourable
permeabilities. The deliverability of a reservoir is determined by pressure, thickness and
permeability. These parameters then determine the number of wells, necessary to achieve the
target values given for storage operation.

Table 23 contains the data that were available for all fields. From these fields those were chosen
for a final assessment that fulfilled the criteria for depth (5,000 – 9,800 ft) and size (IGIP
between 80 and 300 Bscf).

86
 Table 23: Reservoir data for all fields

Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
Upper
1 Bhal syedan 1989 14140 Chorgali Limestone 12 23 2,9 0,4 9900 4,1
Indus

Upper Sakessar, Tobra, Limestone,

2 Chak-naurang 1986 8900 61/82 14,5 0,5 5,8 3961 8,5
Indus Khewra Sandstone

Upper
3 Chanda 1999 16220 Datta, Lumshiwal Sandstone 91,2/85 21/14 1,89 2,77 75,4 20,6 6744 123,9
Indus
Chorgali
1-5 %;
Sakessar
1-3 %;
Limestone
Upper Chorgali, Patala 1-
4 Dakhni 1993 14800 (Fratured), 77 2 -- 5 4,16 255 10,6 7571 282,9
Indus Sakessar,Patala 4 %,;
Sandstone
Lockhart
1-3 %;
Datta 1-
6%
Upper Chorgali, Limestone
5 Fimkesser 1981 10000 27,9-93,5 0,03 -1,4 19,3 21,7 5670 62,3
Indus Sakessar (Fratured)

Upper Sakessar, Tobra, Limestone,

6 Kal 1995 9000 70 Khewra 0,02 -9 4,87 1,9 7 4100 12
Indus Khewra Sandstone

9,84 Jutana,
Upper Tobra, Khewra, 72,18 Tobra
7 Missa Keswal 1991 7300 Sandstone 17 29,4 9,3 4397 43,7
Indus Jutana Khewra, 10-15 %
10,17 Tobra
Upper Sakessar,Jutana, Limestone, 67 Khewra,
8 Rajian 1994 8900 100-200 4,15 6 17,5 5559 39,9
Indus Tobra, Khewra Sandstone 11,53 Jutana

300
Upper Margalls, Limestone
9 Sadkal/Sadqal 1992 12500 Margalla, 21,6 -813 72,9 5,3 9876 91,2
Indus Chorgallu (Fratured)
134 Chorgali
Upper Limestone,
10 Toot 1968 14400 Sakessar, Dataa 250 15 <2,5 5,72 37,2 17,4 6700 77,9
Indus Sandstone

Upper Limestone
11 Bhangali 1989 12805 Chorgali/Sakessar 9974 6,73 0,68 1,16 10,2 8,6 6500 20,7
Indus (Fratured)

87
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure

Chorgalu,
Upper Limestone,
12 Dhurnal 1984 13428 Sakessar, Patala, 430 3,5 0,5-50 148,7 55,7 9164 326,7
Indus Sandstone
Wargal

Upper Limestone
13 Rantana 1989 16379 Patala 3-4 % 54 2,4 9730 62,2
Indus (Fratured)
Upper Chorgali, Limestone,
14 Balkassar 1937 8399 35,2 3835 52,9
Indus Sakessar Sandstone
Sakessar,
Upper Limestone
15 Dhulian 1937 8268 Foekhand, 285 8-10 % 80 0,75 1,32 213 42,5 5400 293,1
Indus (Fratured)
Jurassic
Upper Limestone
16 Joyamair 1944 10000 Chorgali 10,5 3535 12,9
Indus (Fratured)
Upper
17 Khaur 1915 6533 Sakessar Limestone 4,4 3500 5,4
Indus

Chorgali,
Upper Limestone, 1.3 %,
18 Meyal 1969 12514 Sakessar, Raniko, 275 50 0,47 0,9 291,9 40,3 6814 387,7
Indus Sandstone 8-10 %
Jurassic

Upper
19 Minwal 1997 7149 3,7 3500 4,6
Indus
Chorgali,
Upper Sakessar, Limestone,
20 Pariwali 1994 16239 0,3 0,38 85,3 6,8 7500 103
Indus Lockhart, Sandstone
Dhakpass
Chorgali,
Upper Sakessar, Limestone,
21 Pindori 1991 12720 0,51 0,88 210,5 28,1 7000 279,1
Indus Lockhart, Sandstone
Dhakpass
50 Chorgali,
Upper Chorgali,
22 Turkwal 1997 10500 Limestone 120 0,95 0,37 4,2 3,8 5600 11,6
Indus Sakessar
Sakessar

Upper Tobra, Khewra, Conglomerate

23 Adhi 1978 9219 90 6-10 % 10 1,44 0,32 371 39,3 5100 441
Indus Jutana Sandstone

Central
24 Savi-Ragha 1994 9768 30
Indus
Central
25 Mari 1957 2460 Habib-Rahi Limestone 160 10-12 % 30 18,54 8,84 6800 6800
Indus
Dunghan /
Central Limestone,
26 Zarhun Sth 1998 Mughalkot 8,37 7,3 93 93
Indus Dolomite
/Chiltan

88
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
Central Matrix-2,
27 Dhodak 1976 8500 Ranikot, Pab Sandstone 540/900 9,7 4,2 2,27 623,1 29,8 3210 656,5
Indus Fract.262
Central Sui Main, Limestone,
28 Loti 1985 5500 200/525 10-16 % 4-22/4-18 7,26 10,8 292,5 1430/1870 817
Indus Ranikot, Pab Sandstone
Lumshiwal,
Central 15.5 -
29 Nandpur 1994 6500 Samanasuk, Sandstone 360/440/180 1,5 - 135 51 0,26 286 2150/2800/2980 215
Indus 22,9
Shinwari
Lumshiwal,
Central
30 Panjpir 19985 5900 Samanasuk, Sandstone 65-100 24,5 1,5 - 135 59,61 6,32 127,3 2600 87,91
Indus
Shinwari
6 - 10
Central
31 Pirkoh 1977 7900 Ranikot, Pab Sandstone 100 %, 10- 12 5,42 8,26 2093 2260 1540
Indus
16 %
4600 Siu Main, Sui
Central 7,8 -
32 Quadirpur 1990 /4200 Upper, Habib- Limestone 535/312/95 6,2-8,8 11,33 5,81 5147 3,8 2064/2033/1382 5795
Indus 10,3 %
/3445 Rahi
Central
33 Rodho 1974 8100 Ranikot, Pab Sandstone 260/320 3,8 3,8
Indus
Central
34 Uch 1955 4600 Sui Main Limestone 527 18-21 15-422 19,88 41,3 3100 2046/2061/2071 6880
Indus
Central
35 Badar 1994 Sui Main Limestone 42 0 34 34
Indus
Central
36 Kandra 1996 5226 Sui Main Limestone 18,8 58,8 1700 1700
Indus
Central Sui Main + Sui
37 Sui 1952 4450 Limestone 607 18,5 3,58 6,81 10780 10780
Indus Upper
Central
38 Sui Deep 1998 6600/8300 Pab Sandstone 15-18 % 124 2,12 9,56 269 2851 269
Indus
Central
39 Kandkot 1959 4500 Sui Main Limestone 315 18,6 16,91 6,27 1296 1296
Indus
Central
40 Mazarani 1959 10112 Habib-Rahi Limestone 7,08 0,31 33 33
Indus
55-88
Central 25-35 (SUL);
41 Chachar 1995 4397 Limestone ((SUL), 88- 13-18 101,4 1873 101,4
Indus 1-5 (SML)
147 (SML)
Central
42 Sara 1994 3701 Sui Main Limestone 157 12,5 18,9 1,56 32 32
Indus
Central
43 Suri 1997 4035 Pab 19 2 38,7 38,7
Indus
Lower
44 Zamzama 1998 12133 Lr. Goru Sandstone 21,16 2,59 2208,5 10,95 2231,59
Indus
Lower
45 Batti/Nakurji 1989 7550 Lr. Goru Sandstone 5,51 1,38 93,78 2,94 97,64
Indus

89
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
Lower
46 Bukhari 1986 6558 Lr. Goru Sandstone 15,2 667 2,42 1,87 93,81 1,65 2819 95,48
Indus
Lower
47 Buzdar 1991 5092 Sakessar Limestone 17 14,5 4,76 210,73 1,14 211,74
Indus
Lower
48 Golarchi 1984 6560 Lr. Goru Sandstone 8,5 42 2,42 3,4 70,88 0,26 71,18
Indus
Lower
49 Kato 1989 7950 Lr. Goru Sandstone 1,97 2,3 8,26 0,37 8,77
Indus
Lower
50 Khorewah 1988 6384 Lr. Goru Sandstone 11 164 4,72 1,82 131,33 1,75 2916 133,16
Indus
Lower Khorewah
51 1995 Lr. Goru Basal Sandstone 2,04 5,04 9,68 0,02 9,68
Indus deep
Lower
52 Liari 1986 7000 Lr. Goru Sandstone 14,33 1000 2,34 11,82 16,72
Indus
Lower
53 Liari Deep 1994 Lr. Goru Middle Sandstone 2,3 5,46 3,35 0,11 3,36
Indus
Lower M. Ismail
54 1998 Lr. Goru Basal Sandstone 0 5,45 15,69 0,22 16
Indus deep
Lower
55 Makhdumpur 1986 6500 Lr. Goru Sandstone 4,2 24,2 2,3 5,46 57.57 0,54 58,17
Indus
Lower Makhdumpur
56 1995 Lr. Goru Basal Sandstone 14,2 24,96 0 24,86
Indus deep
Lower
57 Nari 1985 6496 Lr. Goru Sandstone 12,5 24,7 5,19 2,83 12,59 0,09 12,69
Indus
Lower
58 Pirkoh S 1988 82222 Lr. Goru Sandstone 4,2 24,4 4,13 3,21 11,11 0,09 11,24
Indus
Lower
59 Rajian 1997 Lr. Goru Sandstone 4,84 3,43 11,21 0,03 11,21
Indus
Lower
60 Sakhi 1996 6830 Lr. Goru Sandstone 9,42 2,43 9,5 7,57 18,49
Indus
Lower
61 South Buzdar 1993 3839 Lr. Goru Sandstone 14,5 4,75 5,89 0,04 5,92
Indus
Lower
62 Turk 1985 6550 Lr. Goru Sandstone 500 to 650 9,5 98,7 1,33 1,75 166,71 2 168,81
Indus
Lower
63 Turk deep 1988 6750 Lr. Goru Basal Sandstone 9,85 114,83 0,3 115,18
Indus
Lower
64 Zaur 1994 6532 Lr. Goru Sandstone 3,22 1,77 23,44 7,31 31,75
Indus
Lower
65 Zaur deep 1995 Lr. Goru Middle Sandstone 1,57 4,74 27,35 0,76 28
Indus
Lower
66 Badhra 1999 Mughal Kot Sandstone 8-15 20 - 500 7,18 1,8 75 75
Indus

90
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
Lower
67 Kandanwari 1989 11410 Lr. Goru Sandstone 10 19 150 0 10,5 432 432
Indus
Lower
68 Bhit 1997 7044 Pab Sandstone 19,61 0 1119 1119
Indus
Basal
Sands Basal Sands
Lower 15 %, 210 md,
69 Bobi 1988 9200 Lr. Goru Sandstone 92 14,3 0 61,4 8,4 3900 /4017 73,19
Indus Middles Middle Sands
sands 18,2 %
20%
Lower
70 Daru 1989 8500 Lr. Goru Sandstone 25 10 1925 0 2,51 22,5 0,64 3713 29,75
Indus
Lower
71 Hundi 1965 5900 Ranikot Sandstone 67 20 8 16,98 1,01 25,76 1079 39
Indus
Lower
72 Jakhro 1998 10000 Lr. Goru Sandstone 20 10 5 32,51 3,89 6,16 0,31 3850 12,24
Indus
Lower
73 Kunnar 1988 7000 Lr. Goru Sandstone 300 12,53 2770/983 0 2,51 67,6 12,4 2896 80,53
Indus
Lower
74 Mithrao 1994 11800 Lr. Goru Sandstone 38 10 200 3,21 0 19 1,05 4268 44,21
Indus
Lower
75 Nur 1991 9200 Lr. Goru Sandstone 42,7 2,6 3,97 4,65 14,49 0,06 3490 3,8
Indus
Lower
76 Pasakhi 1989 6000 Lr. Goru Sandstone 68/84 5,5 600 4,96 0 9,16 24,68 2923 35,13
Indus
Lower 16 - 122 /
77 Sari 1970 5000 Ranikot Sandstone 58 URK 10,4 16,98 1,01 17,83 1235 32
Indus 220
Lower
78 Tando Alam 1984 5500 Lr. Goru Sandstone 6,53 300 0 3,08 7,65 22,42 3293 34,22
Indus
Lower Tando Allah
79 1998 5300 Lr. Goru Sandstone 213 12 296 13,4 10,3 42,2 0,75 1850 22,55
Indus Yar
Lower
80 Thora 1987 7300 Lr. Goru Sandstone 36 15 400 3,94 0 6,63 22,98 3013 31,56
Indus
Lower
81 Miano 1993 11155 Lr. Goru "B" Sandstone 0 11 900 900
Indus
Lower
82 Sawan 1998 11253 Lr. Goru "C" Sandstone 0 8,9 1720 1720
Indus
Lower
83 Kausur deep 2003 104 104
Indus
Lower
84 Naimat Basal 2003 199,84 2,68 199,84
Indus
Lower
85 Siraj south 2003 88 1,44 89,5
Indus
Lower
86 Usman 148,56 148,56
Indus

91
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
Central Habib Rahi
87 Mari HRL 1957 2272 Limestone 341 24,0 50,00 17,58 10,45 109,44
Indus Limestone

Sui Main
Central
88 SML-1 2005 3328 Limestone & Sui Limestone 515 20 2,6 13 3,2 31,4
Indus
Upper Limestone

Sui Main
Central
89 Bhitai 2007 3320 Limestone & Sui Limestone 515 15 12 13 4,5 110,4
Indus
Upper Limestone

Lower Lower Goru A & B

90 Sujawal X-1 2010 7718 Sandstone 190 6 7 0,85 3,61 17,8
Indus Sands
Upper Lower Goru C
91 Sujjal-1 2017 7262 Sandstone 321 8 180 0,85 3,20 57,0
Indus Sand
Upper Lower Goru A & B
92 Aqeeq 2017 7003 Sandstone 131 5 1,68 2,80 3,20 6,9
Indus Sands
Lower
93 Dabhi North 1998 5920 ft B Sand Sanstone 100 ft 16 60 17,69 4,77 64 167 2.428 8.5 MMBO
Indus
B Sand: B Sand: 100 B Sand:
Lower 5290 ft ft 18 12 BCF &
94 Dabhi South 1986 B & C Sands Sanstone 16,2 1,8 5 133
Indus C Sand: C Sand: C Sand: 385 MBO
5510 ft >250 ft 13
B Sand: B Sand:
100 ft
Lower 5230 ft 25 9.4 MMBO
95 Dhabi 1984 B & C Sand Sanstone C Sand: 16,2 1,8 - - 2550
Indus C Sand: C Sand: & 25 Bscf
>250 ft
5450 ft 16
Lower 3.5 MMBO
96 Duphri 1988 2320 ft B Sand Sanstone 35 ft 16 150 18,08 1,38 13 3,5 1161
Indus & 13 BCF

Lower B Sand: 6.4 MMBO

97 Jabo SFB 1986 6420 ft B Sand Sanstone 13 530 21,56 3,04 4,7 6,4
Indus ~200 ft & 4.7 BCF

Lower
98 Jagir 1996 6920 ft B Sand Sanstone 250ft 12,5 450 10,36 5,72 2,5 7,22 2867 9.1 MMBO
Indus
Lower 5100 ft & 85 ft & 105 8.7 &
99 Jalal 1993 A & B Sands Sanstone 8,63 1,74 - - 2831 & 2817 28.6 Bscf
Indus 5200 ft ft 19.9
0.99
Lower 3980 ft & 76 ft & 288 14 & 35 &
100 Jhaberi 2000 B & C Sands Sanstone 20 & 17 & 1831 9 1845 & 1898 31 Bscf
Indus 4150 ft ft 18.5 42.7
1.41
Lower 5160 ft & 9.4 &
101 Junathi South 2000 A & B Sands Sanstone 72 ft & 73 ft 21,82 1,26 - - 2257 15.4 Bscf
Indus 5182 ft 14.3
0.1 - 1000 17.8
Lower
102 Khaskeli 1980 3200' ft A & B Sands Sanstone 130 ft 20 & 24 mD (avg. 50 2,55 1,09 - 756 1633 MMBO &
Indus
mD) 6.6 MMBO

92
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure
A Sand:
1.6 MMBO
Lower 166 ft (A&B 11% 2116 psi (B
103 Koli 1989 4420 ft A & B Sands Sanstone A sand: 84 10,9 1,65 - - & 17.4
Indus Sand) B Sand : Sand)
BCF
20%
Lower 32.1
104 Laghari 1982 2545 ft C Sand Sanstone > 200 ft 28 3300 2,62 3,11 - 556 1166
Indus MMBO
Lower
105 M. Ismail 1991 7200 ft B Sand Sanstone 260 ft 11 113 6,02 3,84 - 17 3013 1.5 MMBO
Indus
A Sand:
A Sand:
A&B A&B 1.6 Bscf
11
Sands: Sands: 245 B Sand:
Lower B Sand:
106 Matli 1986 4920 ft A, B & C Sands Sanstone ft 220 9,47 1,72 110 300 2483 21 Bscf
Indus 16
C Sand: C Sand: C Sand:
C Sand:
5140 ft >300 ft 33 BCF &
17
1.2 MMBO
A Sand:
A Sand: A Sand: 25 A Sand: 5.7 MMBO
3750 ft ft 13 B Sand:
A sand: 1762, B
Lower B Sand: B Sand: 120 B Sand: 125, 625 & 34.5
107 Mazari 1985 A, B & D Sands Sanstone 12 1,5 287 1552 sand: 1757, D
Indus 3800 ft ft 24 250 mD MMBO
Sand: 1947
D Sand: D Sand: 150 D Sand: D Sand:
4440 ft ft 19-26 0.4 BCF &
4 .1 MMBO
A Sand:
Lower 13
108 Mazari South 1985 3600 ft A & B Sands Sanstone 40 ft & 50 ft 2000 21,2 2,3 20 2069 1792 35 MMBO
Indus B Sand:
21
0.5 MMBO
B Sand: 30 B Sand:
& 0.2 Bscf
Lower 2100 ft & ft 20
109 Paniro 1997 B & C Sands Sanstone 410 - 12 927 gas (B), &
Indus 2200 ft C Sand: C Sand:
2.2 MMBO
>200 ft 30
(C)
Lower 3.6 MMBO
110 Rind 1989 3000 ft B Sand Sanstone 90 ft 22 2200 16,14 1,52 - - 1372
Indus & 2.7 Bscf
6.7 BCF &
B Sand: B Sand: 300 B Sand:
6 MMBO
Lower 5980 ft ft 13-18
111 Sakhi 1996 B & C Sands Sanstone 3,21 0,93 - 71 (B), 6 BCF
Indus C Sand: C Sand: C Sand:
& 5 MMBO
6360 ft >300 ft 17
(C)
Lower 9 MMBO &
112 Sonro 1985 3720 ft B Sand Sanstone 80 ft 26 198 24,98 0,23 163 433 1774
Indus 30 Bscf

93
 Estimated
Average Recoverable Recoverable Storage
Average Reservoir
Discovery Well Reservoir Reservoir Porosity Permeability N2 Co2 Gas Oil Capacity
No. Region Field Thickness Pressure
Year Depth Formation Lithology (%) K (mD) (%) (%) Reserves Reserves (Bscf) at
(feet) (psia)
(ft) (BCF) MM BBL) actual
pressure

USSS:
3.963
Bscf,
MSSM: 1.1
Middle Middle
USSS, MSSM, Middle Sand: Bscf,
Lower South Buzdar Sand: Middle Sand: Sand:
113 1995 Middle Sand, Sanstone 30 - 300 mD 9,6 9,6 5648 521 2600, LSSS: Middle
Indus deep 5660 ft ~100 ft 20-29
LSSS 3000 Sand: 22
LSSS: LSSS: 15 ft LSSS:
BCF &
6650 ft 17
3.78
MMBO,
LSSS:
15.5 BCF
Lower 15.3
114 Tangri 1995 7050 ft B Sand Sanstone 250ft 12,5 450 9,92 5,54 335 284 3021
Indus MMBO
Lower
115 Zaur NFB 1994 6900 ft B Sand Sanstone 109 ft 13 32 5,9 2,12 337 201 2895 7.8 MMBO
Indus
15- 20-
116 Shahdadpur 3100-3300 Massive Sand Sandstone 200-400 5-12 50-180 690 7,57 5200
20 25
Shahdadpur
117 3500 Massive Sand Sandstone 30-40 5-12 <50 0.5-1 6-8 81 0,90 5193
West
118 Kabir X-1 3050 Basal Sand Sandstone 100 5-12 0.3-2 1,50 2,00 16 0,89 7500

119 Adam 3600 Lower Basal Sand Sandstone 35 4-9 25-35 9,00 15 28 0,95 5100

120 Adam West 3800 Massive sand Sandstone 150-220 8-14 135-165 1,00 8,00 37 0,09 5600

121 Fazl 3750 Massive Sand Sandstone 30 5-12 3-5 0,3 8 14 0,02 5600

207
Upper (Chorgali);
122 Rantana 15250 Chorgali/Sakessar 3,3 6690 47
Indus 213
(Sakessar)
Upper
123 Rantana 12150 Lokhart 360 3,5 1,16 9493 80
Indus
Upper
124 Rantana 12150 Datta 482 5,6 9750 27
Indus
Lower
125 Zamzama 1900 Nari 65 20 241 3000 3480 3480
Indus
Lower
126 Zamzama 3530 Pab 200 8 100 2500 5511 5511
Indus
Lower
127 Zamzama 3480 Khadro 7 8 240 15 5453 5453
Indus

94
6.1.1 Selected Fields
After applying these criteria (depth 5,000 – 9,800 ft and size between 80 and 300 Bscf initial gas
in place) to the above listed fields a short list of the fields shown in Table 3 was obtained.

Table 24: Short list of fields after ranking with respect to optimum depth and size

Porosity IGIP
Region Field Depth (m) Thickness(m) k (mD) kh(mD*m)
(%) (Bscf)

Upper
Dhulian 2,521.74 86,925 9 80 213 6,954.00
Indus

Upper
Adhi 2,811.79 27,45 10 371 274.50
Indus

Central
Loti 1,677.5 221,125 13 292.5 2,874.63
Indus

Central
Nandpur 1,982.5 298,9 14.6 0.046 286 13.75
Indus

Central
Panjpir 1,799.5 25,1625 13.7 0.046 127.3 1.16
Indus

Central
Sui Deep 2,272.25 124 269 0.00
Indus

Lower
Batti/Nakurji 2,302.75 93.78 0.00
Indus

Lower
Bukhari 2,000.19 60 15.2 667 93.81 40,020.00
Indus

Lower
Khorewah 1,947.12 60 11 164 131.33 9,840.00
Indus

Lower
Turk 1,997.75 175.37 9.5 98.7 166.71 17,309.51
Indus

Lower
Turk deep 2,058.75 114.83 0.00
Indus

Upper
Sujawal X-1 2,353.99 157.07 15 12 110.4 1,884.90
Indus

A further important parameter is the potential deliverability, which is reflected by the kh-value in
the last column. This means that Dhulian in the Upper Indus Region are selected. This field
however is an oil field and should not be considered as the presence of oil has an impact on the
produced gas quality and the presence of oil may lead to production problems because of 3-
phase flow and interactions between the oil and gas. Loti in the Central Indus Basin would be a
candidate. However due to the low thickness the deliverability is low.

There was also given special notice to the Zamzama field by the current operator. However, this
field is too large and from the information it was not clear if there exist hydrodynamic
independent blocks, which would suit the requirements for storage with respect to size and
depth. The most promising candidates are in the Lower Indus Basin the Field Khorewah, Bukhari
and Turk. As all these fields are in the same area in a later stage these fields may be combined
to a storage cluster. Out of these fields the Khorewah field matches closest the criteria set-up for
storage size and capacity. For this reason, in the following the Khorewah field was analysed in
more detail.

95
6.1.2 Assessment of Khorewah and Bukhari
The gas condensate fields Khorewah and Bukhari had also been selected in a study by SOFREGAZ
from 2007. In the following a short assessment of the findings in this report is made as
reference.

STRUCTURE
The gas condensate fields Khorewah and Bukhari were selected as best candidates for gas
storage in the feasibility study. Both reservoirs are in the sandstones in the Lower Goru
formation. Both reservoirs consist of three sand layers (A, B, and C) and the top depths are
approx. between 5,500 ft and 6,000 ft (around 1,800 m). The initial reservoir pressures were
given to 2,916 psi in a depth of 5,891 ft (201.2 bar at 1,796 m) in Khorewah and to 2,819 psi
(194.5 bar) for Bukhari. These are favorable data for gas storage with respect to a possible
pressure regime for a potential storage.

The closure for Khorewah was given with a depth of 800 ft (244 m) and similar for Bukhari (200
ft to 800 ft). The two upper sands in both reservoirs are gas saturated, whereas the C-sand is
almost 100 % water saturated. In addition, the North Block in the Bukhari field is oil saturated in
the B-sand.

As a first assumption the initial Gas-in-Place of both fields can be taken as storage volumes. In
both fields the Lower Goru sands have more than 2,000 ft of Marl/Clay/Shale as cap rock. So, in
a later stage, when having core samples to prove the tightness of the cap rock (capillary
threshold pressure) and of the structure, it may be considered to raise the operating pressure for
gas storage to increase the working gas volume.

GAS-IN-PLACE / VOLUMETRICS
In the feasibility study by SOFREGAZ, the initial Gas-in-Place was determined by a volumetric
Monte-Carlo simulation and from p/z calculations. The Monto-Carlo simulations could not be
retraced because of missing data and due to some contradictions in the parameters used. For
example, in a Table on page 135 e.g., in the Sofregaz report the minimum porosity is given as
0.112 and the maximum porosity as 0.138. This corresponds to the stated average porosities
derived from the interpretation of the logs of the corresponding wells. However, an average
porosity of 0.2 was used as input for the Monte-Carlo simulation, which is larger than the stated
maximum porosity.

For the Khorewah field the porosities taken were much higher than the log porosities. According
to SOFREGAZ, this was done to adjust the Monte-Carlo results to the p/z analysis. The porosities
derived from the logs for the “B” sand range from 10.1 % to 11.7 %, whereas the minimum and
maximum porosities used for the Monte-Carlo simulation are 11.5 % (minimum porosity) and
22.5 % (maximum porosity).

This procedure gives some evidence that geological description of the fields may not be entirely
correct or that the geological setting is not yet correctly understood.

96
 In addition, the porosity values given in different sections of the study are not consistent. For the
Bukhari field for example, the porosities derived from the well logs are given to 11.2 % to
13.8 % for the “A” sand and to 11.1 % to 13.7 % for the “B” sand. In a later section the
porosities are stated with 15 to 20%. Finally, in the corresponding concluding section, different
porosity values are given again (12 to 18%).

POROSITY AND PERMEABILITY

In the SOFREGAZ report high permeabilities of generally more than 100 mD are mentioned at
low porosities of approx. 11 to 14 % for the Bukhari field and approx. 8 to 12 % for Khorewah.
According to general experience, it is unusual to find such high permeabilities at such relatively
low porosities. However, these permeabilities are reported quite frequently and may be realistic.
Nevertheless, the reason for this ‘unusual’ behavior should be clarified as it will be essential for
the derivation of a later storage performance.

Although the headers of the well logs shown in the report are not readable, the above stated
porosities can be confirmed, if a standard notation is assumed. Corresponding separations in
resistivity logs also show that the sands seem to have a good permeability.

A correlation between porosity and permeability given in the report for Khorewah is:

𝐿𝐿𝐿𝐿𝐿𝐿(𝑘𝑘) = 0.2525𝜑𝜑 − 1.7487

This correlation also does not reflect the permeabilities given in the report. Also, the results of
the well tests indicate that the permeability of the Lower Goru sand in these two fields may be
smaller.

Furthermore, the well test interpretation in the feasibility study cannot be retraced. For example,
a well test in well #1 of the Khorewah field (page 95) determined a flow rate of 15.5 MMscf/d at
a well head flowing pressure (FWHP) of 1,800 psi and at a shut-in well head pressure (SIWHP) of
2,480 psi. But with the constants of the A&B equation given on page 96, the rate Q would be
approx. 82,276.45 Mscf/d. Additionally, by calculating the well head pressures to sand face
pressures, the shut-in pressure at reservoir depth (5,900 ft) would result in pr=2,884 psi and in
pwf=2,086 psi. In this case the resulting flow rate necessary to fulfil the equation would be
approx. 101,720 Mscf/d, which is even higher than the measured rate.
Anyway, the permeability, however, is the basis for the deliverability calculation of gas storage
wells. To verify the permeabilities, it is important to have a comprehensive set of petrophysical
laboratory data and well logs (as LAS files or at least in a readable format). In addition, existing
well test data are required and e.g. well flowing head pressure and production rates for gas,
water, and condensate/oil.

PRODUCTION – KHOREWAH FIELD

According to the SOFREGAZ report, the Khorewah field had a cumulative gas production of
approx. 120 Bscf (approx. 3,360 Mio. sm3) down to a reservoir pressure of approx. 1,200 psi

97
 (approx. 83 bar) in 2007. The total required storage working gas volume (WGV) was anticipated
in the report from 2007 to be 42 Bscf with a cushion gas volume (CGV) of 144 Bscf.
The total required withdrawal rates were given as 1,487 MMscf/d at minimum pressure and 2,205
MMscf/d at maximum storage pressure.Regarding the number of planned wells this would result
in approx. 60 MMscf/d for the A-sand and approx. 90 MMscf/d for the B-sand per well.

The corresponding field specific data are summarized in Table 4 to Table 6 below. In addition, the
data are given in metric units for means of comparison for usual gas storage figures in Europe.
Performed well tests (shown in Table 7) gave production rates of 10 – 22 MMscf/d for both sands.
The peak production rates of the wells were 15.5 MMscf/d. An interpretation of these tests results
would lead to permeabilities of below 10 mD.

This underlines the importance to have reliable test data and data for the permeabilities and
other properties of the sands.

For the further work of the current project, it is recommended to consider building a numerical
reservoir simulation model to study the well performance and the use of horizontal or slanted
wells as well as appropriate well stimulations measures.

Again, the Upper Goru sands have more than 2,000 ft of Marl/Clay/shale as cap rock so that in a
later stage, when having core samples to prove the tightness of the cap rock (capillary threshold
pressure) and of the structure, it may be considered to increase the maximum permitted
pressure for gas storage operations.

Table 25: Khorewah Field – Anticipated Storage Parameters in Field and Metric Units

Deliverability
Operating Pressure Deliverability
No. per Well
Sand WGV CGV
Wells
Psi MMscf/d MMscf/d

at at
Pmin Pmax Bscf Bscf - at Pmax at Pmax
Pmin Pmin

A 2,200 2,820 9.60 45.05 6 366 509 61 85

B 2,170 2,820 32.42 99.09 12 1,121 1,696 93 141

Total 42.02 144.14 18 1,49 2,205

Deliverability
Operating Pressure Deliverability
No. per Well
Sand WGV CGV
Wells
Bar Msm3/h Msm3/h

at at
Pmin Pmax Mio. sm3 Mio. sm3 - at Pmax at Pmax
Pmin Pmin

A 151.8 194.6 268 1,261 6 427 594 71 99

B 149.7 194.6 907 2,774 12 1,308 1,979 109 169

Total 1,176 4,035 18 1,74 2,573

98
 Table 26: Khorewah Gas Production

Production*
Well Sand
BCF Mio. sm3

1 B 43.37 1,214

2 B 31.35 878

3 A 17.45 489

4 A 30.07 2,581

* at 1,200 psi or 83 bar reservoir pressure

Table 27: Khorewah Stratigraphy and Reservoir Properties in Field and Metric Units

Sand / Well Bottom Top Gross Net PHI Sw

A ft ss ft ss ft ft % %

Well 1 5,859 6,09 231 42.0 N/A N/A

Well 2 5,992 6,194 202 43.0 N/A N/A

Well 3 6,201 6,389 188 15.5 N/A N/A

Well 4 5,861 6,064 203 48.0 N/A N/A

B ft ss ft ss ft ft % %

Well 1 6,131 6,247 116 47.0 N/A N/A

Well 2 6,35 6,487 137 57.5 N/A N/A

Well 3 6,431 6,526 95 0.0 N/A N/A

Well 4 6,116 6,225 109 55.5 N/A N/A

Sand / Well Bottom Top Gross Net PHI Sw

A m ss m ss m m % %

Well 1 1,787.0 1,857.5 70.5 12.8 9.2 13.7

Well 2 1,827.6 1,889.2 61.6 13.1 8.1 22.4

Well 3 1,891.3 1,948.6 57.3 4.7 7.9 23.0

Well 4 1,787.6 1,849.5 61.9 14.6 7.7 15.7

B m ss m ss m m % %

Well 1 1,870.0 1,905.3 35.4 14.3 10.1 22.2

Well 2 1,936.8 1,978.5 41.8 17.5 11.7 30.5

Well 3 1,961.5 1,990.4 29.0 0.0 N/A 100.0

Well 4 1,865.4 1,898.6 33.2 16.9 10.4 14.9

99
 Table 28: Khorewah Field Well Test Results in Field and Metric Units

Well (Sand) WHFP in psi BHFP in psi WHP in psi BHP in psi Q in MMscf/d

#1 (B) 1,800 2,480 15.5

1,585 2,825 22.7

#2 (B) 2,080 2,922 11.3

#3 (A) 1,630 13.9

3
Well (Sand) WHFP in bar BHFP in bar WHP in bar BHP in bar Q in sm /h

#1 (B) 124.2 171.1 18,083.3

109.4 194.9 171.1 26,436.7

#2 (B) 143.5 201.6 201.6 13,160.0

#3 (A) 112.5 201.6 16,216.7

PRODUCTION – BUKHARI FIELD

The Bukhari field had a cumulative gas production of approx. 86 Bscf (approx. 2,400 Mio. sm3)
down to a reservoir pressure of approx. 300 psi (approx. 21 bar).
The total required storage WGV was anticipated in the report from 2007 to be 18 Bscf with a CGV
of 74 Bscf.

The total required withdrawal rates were given as 670 MMscf/d at minimum pressure and 960
MMscf/d at maximum storage pressure. With the number of planned wells this would results in
approx. 44 MMscf/d for the A-sand and approx. 50 MMscf/d for the B-sand per well at minimum
pressure, and 73 in MMscf/d and 66 MMscf/d at maximum pressure, respectively.

The corresponding field specific data are summarized in Table 29 to Table 31 below. In addition,
the data are given in metric units for means of comparison for usual gas storage figures in
Europe.

Performed well tests (see Table 32) resulted production rates of 11 – 17 MMscf/d for both sands.
The peak production rates of the wells were 25 MMscf/d. Again, this underlines the importance to
have reliable test data and other required data to be able to verify the permeabilities and other
stated properties of the sands.

Also, for Bukhari it should be considered to build a numerical reservoir simulation model to study
and investigate a possible increase of the maximum permitted operational storage pressure or to
use an improved well design.

100
 Table 29: Bukhari Field – Anticipated Storage Parameters in Field and Metric Units

Deliverability per
Operating Pressure Deliverability
Sand WGV CGV No. Wells Well

Psi MMscf/d MMscf/d

Pmin Pmax Bscf Bscf - at Pmin at Pmax at Pmin at Pmax

A 1,975 2,8 6.50 19.50 5 220 365 44 73

B 2,26 2,8 11.45 55.05 9 450 595 50 66

Total 17.95 74.55 14 670 960

Deliverability per
Operating Pressure Deliverability
Sand WGV CGV No. Wells Well
3
Bar Msm /h Msm3/h

Pmin Pmax Mio. sm3 Mio. sm3 - at Pmin at Pmax at Pmin at Pmax

A 136.3 193.2 182 546 5 257 426 51 85

B 155.9 193.2 320 1,541 9 525 694 58 77

Total 502 2,087 14 782 1,120

Table 30: Bukhari Gas-In-Place and Recovery in Field and Metric Units

Volumetrics Gas Reserves at

Material Balance
Sand Central Block North Block
1,200 psi 500 psi
BCF BCF BCF

A 29.48 27.68 2.86 17.5 24.8

B 62.69 54.09 1.87 37.2 52.7

C 6.24

Total 92.17 88.01 4.73 54.75 77.5

Volumetrics Gas Reserves at

Material Balance
Sand Central Block North Block
82.8 bar 34.5 bar
3 3
Mio. sm Mio. sm Mio. sm3

A 825 775 80 490 694

B 1,755 1,515 52 1,043 1,476

C 175

Total 2,581 2,464 132 1,533 2,171

Table 31: Bukhari Stratigraphy and Reservoir Properties

Sand / Well Top Top Net Net PHI Sw

A ft ss m ss ft m % %

Well 1 5,673 1,730.3 30 9.2 13.8 21.5

Well 2 5,723 1,745.5 50 15.3 11.8 19.8

Well 3 5,799 1,768.7 25 7.6 12.0 24.1

Well 4 5,920 1,805.6 20 6.1 11.2 18.6

B ft ss m ss ft m % %

Well 1 5,852 1,784.9 82 25.0 13.7 20.0

Well 2 5,920 1,805.6 100 30.5 12.8 22.8

Well 3 6,011 1,833.4 71 21.7 11.5 25.2

Well 4 6,065 1,849.8 38 11.6 11.1 34.9

101
 Table 32: Bukhari Field Well Test Results in Field and Metric Units

Well (Sand) WHFP in psi BHFP in psi WHP in psi BHP in psi Q in MMscf/d

#1 (B) 1,280 2,480 11.27

#2 (B) 1,082 2,480 16.95

#3 (A) 1,480 2,480 13.9

Well (Sand) WHFP in bar BHFP in bar WHP in bar BHP in bar Q in sm3/h

#1 (B) 88.3 171.1 13,148.3

#2 (B) 74.7 171.1 19,775.0

#3 (A) 102.1 171.1 16,216.7

102
7. RESERVOIR ENGINEERING

The fields assessed as candidates (Khorewah, Bukhari and Turk) for gas storage are similar with
respect to size, depth and pressure. For all three above mentioned fields the reservoir is in the
Lower Goru Sandstone. So, the investigation described below for the Khorewah field can be also
taken as representative for Bukhari and Turk

STRUCTURE OF KHOREWAH

The reservoir is in the sandstone of the Lower Goru formation. It consists of three sand layers (A,
B, and C) and the top depth is approx. between 5,500 ft and 6,000 ft (around 1,800 m). The
initial reservoir pressure was given to 2,916 psi in a depth of 5,891 ft (201.2 bar at 1,796 m).
These are favorable data for gas storage with respect to a possible pressure regime for a
potential storage.

The closure for Khorewah was given with a depth of 800 ft (244 m). The two upper sands are gas
saturated, whereas the C-sand is almost 100 % water saturated.

A structure map of the Khorewah reservoir is shown in Figure 18 and a composite log of well
Khorewah 1 in Figure 19

103
 Figure 18: Khorewah structure map. Top Goru A-Sand

104
 Figure 19: Composite log of well Khorewah 1. The porosity of the A and B sand is approx. 10 %

PRODUCTION AND INITIAL GAS IN PLACE OF KHOREWAH

In the below figure, the daily production rates for Khorewah wells 1 – 4 are shown until 2005.
The peak rates were up to 18,000 Mscf/d or 453,000 sm3/d or 18,875 sm3/h. Such rates may
also be expected as minimum withdrawal rates for a storage well.

105
 Figure 20: Khorewah daily well production rates

In Figure 21 a p/z plot of the Khorewah gas field is shown. This gives an initial pressure of
3,004 psi (207 bar) and an initial gas in place of 198 Bscf (5,607 Mio. sm3).

Figure 21: Khorewah p/z plot

PERMEABILITY

Laboratory data of porosity and permeability measurements were obtained from the Khorewah
field for the A and B sand. In Figure 22 a cross plot of permeability vs. porosity is shown. The

106
 Lower Goru sands obtain parts of high porosity and permeability according to the measurements.
But also, parts of low permeability and porosity are found.

Figure 22: Cross plot of permeability vs. porosity for Khorewah A and B sands

The average porosity for the A-sand is 10.8 % and 12.6 % for the B-sand according to the
composite log shown in Figure 2. This would lead to an average permeability app. 20 – 50 mD.
The net pay for A- and B-sand is 180 ft (55 m)

WELL TESTS

In Table 33 the results of some well test is listed. These tests are not analyzable using C&n plots.
However, the numbers indicate that a flow rate for a storage well of 30,000 – 40,000 sm3/h
seems possible, if the well flowing pressure is low enough. The permeability that may be
estimated from the values is in the range of 10 mD to 50 mD.

Table 33: Khorewah Field Well Test Results in Field and Metric Units

Well (Sand) WHFP in psi BHFP in psi WHP in psi BHP in psi Q in MMscf/d

#1 (B) 1,800 2,480 15.5

1,585 2,825 22.7

#2 (B) 2,080 2,922 11.3

#3 (A) 1,630 13.9

Well (Sand) WHFP in bar BHFP in bar WHP in bar BHP in bar Q in sm3/h

#1 (B) 124.2 171.1 18,083.3

109.4 194.9 171.1 26,436.7

#2 (B) 143.5 201.6 201.6 13,160.0

#3 (A) 112.5 201.6 16,216.7

107
 Table 34: Khorewah reservoir parameter (ref. well #1)

Formation Lower Goru-Sandstone

Depth (Top A-sand) 5,900 ft 1,798 m

Temperature 212 °F 100 °C

Initial pressure 2,916 psi @ 59,891 ft 201.2 Bar @1,796 m

Initial Gas in Place 198 Bscf 5.6 Mrd. Sm3

Gross thickness A-sand 231 ft 70 m

B-sand 216 ft 65

Net thickness A-sand 95 ft 29

B-sand 85 ft 26

Avg. Porosity A-sand 10.8 %

B-sand 12.6 %

Avg. Permeability A-sand 31.2 mD

B-sand 55.3 mD

STORAGE WELL INFLOW AND OUTFLOW PERFORMANCE

In Figure 23 (see below) the inflow and Outflow performance for a storage well is shown. The
chart was calculated using the parameters shown in Table 35

Table 35: Parameter for Calculation of Inflow and Outflow Performance Relationship (IPR)

Parameter Value Value

Permeability 30 mD

C 235 (for sm3/h)

n 0.795

Depth 1,800 m 5,905 ft

Tubing Length 1,800 m 5,905 ft

Tubing Diameter 4.5 inches

108
 180
Bottom Hole Flowing Pressure in bar

155
pws= 80 bar
pws= 110 bar
pws= 140 bar
pws= 170 bar
130 pws= 200 bar
ptf= 30 bar
ptf= 72.5 bar
ptf= 115 bar
ptf= 157.5 bar
105
ptf= 200 bar
v(critical) = 20 m/s

80
0 15000 30000 45000 60000

Figure 23: Inflow and Outflow performance relationship for a Khorewah storage well

The IPR curves shown in Figure 23 result in – for example for a reservoir pressure of 140 bar and
a well head flowing pressure of 115 bar – a gas flow rate of 40,000 sm3/h. This means that for
the anticipated total withdrawal rates of 924,000 sm3/h at least 23 wells would be required.
However, this number may even be higher, when the reservoir pressure is dropping during the
withdrawal period and if hysteresis effects are considered. This effect is shown in more detail in
the material balance calculations, performed and described in subsequent chapters of this
analysis.

As the storage pressure is high and the well rates are moderate, a tubing size of 4.5 inch is
considered sufficient. To be on the safe side, maximum 5-inch tubing may be used. Larger
tubing’s will reduce the flow velocity and may also cause difficulties to produce free liquids
(water).

GAS PVT PROPERTIES

In and Table 36 and Table 37 the gas and condensate compositions of Khorewah are given.
For any reservoir simulation using either a material balance or numerical simulation model, it will
be important to calculate the produced condensate during withdrawal. This will be important for
the reservoir and well performance as well as for the planning of the surface facilities.

The estimated composition of the extracted gas (storage gas plus condensate) is given in
Table 38.

Table 36: Khorewah Gas Composition in mole %

Field C1 C2 C3 N2 CO2

Khorewah 82.5 5.88 2.17 4.8 1.9

109
 Table 37: Condensate Composition of Khorewah Field

Component Conc. Mole %

N2 0.35

CO2 0.64

C1 14.58

C2 4.1

C3 4.25

iC4 1.44

nC4 3.48

iC5 2.57

nC5 3.01

C6 6.93

C7 12.57

C8 12.56

C9 9.2

C10 6.31

C10-C12 3.68

C12+ 11.35

Table 38: Composition of extracted gas

Component Conc. Mole %

C1 89.185

C2 2.556

C3 0.512

i-C4 0.09

n-C4 0.11

i-C5 0.122

n-C5 0.11

C6 0.12

C7 0.065

C8 0.063

C9 0.043

C10 0.027

C11 0.007

C12 0.006

C13 0.009

H2O 0.08

N2 5.601

CO2 1.294

110
8. MATERIAL BALANCE SIMULATION
A material balance simulation describes the gas field as a kind of tank. For gas storage in porous
media this is also a valid approach because the gas in a porous reservoir is almost as mobile as
in a tank, other than e.g., oil.

The Khorewah gas field is not divided into compartments, so it is reasonable to describe it as one
tank (see Figure 18). The production is coming from 2 layers (A- and B-sand). In the production
data received, there was no distinction made between the production from these different layers.
Due to this and because the 2 layers are rather similar (see composite log in Figure 19), it is
reasonable to simulate the hole field as 1 tank.

For the simulation a software was used that can simulate the thermodynamical behavior of the
gas especially regarding condensate and free water drop out. The simulation also considers
hysteresis effects.

The gas production from the tank is reflected by the sum of single well productions. The inflow
performance into the wells is calculated with respect to the reservoir permeability. The pressure
loss in the wells is calculated as well. The main part of pressure loss is due to gravity.

PREPARATION OF INPUT DATA

The input data for the simulation were obtained from the start of production in 1993 until end of
2020. The format of the data is shown in Table 39. The data were digitized and converted to a
format suitable as input for the simulation program. The simulation was done in metric units,
pressure is in bar and flow rates in sm3/h.

Historical pressures were taken from the p/z plot data as shown in Figure 21. The pressures were
assigned to the correct point in time by the cumulative production. This procedure would result in
some imprecision which were regarded as acceptable, as no exact data were available.

Table 39: Khorewah field production data

Cum Gas
Gas Rate OIl Rate Water Rate (CD) Cum Oil Cum Water
Date Prod
(CD) Mcf/d (CD) Mcf/d Mcf/d Prod Mbbl Prod Mbbl
MMcf

01-01-1993 3.679 38.55 0.97 114.06 1.2 0.03

01-02-1993 1.177 14.04 2.79 147.01 1.59 0.11

01-03-1993 1.323 19.55 0.19 188.04 2.19 0.11

01-12-1993 3.462 58.65 3.48 295.35 4.01 0.22

01-01-1994 28.601 508.87 38.65 1181.97 19.79 1.42

01-02-1994 31.127 548.29 45.29 2053.53 35.14 2.69

111
 HISTORY MATCHING

A match of the historical data was performed with respect to pressure development, water
production and condensate production. The results of the history matching are shown in the
Figures below.
The simulation was performed with an initial gas in place of 5.579E+09 sm3, an initial pressure of
218 bar and a reservoir permeability of 30 mD. The reservoir temperature was 100 °C and the
reservoir net thickness 55 m. The field gas production rate shown in the figures below.

Field Gas production with four (4) wells and a permeability of 30 mD. This confirms that the
overall permeability is at least 30 mD and more.

Figure 24: Khorewah field gas production rate in MMscf/d and sm3/h vs. time

In the below figures the development of the gas in place is shown. The markers are values taken
from the Sofregaz report. The corresponding pressure development is given in Figure 9.

112
 Figure 25: History match of gas in place development in Bscf (Markers are measured values)

Figure 26: History match of gas in place development in sm3 (Markers are measured values)

113
 Figure 27: History match of pressure development in psi (Markers: measured values)

Figure 28: History match of pressure development in bar (Markers: measured values)

In the next two figures the measured and simulated water production rate is shown. The
simulation calculated only the water dissolved in the gas. As the gas is very hot (100 °C) a high
amount of water can be dissolved in the gas. This amount of water will also be produced during
gas storage operation. In 2002 the production of mobile reservoir water began. The reservoir
pressure at that time was at about 100 bar. It is most likely that during the first storage cycles
mobile reservoir water production will start in addition to the dissolved water depending on the
location of the individual wells in the reservoir. The flow of free water in the reservoir can only be
calculated using a detailed geological reservoir model and a numerical simulation.

114
 Figure 29: Water production rate in bbl/d

Figure 30: Water production rate in L/h

Simulated and measured condensate production is shown in the next two figures. At the
beginning of the simulation the simulated condensate production is somewhat higher than the
measured rate. In general, the condensate production is simulated reasonable. This is quite
important for the lay out of the gas storage surface facilities. According to the good match in the
simulation, it can be concluded that the “oil” production reported in the production statistics is
rather condensate than oil. As there was no consistent oil phase found in the logs, this means
that during gas storage the production of condensate will be smaller than during the initial gas

115
 production as dry gas is injected into the almost depleted gas field. The same will also apply to
CO2 and N2 which were components in the original gas composition.

Figure 31: Measured and simulated condensate production in bbb/d

Figure 32: Measured and simulated condensate production in m3/d

PREDICTIONS

Based on predefined withdrawal and injection rates a prediction scenario regarding storage
operation was calculated using the material balance model described above.
The storage parameters are defined as:

Minimum Working Gas Capacity: 44 Bscf (1,232 Mio. sm3)

Peak Withdrawal Capacity: 792 MMscf/d (924,000 sm3/h)
Minimum Injection Capacity: 396 MMscf/d (462,000 sm3/h)
116
 One storage cycle is simulated. It is assumed that the storage was already filled at a pressure of
100 bar. Then Injection started with a rate of 396 MMscf/d (463,000 sm3/h) until the pressure of
207 bar was reached. Subsequent the storage was produced at the maximum withdrawal rate of
792 MMscf/d (924,000 sm3/h). The storage was produced until the possible production rate was
almost zero. The well head flowing pressures were set to 55 bar. The corresponding storage
performance curve is given in Figure 34. The inventory is 5,334 Mio. sm3 or 188 Bscf.

Figure 33: Storage Performance Curve – Withdrawal Rate vs. Gas in Place

Figure 34: Storage Performance Curve – Withdrawal Rate vs. Gas in Place

117
 Table 40: Key figures of Khorewah Gas storage

Description Value Metric Value Imperial

Inventory 5,334 Mio. sm3 188 Bscf

Plateau Rate 924,000 sm3/h 792 MMscf/d

Total Working Gas (WGV) 2,945 Mio. sm3 104 Bscf

Plateau Rate WGV 2,228 Mio. sm3 78 Bscf

Cushion Gas (CGV) 2,398 Mio. sm3 84 Bscf

WGV/(WGV+CGV) 55 % 55 %

Injection Rate 462,000 sm3/h 396 MMscf/d

Max. Reservoir Pressure 196 bar 2,840 psi

Max Well Head Pressure 190 bar 2,755 psi

Min. WH Flowing Pressure 70 bar 1 015 psi

In the resulting figures (see below) the water production is shown. This water production only
comprises the dissolved water. For the planning of the final layout also the production of mobile
reservoir water should be considered.

Figure 35: Water Production – Dissolved Water Concentration

In the subsequent figures the hysteresis curve for the described storage cycle is shown. The
pressure difference is about 20 bar between injection and withdrawal.

118
 Figure 36: Pressure Hysteresis during a storage cycle in psi

Figure 37: Pressure Hysteresis during a storage cycle in bar

CONDENSATE, CO2 AND NITROGEN

In Table 41 the composition of the Khorewah gas is given. The gas contains a high amount of
Nitrogen and CO2. As the field is depleted and the actual reservoir pressure is only about 20 bar
it can be concluded that the content of CO2 and Nitrogen in the extracted gas during the
withdrawal of the storage will only 10 % and below the original concentration. This concentration
will further decrease in the subsequent storage cycles.

119
 Table 41: Khorewah Gas Composition in mole %

Field C1 C2 C3 N2 CO2

Khorewah 82.5 5.88 2.17 4.8 1.9

This assumption will also apply to the condensate production. As can be seen in Figure 22 the
condensate fraction during production was almost constant at 50 g/sm3. Since this concentration
was constant and that no continuous oil phase was found in the Khorewah field it can be
concluded that also the condensate concentration will be 10 % of the original value and will
decrease during further storage cycles.

Figure 38: Condensate fraction in produced gas – simulated and measured

STORAGE CYCLES

As an example, for a storage operations 6 storage cycles were simulated. The simulation started
with a 1st gas fill from an initial reservoir pressure of 20 bar (290 psi). The withdrawal periods
started Nov. 1st and ended March 1st. Then with a short delay of about 10 day the re-injection
period stated until the maximum pressure was reached Nov 1st and the new withdrawal period
began. In Figure 16 the withdrawal rates of these cycles are shown. It is possible to maintain the
maximum required rate almost over the whole withdrawal period.
The working gas volume is app. 85 Bscf (2,400 Mio. sm3). These storage cycles were run with the
rates as given in Table 19.
Below the development of the gas in place and pressure are shown.

120
 Figure 39: Withdrawal rates several storage cycles in MMscf/d

Figure 40: Withdrawal rates several storage cycles in sm3/h

121
 Figure 41: Inventory during storage cycles in Bscf

Figure 42: Inventory during storage cycles in sm3

122
 Figure 43: Pressure development during storage cycles in psi

Figure 44: Pressure development during storage cycles in bar

123
9. WELL DESIGN OF STORAGE WELLS
Based on the current degree of detail of the project, the new potential storage wells are planned
as vertical wells in the first instance. However, although the wells are planned to be vertical,
minimal deviations of the planned well trajectory in the top-hole section might occur due to the
nature of drilling operations. Nevertheless, the inclination should always remain as low as
possible.
The final depth of the well is planned to be at approx. 1,900 m true vertical depth (TVD) in the
Lower Goru-Sandstone. It is considered that the formation must be accessed with a 7" cemented
liner (pre-condition derived by reservoir engineering investigations).

Before starting the drilling operation, a conductor casing with an outer diameter (OD) of 18 ⅝"
needs to be rammed or pre-drilled, run in to a depth of approx. 30 m and be cemented. The
conductor casing serves to secure mud circulation until installation of a 13 ⅜" intermediate
casing, minimizes the risk of washing out the foundation of the drilling rig and seals off shallow
freshwater horizons. The installation of the conductor casing will be part of the drilling site (well
pad) construction.

A generic casing design of the wells, which will be site-specific and thus, subject to change in a
later detailed engineering, is given in the table below. Beside the setting depth, all loads to the
casings must be calculated in a Stress Check analysis during detailed engineering and the grades
and weights of the casing have to be re-designed.
Beside the conductor casing, an intermediate casing is intended. The general function of the
intermediate casing is:

• load bearing of casings as well as of the wellhead and the BOP before drilling into a
pressurized formation,
• sealing of any water horizons and mud loss zones and
• protection against negative rock conditions (loss of mud, fallout, swelling or squeezing
rock, boiling, inflow of formation water)

Due to the final liner diameter of 7" as per requirement from reservoir engineering perspective
and the final casing diameter of 9 ⅝", the intermediate casing is planned as 13 ⅜" casing. The
preliminary planning depth of the 13 ⅜" casing is 1,100 m (TVD). Due to missing detailed
geological information and data in this stage of the project, the setting depth of the casing must
be reviewed in a later detailed engineering phase based on the above-mentioned function.

The depth of the gas tight 9 ⅝" production casing is intended to be at 1,790 m TVD but will also
be subject to change as it shall be set in the upper Goru formation a few meters above the lower
Goru formation. After reaching the final depth, the well will be prepared with a 7" cemented liner.
The liner hanger will be set in the 9 ⅝" casing.

124
 Table 42: General Casing Design

Setting
OD Connection Depth
Casing Weight Top of Cement Remarks
["] type [m
TVD]

Based on the near

Conductor 18 ⅝ - 30 -
surface geology

BTC or To be reviewed in
Intermediate 13 ⅜ 61 lb/ft, 1,100 Surface
equal detailed engineering

Surface,
Setting depth a few
43.5 minimum 100
Production 9⅝ Gas tight 1,790 meters above the
lb/ft, m in the 13 ⅜"
Lower Goru
casing

Set in the lower Goru

Liner 7 23 lb/ft, Gas tight 1,900 Liner Hanger
formation

GENERAL GENERIC WORK PROGRAM

• 18 ⅝" conductor casing is already set at a depth of approx. 30 m (TVD)

• Mobilization and rigging up of drilling rig
• Preparation of drilling mud
• With 17 ½" bit drilling to setting depth of the 13 ⅜" casing depth plus approx. 5 m
• Execution of wireline logging
• Running in 13 ⅜" intermediate casing with float shoe and float collar to 5 m above the
total depth (TD) (approx. 1,100 m TVD (depth to be reviewed during detailed
engineering)), stinger cementation through drill pipe (DP) to surface
• Wait on Cement (WOC) according to recommendation by cementing service, sampling
• Installation of wellhead (starter head, drilling spool, BOP)
• Testing BOP and well control equipment
• Drilling out shoe track of 13 ⅜" casing
• Perform formation integrity test (FIT) or a leak of test (LOT)
• Drilling with 12 ¼" bit into the upper Goru formation (a few meters above the top of the
lower Goru formation)
• Execution of wireline logging
• Running in 9 ⅝" production casing to about 5 m above TD (approx. 1,790 m TVD),
performance of stinger cementation through drill pipe (DP) to surface
• WOC according to recommendation by cementing company, sampling
• Change mud to Drill-In fluid
• With 8 ½" bit drilling out the shoe track of 13 ⅜" casing shoe
• Perform formation integrity test (FIT) or a leak of test (LOT)
• Drilling with 8 ½" bit to final depth at approx. 1,900 m TVD
• Running in 7" liner with 9 ⅝" x 7" Liner hanger to about 5 m above TD (approx. 1,895 m
TVD)
• Perform cementation to top of liner
• Final set of liner hanger system (depending on liner hanger system)
• WOC according to recommendation by cementing company, sampling
• Execution of cased hole logging to confirm the integrity of the well

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 • Either rigging down or proceeding with the completion of the well with same rig

RELEVANT EQUIPMENT AND RSERVICES FOR DRILLING

9.2.1 Drilling pad

The presented information is based on the assumption of the suitability of a standard drilling pad
layout. Depending on rig static and load plan of the drilling rig which will later actually be used,
the final layout of the drilling pad and foundation must be engineered. For calculation of
earthworks, foundations and volumes, a detailed topographic survey and soil investigation must
be provided by the owner.
In general, a drilling pad consists of:
• a drilling cellar including a pre-set conductor casing,
• a rig foundation (approx. 25 x 15 m depending on rig type),
• further foundation (e.g., for cement silos),
• water hazard area,
• a further area and
• access road.

When designing the drill site, it must be ensured that, in addition to access, every point on the
drilling site is accessible by creating escape and rescue routes.
During drilling, various types of fluids are produced on the drill site in addition to drilling material
and mud residues. For reasons of environmental protection, especially water protection, drilling
sites shall be designed in a way that no liquids hazardous to water can intrude into the soil.
Furthermore, liquids are separated and disposed of each other as far as possible.

About water hazards, a drilling site consists of two different areas, which are used for the
installation of machines, the accommodation of storage containers and the handling of traffic.
The water hazard area comprises the areas in which precautions must be taken to prevent water-
hazardous liquids (irrespective of the water hazard classes) from penetrating into the soil. This
area includes, among other things, the drilling rig foundation with drilling cellar, the machine
parking area and the diesel oil storage area and can also include mud tanks, "solids control"
equipment and drilling material pits or containers, if substances hazardous to water are handled
there. If necessary, additional storage areas can be created for substances and materials for
which a groundwater hazard is to be feared. For example, flushing chemicals hazardous to water
must be stored in a water hazard area. The area is separated from the other areas by a
sufficiently high surrounding upstand. The precipitation water and other liquids are collected.
Infrastructural systems (e.g., drainage systems, on-demand suction) must be capable of
preventing an overflow.

The further areas include the areas of the drilling site where a water hazard is not to be
expected. These areas include, among others, traffic areas, storage areas for office, sanitary,
workshop and other containers, storage areas for mud additives that are not hazardous to water
and the pipe storage area. The minimum requirement for other areas is a sufficiently paved

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 surface, e.g., gravel, road mats or similar. The areas used by vehicles are to be designed for the
expected load. The precipitation water can seep into this area.

9.2.2 Drilling rig

The wells must be drilled with a rotary drilling rig of about 150 t maximum allowable hook load
capacity. While a hook load capacity of approx. 125 t would suffice to handle the drill string and
casings of the required length, a certain hook load reserve increases the safety of the well in case
of drilling problems, such as stuck pipes, circulation losses, etc. A top drive drilling rig should be
preferred as it would allow for faster drilling and include more technical options in case of drilling
problems. The final rig layout needs to be designed based on results of a detailed engineering
phase.

9.2.3 Casing and casing equipment

To ensure long term integrity and stability of the well, casings of varying diameters need to be
installed into the well. The general casings, their initially planned depths, diameters and weights
can be found in Table 42: General Casing Design-
The casings have a maximum collapse resistance based on their weight and grade. The collapse
resistance represents the maximum permitted differential pressure on the casing that is not to be
exceeded.

The current design of both casings is based on the initial pressure of approx. 202 bar in the lower
Goru formation It shall be noted that, due to missing details of geological data, the setting
depths of the 13 ⅜" and the 9 ⅝" casings, as well as their weights are to be reviewed in a later
detailed engineering process. Subsequently, corresponding suitable grades can also be derived.
All casings are planned to be installed up to surface and set in the casing hangers of the
wellhead, except of the 7" liner, which is set in place with a liner hanger system in the first
segment of the 9 ⅝" casing.

According to the purpose of the casings, suitable connections must be used. Due to their contact
to the stored fluid and their property as barrier elements both, the 9 ⅝" production casing and
the 7" liner, should be equipped with gas tight connections to prevent the migration of storage
gas into the 9 ⅝" x 13 ⅜" or 7" x 13 ⅜" annular. For the 13 ⅜" intermediate casing it would be
sufficient to be equipped with BTC connections.

It must be noted that, depending on the connections used and the equipment of the drilling rig, a
make-up service could become necessary. Gas tight connection types require a computer-
controlled make-up to ensure proper sealing and tightness.

The casings need to be cemented to provide a permanent barrier against inflow from the porous
media into the annulus. For the 13 ⅜" intermediate casing and the 9 ⅝" casing, a stinger
cementation can be recommended. Thus, both casing strings need to be equipped with a float
shoe at the base and a float collar at the top of the first casing segment. After running in the
casing into the well, a DP with stinger is run into the hole until it stabs into the float collar. The

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 cement is pumped through the DP into the 13 ⅜" x 18 ⅝" resp. the 9 ⅝" x 13 ⅜" annular until
surface. The float shoe protects the casing string from reverse flow, the float collar ensures the
cementation of the annulus with minimal cement residue within the casing.
To ensure a complete cement sheath around the casings, the casings should be placed in the well
as central as possible. Therefore, the use of centralizers is strongly recommended.
For cementing the 7" liner a liner cementation should be performed. Accordingly, the material
required to be installed into the liner for that process differs from that for a stinger cementation,
e. g. liner landing collar instead of a float collar and a wiper plug instead of a float shoe.

9.2.4 Drilling bits

For each drilling section a different bit type and diameter is necessary. The type (IADC bit type)
and the required quantity of each bit type must be specified in a later detailed engineering. Due
to the lack of details in geological data, no further specification can be provided at this time.

Table 43: Drilling Bit Dimensions

Casing Diameter Bit Diameter Depth

Pre-drilled or
18 ⅝" Conductor 30 m
hammered

13 ⅜" intermediate casing 17 ½" 0 – approx. 1,100 m TVD

9 ⅝" production casing 12 ¼" approx. 1,100 m TVD to 1,795 m TVD

7" Liner 8 ½" approx. 1,795 m TVD to 1,900 m TVD

9.2.5 Mud system

The drilling mud used should be designed in a way that the well remains overbalanced during the
drilling operations. Furthermore, it should be designed in a way that the following properties are
provided:
• prevent influx of fluids during drilling operations,
• formation of a mud cake to prevent loss of the mud into the formation and
• removal of the cuttings during circulation and keeping the cuttings in suspense while the
mud pump is inactive.

For the drilling of the 17 ½" section a freshwater based bentonite mud can be applied. The
density of the mud needs to be adjusted so that the resulting pressure is above the pore
pressure of the formation drilled but below the frac pressure of the formation.
After drilling out the shoe track of the 13 ⅜" casing, it can be necessary to replace the
freshwater based bentonite mud by a salt water-based mud due to the potential of drilling a
formation with a high saline content or saltwater bearing layers. The use of a bentonite mud is
not recommended where there is potential salt contact, as it loses its properties on exposure to
salt. As in the stage prior, the density of the mud should be adjusted in order that the resulting
pressure is situated in between the pore pressure and the frac pressure of the formation.
While drilling into the reservoir, a formation-preserving drilling mud called Drill-In fluid is strongly
recommended to avoid long-term formation damage. Standard drilling muds form a mud cake
which, in a formation of high porosity and permeability, migrates into the pores and seals the

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 flow paths, reducing the productivity. Drill-In fluids create reversible mud cakes which can be
dissolved by acidizing the well.
Due to potential mud loss zones, lost circulation material (LCM) should be stored at the site to
seal those zones if needed and to minimize mud loss.
Due to the lack of geological data, no further specification can be provided at this time. The
densities, volumes and compositions of the mud system need to be specified in a detailed
engineering process later.

9.2.6 Mud and cuttings disposal

Mud and cuttings disposal should be minimized by water reduction. This can be realized by using
various equipment installed in series, e. g. shakers, sedimentation tanks, centrifuges, cutting
dryer etc. The disposal of the cuttings is to be ensured in accordance with Pakistani guidelines
and laws.

In addition to drill cuttings from rock formations (which cannot be specified due to lack of
geologic data) cuttings from drill-out cement residues, the float collars and the float shoes are to
expect.

9.2.7 Mud logging

Drill cuttings circulated to surface by the drilling mud will be collected by the mud logger.
The mud logging service shall be on-site during times of active drilling and has to work
continuously. The mud logging service shall start with spud-in of the 17 ½" section and will be
completed after reaching final depth.
The mud logging personnel have to be geologically trained and familiar with all their tasks and
responsibilities including:
• collection and monitoring of relevant drilling parameters,
• depth-referenced collection of cutting samples according to the work program,
• sample preparation (cleaning, sieving, drying) and archival storage of samples for well
documentation,
• petrographic description of cutting samples (using the specified description criteria) and
preliminary stratigraphic interpretation,
• assistance in the core extraction (including cleaning, marking and storing of cores in
labelled boxes) and in the core documentation and photography,
• regular reporting on the daily progress to the supervisor and customer (including mud log
and drilling data log) and
• performance of daily backups of all data on an external hard drive.

9.2.8 Coring
Optional a coring programme can be performed, if further information of the reservoir formation
and overburden are required. The extracted cores will mainly support the stratigraphic correlation
and identification of the mineralogical composition, porosity estimation as well as the calibration
of the open hole wireline logs. If coring shall be performed, an 8 ½" x 4" core barrel of 9 m length
is recommended. If required, cores can be recovered oriented to enable a better 3D interpretation
of the geology.

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9.2.9 Open hole logging program
Wireline open hole logging provides valuable direct or indirect information on the petrophysical
rock properties along the well path. The combination of different logging tools has proven to
provide adequate data for further geological interpretation. Standard open hole logs are:
• Natural Gamma Ray Log,
• Density Log,
• Neutron Porosity Log,
• Caliper Log,
• Resistivity Log,
• Spectral Gamma Ray Log,
• Spontaneous Potential Log,
• Photoelectric Effect,
• Sonic Log and
• Acoustic Televiewer Log (Optional).

The necessity of the individual logs must be determined during the detailed engineering. As a
rule, less log types are necessary in the overburden. In the reservoir formation, it can be helpful
to obtain additional information about the prevailing rock properties by means of further logs.

9.2.10 Directional control, surveying

Obtaining a vertical well trajectory is the essential issue in view of entering the depleted reservoir
at the planned target. Although the well must be vertical, minimal deviations of the planned well
trajectory in the top-hole section might occur due to the nature of drilling operations. To ensure
the well to be within the acceptable verticality range the well path must be controlled regularly.
For this purpose, a stiff bottom hole assembly for drilling the well and the use of an inclination
measurement system (either a single or multi shot system) for the determination of the
verticality is recommended. Optional the usage of a Measuring While Drilling (MWD) system is
possible.

Due to the risk that the well trajectory deviates strongly from the planned well path, a directional
drilling system should either be kept available on site or it should be ensured that an appropriate
system can be procured ready for use within a short time. For the directional drilling operations,
the drill string can either be equipped with a mud motor system or a Rotary Steerable System
(RSS).

Another aspect that needs to be taken into consideration is the target tolerance. Depending on its
radius, it may be recommended to perform all drilling operations with a directional drilling
system.

9.2.11 Cement properties

Conductors an all casings should be designed to be cemented (where not driven) back to surface.
The weight (density) of the slurry and spacer should be designed so that the well remains
overbalanced throughout the cementing operation. The weight and planned height of the cement

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 top should be designed so that the formation is not fractured during cementing. The cement job
should be designed to:
• prevent influx whilst the cement is setting,
• provide compressive strength quickly and
• provide a long-term (permanent) barrier to flow in the annulus.

The most important factor is to completely fill the annulus around the casing with cement from
the shoe to a high enough level to provide the required barrier.
The following aspects should be considered:
• preventing overgauge hole sections forming during drilling,
• centralizing the casing to hold it off the hole walls to ensure a complete sheath of cement
around the pipe and
• mud displacement by prejob circulation, spacer and lead cement slurry.

It is also important to place uncontaminated cement around the shoe and to avoid any
contamination from mud during the cementing and displacement operations. There should be
accurate displacement calculations to prevent cement being pumped out of the shoe track in the
event of the plug not bumping.
The cement slurry design may include specific additives to improve integrity:
• gas migration control,
• fibrous material for larger hardness and/or
• silica for improved performance at high temperature.

In general, for liner cementing the liner should be rotated while placing the cement. Because the
7" liner will be perforated, this is not mandatory.
A detailed cementing design should be performed in a detailed engineering considering the issues
mentioned above. In principle, API cement is recommended.

9.2.12 Cased hole logging program

The following cased hole logs shall be run in the cased borehole verifying the quality of the
cement in the annulus between borehole wall and casing:
• Cement Bond Log (CBL),
• Variable Density Log (VDL) and
• Ultrasonic Imager Tool (optional).

Cased hole logging is recommended especially for the 9 ⅝" production casing, as this is an
important element for long-term well integrity.

9.2.13 Wellhead and Starter head

The starter head and wellhead shall be designed according to ‘API Std. 6A, Specification for
Wellhead and Christmas Tree Equipment, latest edition’.
Due to the initial pressure in the lower Goru formation approx. of 202 bar at 1,796 m TVD a
pressure rating of API 3,000 PSI minimum should be planned. Furthermore, all applicable and
generally accepted technical rules have to be met. The wellhead consists typically of following
components:

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 • Starter head,
• casing hanger spool for the 9 ⅝" casing,
• production tubing hanger for the 4 ½" production tubing,
• Master valve and
• Top valve.

9.2.14 Fishing service

In case of lost material in the well, e. g. tools or parts of the drill bits, a variety of fishing tools
should be kept available on the site or it should be ensured that an adequate fishing service can
be at the well within a few days to perform the fishing operations.

9.2.15 Technical supervision

During the drilling of the wells, experienced drilling engineers shall supervise the operation. The
tasks of the drilling supervisor include:
• managing drilling activities and services,
• daily drilling reports,
• interface management,
• procurement supervision of purchased masses and quantities and
• communication between parties involved.

9.2.16 Additional requirements

In order to guarantee an uninterrupted and continuous work process, some basic materials are
required in addition to the services and materials mentioned above. These requirements include
fresh water, drinking water, diesel and an electric power supply. These materials ensure the
operation of the rig, are necessary for several services described above to carry out their work
(e. g. the mud and the cementing service) as well as necessary for the installations required for
the personnel.

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10. WELL COMPLETION DESIGN

As a general definition, well completion is the process of making a well ready for commercial
operation. In case of storage wells, the operation includes the injection and production of gas (in most
cases methane). To do so, the installation of different downhole components need to be performed to
allow a safe and state-of-the-art storage operation.

EQUIPMENT FOR THE UGS WELLS

Basically, the general equipment required for the UGS consists of the following parts (from top to
bottom):
• Wellhead and hanger system,
• Tubing/production string,
• Surface controlled subsurface safety valve,
• Packer (incl. tailpipe),
• Tubing-conveyed perforating.

These components will be introduced in the following subchapters.

10.1.1 Wellhead and hanger system

The wellhead (see Figure below) is the intersection of the downhole equipment and the surface
equipment. The wellhead consists of different flanges, valves and a tubing hanger. This tubing hanger
is connected to the top of the tubing string and will be set in the lower part of the wellhead, allowing
to anchor and seal the tubing inside the wellhead. For the planned gas storage, a 3,000 psi wellhead is
considered sufficient.

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 Figure 45: Example of a wellhead

10.1.2 Tubing or production string

The tubing is used to allow the production and injection of gas from the desired formation. The main
function of the tubing is the connection of the tubing hanger and the production packer and therefore
the transport of the fluid or gas. Furthermore, an annulus is created between the installed tubing and
the last cemented casing string. This annulus can be monitored to verify the integrity of the tubing
and installed equipment and hence of the well. Additionally, the annulus is filled with a special
completion fluid (consisting of oxygen scavenger, corrosion inhibitor etc.) protecting the casing string
and thus represents an important barrier. Since the tubing is used for gas operations, it is
recommended to use gas-tight thread connections (also called premium connections).

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10.1.3 Surface controlled subsurface safety valve
The Surface controlled subsurface safety valve (SC-SSSV) is a device that will shut-in or contain
reservoir pressure during an emergency. There are two different types of surface controlled
subsurface safety valve systems used for gas storage applications. The first one is a tubing mounted
safety valve (also called tubing retrievable safety valve (TRSV, as integrated part of the production
tubing installation), see Figure below) and the second one is a wireline retrievable safety valve, which
will be set in a safety valve landing nipple (SVLN).

Figure 46: Example of a TRSV

That SVLN is integrated into the tubing comparable to the TRSV, but the valve itself is installed in a
separate slickline run. Both types of valves are connected and controlled via a hydraulic control line
which is attached to the outside of the tubing string. The setting depth of the valve is typically 50
meters. The valves are normally in a closed position and can be opened by applying pressure to the
control line. In case of an event (e.g. the well head will be damaged) the hydraulic pressure is bled off
and the valves closes automatically, making this device fail safe. Safety valves are general part of any
production well since the valve shuts-in in the well in case of an emergency and to hence avoid
undesired escape of storage medium.

10.1.4 Packer (incl. tailpipe)

A packer (see Figure below) is a device that forms a seal between two sections of a well. Applied for
underground gas storage, the packer seals off the lower section with the perforated 7-inch casing (and
the formation) and diverts fluids and hydrocarbons from the main wellbore into the production tubing.
Gas cannot enter the annulus between the last cemented casing and the tubing. The main component
of the packer is the elastomeric element, which will create the seal to the annulus by mechanical
compression. The packer is held in place with two counteracting slips that anchor the packer inside the
casing wall and prevent movement caused by pressure- or temperature changes.

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 Figure 47: Example of a Packer

The equipment located below the packer is called packer tailpipe. This tailpipe consists of pup joints or
flow coupling (pipes with a bigger wall thickness), landing nipples (pipes containing a profile and a
seal bore allowing to temporarily install down hole tools, e.g., plugs) and a wireline re-entry guide
(designed to facilitate re-entry into the tubing string of electric-line or slickline assemblies).

There are different methods to set the packer and activate the slips and seals. However, for the use in
an underground gas storage well, a hydraulic-set packer is preferable. This type of packer is run in
hole to the planned setting depths and after that a plug is installed into the landing nipple of the
tailpipe. By applying pressure to the tubing, the mechanism in the packer is activated at a pre-
determined pressure initiating a process in which the element will be compressed and expanded to the
casing wall and the slips will be forced onto a cone and engage the casing wall to anchor the packer in
place. After that, the plug can be retrieved from the tailpipe and the assembly is ready for operation.

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10.1.5 Tubing-conveyed perforating (TCP)
Currently, the idea is to install a liner at the depth of the formation, which means that the formation is
sealed and no gas can be injected or produced. To enable the access to the formation and allowing
communication between the well and the formation, a special perforation gun assembly will be
attached to the lower part of the packer tailpipe. This assembly consists of a primary and a secondary
(backup) firing head, a dropping mechanism and the perforation guns (see Figure below). After the
operation is finished, the guns are discharged creating an access to the formation. The device
automatically drops in the lower part of the well (sump).

Figure 48: Example of a gun charge

SPECIAL EQUIPMENT FOR PORE STORAGE APPLICATIONS

Sand Control may become an issue in the lifetime of the gas storage. This might be the case after the
formation got unstable and sand is produced leading to high wear and erosion in subsurface and
surface equipment. A possible solution is to install a gravel pack in the well. Therefore, the old
completion is removed from the well and a new completion, containing a gravel pack is run in hole.
Such gravel pack installation consists of screens (see Figure below) that are added to the packer
tailpipe of the packer. After the new assembly is at setting depth, gravel of pre-determined size is
pumped into the well, filling the space between the casing and the screen. Sand produced from the
formation is trapped in the gravel and as a matter of fact no sand can enter the production string.

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 Figure 49: Example of Screens

If the formation is already known for sand production, screens can be installed in the initial completion
phase either in the form of stand-alone screen application as part of the liner or in the form of an
expandable sand-screen application.

However, a proper grain-size distribution analysis will be required to select the most effective sand-
control method

OTHER WELLS

In the following subsections other required wells, the observation wells and water disposal wells, are
presented and briefly described.

10.3.1 Observation Wells

For the operation of an underground gas storage, observation wells are required in order to ensure
that no stored gas will be lost (for example by gas migration across a spill point). Such observation
wells can be old wells, which were removed from service or new but smaller designed wells. The wells
are normally drilled to monitor the pressures in e.g., the cap rock, upper aquifers or at the edges of
the reservoir or to take sample from the aquifer or cap rock. Since no production is required from the
well, the casing design and therefore the completion design is different and basic.
Casing design:

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 • 16” Conductor Casing
• 9 5/8” Surface Casing
• 7” Last Cemented Casing
• 5” Liner

Due to the smaller casing design, the drilling costs can be reduced compared to the storage wells.
For the well completion, the following parts are recommended (from top to bottom):
• Well Head 7” x 2 7/8”, pressure rating 3,000 psi, incl. pressure sensors,
• 2 7/8” Tubing with premium thread connections,
• Optional: subsurface controlled safety valve or check valve,
• One-Trip-Packer (with tubing connections on top and bottom),
• Tail Pipe with Landing Nipple

Whether a safety or control device (e.g. subsurface controlled safety valve) is required depends on the
requirements of the local mining authorities. Furthermore, the pressure is usually directly monitored
at the wellhead of the different wells. In case downhole monitoring is required for example by the local
authorities, a sensor can be set in the Landing Nipple via Slickline and retrieved after a certain period.

10.3.2 Water Disposal Wells

In order to inject the formation water that is produced to surface by the withdrawal of the storage
gas, some separate wells are required. At this time, the water disposal horizon is not known, therefore
it is assumed that the formation water will be injected in the aquifer of the reservoir. Consequently,
the target depths of these wells would also be approx. 2,000 m. Comparable to observation wells, a
simple casing design is sufficient.
Casing design:
• 16” Conductor Casing
• 9 5/8” Surface Casing
• 7” Last Cemented Casing
• 5” Liner

In order to enable the injection of approx. 250 m³/d a 3 ½” tubing is recommended. Therefore, the
proposed completion would consist of the following parts (from top to bottom):
• Well Head 7” x 3 ½”, pressure rating 3,000 psi,
• 3 ½” Tubing (optional carbon fiber tubing)
• Optional: subsurface controlled injection valve or check valve,
• One-Trip-Packer (with tubing connections on top and bottom),
• Tail Pipe with Landing Nipple

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 Depending on the chemical composition and the resulting corrosiveness of the injected fluid, a
standard low alloy steel might not be able to withstand the injection for a longer period. Therefore, a
carbon fiber tubing might be an alternative solution.

With regard to the depth of a water disposal well it has to be mentioned, that it is not mandatory to
inject the produced formation water back to the origin reservoir. In case a shallower aquifer with
formation water of a similar composition to that of the produced reservoir water exists, a permit can
usually be applied for injection of the produced formation water into the aquifer of the shallower
depth. As a matter of fact, this would be associated with lower drilling costs. On the other hand, a
corresponding exploration of such a shallower aquifer needs to be considered.

SUMMARY OF WELL OPERATION

The following summary about the basic requirements and assumptions for storage wells as well as for
relevant other wells (observation wells and water disposal wells), shown in below, represents the
outcome of the reservoir engineering investigations

In this context, the corresponding design parameters for drilling and completion are subjects of
change with regard to a change in the state of knowledge in later project phases. Consequently, the
presented preliminary layouts and designs need to be re-calculated and adjusted based on an
improved state of knowledge during a detailed design phase.

Table 44: Summary of Well Operation

Production
Target
Number of /
Type of Well Orientation Depth Basic Parameters
Wells Injection
(TVD)
Tubing

Max. Production Rate:

42,000 m3(Vn)/h
1,900
Storage Well 22 Vertical 4 1/2” Perforation Length:
m
3 to 5 Sections with Total Length
of approx. 35 m per Well

Observation 2,000
Approx. 3 Vertical 3 1/2” For Pressure Observations
Well m

Water Approx. 3 to 2,000 Max. Injection Rate:

Vertical 2 7/8”
Disposal Well 5 m Approx. 250 m3 / day

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11. SURFACE FACILITY DESIGN
The surface facilities are categorised into the two main operating modes: injection and withdrawal.
Some of the process units included in the facilities are usable in both operating modes while the rest
will be exclusive to either injection or withdrawal. The surface facilities can be seen in the PFDs given
in the appendix.

INJECTION
The gas to be injected into the storage will first be measured by custody flow metering equipment
positioned upstream the UGS plant. This equipment operates bi-directionally, since it is also used for
the withdrawal process. The actual volume flow will be converted into standard volume flow using a
gas chromatograph.

An ultrasonic flowmeter will also be installed at the entry UGS plant to measure the arrival and export
flow. Thereafter, solid particles and liquids, which may be present within the gas, will be removed on
the suction side of the compressor using a scrubber. To increase the gas pressure from pipeline
conditions to cavern conditions, a 2-stage compressor with gas turbine driver will be provided. The
maximum flow rate will be achieved by 3 parallel operated compressors. By means of after-coolers,
the process gas will be cooled down to approximately 50°C before it enters approximately 2-5 km long
flow line headers (to be determined once well drilling locations are known) which lead to the central
areas where the new wells will be constructed. There will be a central distribution manifold for each
area, from which subsidiary flowlines will be arranged in star-configuration to the respective well
heads (approximately 5 wells fed from each manifold. The gas flow will be distributed to the different
wells using flow control valves installed in the well supply lines / ‘Xmas-tree’. Following main
equipment is foreseen:

Metering : Ultrasonic flow meter

Compression : Stage scrubbers

Two stage compressors
Interstage air coolers
Discharge air coolers

Bypass line : Control valves

WITHDRAWAL
The injection flow control valves will also be used for the flow control during the gas withdrawal
process before the gas is fed into 3 withdrawal trains. Each train is designed for 33% of the

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 withdrawal capacity and consists of a separation and gas cooling and reducing system and the gas
conditioning. To avoid hydrate formation occurring as a result of the cooling, MEG will be injected. The
gas pressure reducing system will also be used for the control of the gas flow rate. After conditioning
the gas can be compressed if required or fed directly via the metering system into the pipeline.
Following main equipment is foreseen:

Depressurisation: Let-down valve

Separators

Dehydration : 3-phase separator

MEG injection
Gas/gas exchanger
Propane chiller
LT Gas Separators
Export gas compressor
Discharge air cooler

Condensate Stabilisation: Let-down valve

Air cooler
Condensate separators
Condensate cooler

Metering : Ultrasonic flow meter

BATTERY LIMITS
The battery limits of the surface facilities are the inlet/outlet unit where the gas is received/exported
to and from the grid, and the long flow line headers leading to the new wells where the gas is
injected/withdrawn.

PROCESS OPERATING PHILOSOPHY

Operation philosophies for the different operating scenarios are given below:

INJECTION FREE FLOW (WITHOUT COMPRESSION)

Gas received at battery limit and sent via gas metering. The gas is metered at entry by the ultrasonic
flow meter then sent to the compression bypass line where the control valve regulates the injection
flow or pressure. The injection gas is sent via 2-5 km long flow line headers leading to the new wells.

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 The injection can be made to one or more wells. The injection flow rates for each well can be
controlled by the choke valve on each well.

The injection process without compression is illustrated in Figure 50.

Figure 50: Injection without compression process path.

INJECTION WITH COMPRESSION

Gas is received at battery limit and sent through the gas metering. The gas is metered at entry by the
ultrasonic flow meter and flowing to the compression lines, where 1 to 3 trains can be in operation
pending on the required injection flow.

1) The metered gas is sent through the first stage scrubber, compressed, and cooled in the first
stage of the compressor from LP to MP.
2) The cooled MP gas is then sent through the second stage compression, compressed, and
cooled in the second stage of the compressor from MP to HP.
3) The HP gas is then sent to the air coolers

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 4) Gas from the compression trains is commingled before being sent via 2-5 km long flow line
headers leading to the new wells.

The injection can be made to one or more wells. The injection flow rates for each well can be
controlled by the choke valve on each well.

The injection process with compression is illustrated in Figure 51 .

Figure 51: Injection with compression process path.

WITHDRAWAL FREE FLOW (WITHOUT COMPRESSION)

Fluid is withdrawn from the wells and the number of flowing wells can be adjusted as wanted and flow
rate from each well is controlled by the choke valve on the well. The well fluid is flowing via the 2-5
km long flow line headers leading back to the UGS plant from the well cluster areas and fluid from all
wells are commingled prior to gas conditioning.
1) At the surface facilities, the fluid is separated in a 3-phase separator, with water, oil and gas
outlet.

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 2) The condensate outlet is sent to the condensate stabilisation system (1 train) for stabilisation
to atmospheric pressure, where it is first depressurized, cooled by an air cooler, and then sent
through a series of separators, with a final cooling before being stored in the condensate
storage tanks/ or pumped for external storage (to be clarified in a later project phase).
3) The water outlet is sent to the water treatment facilities and injected into disposal wells (to be
confirmed).
4) MEG is injected into the gas outlet line of the 3-phase separator before the gas is cooled in the
tube-side of the gas/gas exchanger and the propane chiller.
5) After the chiller, the gas is further depressurised with a J-T valve before sent to a low
temperature separator to further remove the heavier hydrocarbons.
6) The low temperature gas is then sent to the shell-side of the gas/gas exchanger before being
sent to gas metering and finally exported.

Figure 52: Gas withdrawal from well.

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 Figure 53: Gas/condensate/water separation before dew point control.

Figure 54: Gas treatment before metering.

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 Figure 55: Gas metering and export.

WITHDRAWAL WITH COMPRESSION

Fluid is withdrawn from the wells and the number of flowing wells can be adjusted as wanted and flow
rate from each well is controlled by the choke valve on the well. The well fluid is flowing via the 2-5
km long flow line headers leading back to the UGS plant from the well cluster areas and fluid from all
wells are commingled prior to gas conditioning.
1) At the surface facilities, the fluid is separated in a 3-phase separator, with water, oil and gas
outlet.
2) The condensate outlet is sent to the condensate stabilisation system (1 train) for stabilisation
to atmospheric pressure, where it is first depressurized, cooled by an air cooler, and then sent
through a series of separators, with a final cooling before being stored in the condensate
storage tanks/ or pumped for external storage (to be clarified in a later project phase).
3) The water outlet is sent to the water treatment facilities and injected into disposal wells (to be
confirmed).
4) MEG is injected into the gas outlet line of the 3-phase separator before the gas is cooled in the
tube-side of the gas/gas exchanger and the propane chiller.

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 5) After the chiller, the gas is further depressurised with a J-T valve before sent to a low
temperature separator to further remove the heavier hydrocarbons.
6) The low temperature gas is then sent to the shell-side of the gas/gas exchanger before being
sent to the compressor inlet scrubber.
7) The gas is then compressed in one stage and cooled afterwards by an air cooler.
8) The compressed cooled gas is then sent to the flow metering and finally exported.

Figure 56: Gas withdrawal from well.

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 Figure 57: Gas/condensate/water separation before dew point control.

Figure 58: Gas treatment before metering.

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 Figure 59. Gas compression, metering, and export.

PROCESS EQUIPMENT

The gas storage is basically comprised of the following process equipment:

Injection part:
• Inlet/Outlet Facility (Unit 090)
• Flow Metering (Unit 080)
• Compressor trains 1, 2, 3 and 4 (Unit 070)
• Well flow control system
Withdrawal part:
• Well flow control system
• HP Separation (Unit 010)
• Gas Dew Point Control (Unit 020) propane refrigeration)
• Condensate Stabilisation (Unit 050)
• Water Treatment (Unit 400)
• Flow Metering (Unit 080)

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 • Inlet/Outlet Facility (Unit 090)
Other equipment:
• Auxiliary systems, such as:
• Condensate Storage and Loading (Unit 060)
• Fuel Gas system (Unit 120)
• Interconnecting piping
The aboveground facilities are described in more detail below (in flow direction).

11.2.1 Inlet/Outlet Facility (Unit 090)

Inlet/Outlet facility is at the interface between pipeline and UGS plant. It includes operational and
safety (ESD) valves to allow isolation of the UGS. It allows for bidirectional flow for either injection or
withdrawal modes.

Depending on final MAOP selected for the pipeline, it is necessary to provide overpressure protection
facilities (HIPPS) for the withdrawal mode.

The pigging facilities belong to the pipeline scope. A pig receiver / launcher will be located at the end
of the CPL, upstream of the UGS main station isolation valves and at the Custody Metering Station
(CMS).

11.2.2 Flow Metering (Unit 080)

Custody Metering will take place at the CMS which will be located near to the tie-in location to the TSO
pipeline grid. A pig launcher / receiver will be located at CMS. This is covered in a separate document
(see Pipeline Basis of Design)
Within the UGS, operative metering will be provided for control and monitoring purposes.
The design data for metering of the main gas flow is as follows:

Table 45: Design Data for Flow Metering

1x100% i.e.no redundancy needed for operational metering; no. of

Configuration
streams may be adjusted depending on meter selection

Flow rate 90.000 Nm³/h to 900.000 Nm³/h (80-800 MMSCFD)

Design pressure 225 barg, ANSI #1500

Design temperature 0 °C to 90 °C

Operating pressure injection case 50 to 80 barg

Operating pressure withdrawal case 55 to 70 barg

Operating temperature 10 °C to 50 °C

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 The metering train consists of one ultrasonic metering device, pressure transmitter, temperature
transmitter, flow computer and interconnecting piping. The metering device allows the measurement
of both flow directions, i.e., for injection and withdrawal mode and allows the metering for the total
range, i.e., a bypass system for small rates is not required as ultrasonic meters can have turndowns
up to 1:50.

The composition of the gas is measured by a process gas chromatograph (PGC). The calculation
method of the flow computer will be PTZ to convert gas volume from operating conditions to reference
pressure and temperature conditions. The PGC, calibration bottles and flow computers will be installed
in dedicated rooms. Dew point and H2S analysers should also be foreseen.

Other metering systems might be required at the UGS, as follows: be provided:

• Metering turbine fuel gas
• Metering on-site generation fuel gas if required (to be determined if needed)
• Operative metering at compressor units
• Operative metering in withdrawal trains
• Operative metering at well sites

For the fuel gas metering a turbine flow meter with flow computer for PTZ calculation will
be installed. Pitot tube or orifice plate are proposed for metering at the compressor units and
withdrawal trains. Metering of gas coming to/from the caverns will be carried out via pitot-tube or
orifice plate with temperature and pressure compensation. This metering is indicative only, no
interaction with the metering of the main flow is foreseen. Bi-directional metering is required.
Dew point analysis is conducted downstream of the gas conditioning units in each withdrawal
Line and in the vicinity of the metering for the main gas line (at CMS).

11.2.3 Suction Scrubbers

For the protection of the compressors, the gas taken from the pipeline will be cleaned of all
solid particles and liquids on the suction side of the compressor. The condensate collected
will be fed into the condensate tank by an automatic release system. Pressure vessels shall be
according to ASME VIII.

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 Table 46: Technical Data Suction Scrubbers

Element Description

Quantity 4x33 % of the total injection capacity

Type Vertical separator for particles and liquids (K = 0.11 m/s)

Qmax = 148,000 Nm³/h (132 MMSCFD) (33 % of

maximum injection flow)

Qmin = 45,000 Nm³/h (40 MMSCFD) (50 % of minimum

Flow rate:
injection flow)

Qmax = 295,000 Nm³/h (264 MMSCFD) (30 % of

maximum withdrawal flow flow)

Operation pressure 50 – 80´barg

Operation temperature 10 – 30 °C

Design pressure 250 barg, ASME Class 1500

Design temperature 0 to + 100 °C

Separation efficiency 99.9 % > 5 μm

0.25 bar
Max. pressure drop clean

Cross-over piping and valving must be provided to allow routing of the gas flow via the suction
scrubbers, compressors and aftercoolers also in withdrawal mode.

11.2.4 Compressor / Driver (Unit 070)

Compressor driver energy may derive from natural gas or electricity. Natural gas as fuel gas has the
advantage that it is always available on site from the UGS. On the other hand, electrical power must
be either imported from the national grid or generated on site (again using natural gas from the UGS
as fuel gas). Factors affecting selection of driver energy include energy cost, availability, and
environmental aspects.

The Driver Selection Report (separate document) concluded that a GT-driven centrifugal compressor is
selected with a 3 plus 1 configuration as a base case. This is shown on the PFDs but might be subject
to change during the next design phase.

11.2.5 Gas Aftercoolers

Gas aftercoolers are used for Injection Mode for the cooling of gas between the two compressor stages
and after the compressor discharge. Air-cooled heat exchangers according to API 661 are foreseen.

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 Table 47: Technical Data Gas Aftercoolers

Element Description

Quantity: capacity: to be reviewed if standby unit is required for availability)

Cooler bank with fin tubes, air cooled with electric motor driven variable speed
Type:
fans

Qmax = 148,000 Nm³/h (132 MMSCFD) (33 % of maximum injection flow)

Flow rate
Qmin = 45,000 Nm³/h (40 MMSCFD) (50 % of minimum injection flow)

Flow rate – Max = 295,000 Nm³/h (264 MMSCFD) (33 % of maximum withdrawal flow flow)

Operation pressure: 50 – 225 barg

Operation temperature: 10 – 120 °C

Heat Exchanged: 11.1 MW including 10% margin on surface area

Design pressure: 250 barg, ASME Class 1500

Design temperature: 0 to + 150 °C

Temperature control Speed variation and shutting off fans

Max. pressure drop clean 0.3 bar

86 dB(A), very low noise design

Sound power level

11.2.6 Flow Control for Wells

Each of the well supply lines will be equipped with flow control valves using an operative flow meter
(orifice or equivalent). This equipment must be suitable for bi-directional operation as injection and
withdrawal will be carried out through the same lines. The well flow control system shall enable the
distribution of defined quantities of the total injection flow volumes to the different wells and shall
allow the withdrawal of different flow rates from several wells at the same time.

Upstream the field line overpressure protection for the wells will be required to secure the gas
pressure is kept below 225 barg a set of full flow PSVs can be installed.

11.2.7 Withdrawal Separator (Unit 010)

Three withdrawal separators will be utilized to clean the gas supplied from the wells of all solid
particles and free liquids before entering the gas conditioning equipment. The water is fed to the water

154
 treatment and condensate emulsion collected from the separators will be fed into the condensate
stabilisation system by an automatic release system. Pressure vessels shall be according to ASME VIII.

Table 48: Technical Data Withdrawal Separator

Element Description

Quantity 3 x 33 % of the total withdrawal capacity

Type Vertical Separator for particles and liquids

Qmax = 900,000Nm3/h (800 MMSCFD) (100% of

maximum withdrawal flow)
Flow Rate
Qmin = 90,000 Nm³/h (80 MMSCFD) (100% of
minimum withdrawal flow)

Operation Pressure 55 – 220 barg

Operation Temperature 50 – 100 °C

Design Pressure 225 barg, ASME Class 1500

Design Temperature 0 to + 120 °C

Separation efficiency 99.9 % > 5 μm

Max pressure drop clean 0.3 bar

11.2.8 Gas conditioning system (Unit 020)

The separated gas is to be gas dew point controlled to meet the gas specifications. The gas dew point
control is also done in three trains (3x33%). MEG is injected into the gas stream to avoid hydrate
formation during cooling of the gas.

Gas Dew Point Controller

A train consists of gas/gas exchanger, a propane chiller, a JT valve and a low temperature separator.
The dew point adjustment is achieved by cooling the fluid to condensate the heavy ends. The gas is
cooled by a gas / gas heat exchanger, a propane chiller, and the Joule-Thomson effect through a
depressurising valve. The condensate is separated in a low temperature separator per train. The
separator pressure must be sufficient to maintain the pressure at the end of the pipeline connecting
the UGS facilities to the gas network but still low enough to avoid the separator to operate in the
dense phase region for the fluid before it has reached the gas specifications.

Propane Refrigeration System

A closed loop propane refrigeration circuit is used to cool the raw gas in order to meet the
hydrocarbon dew point specification and to reduce the water content below the specification of 150
ppm. A loop is made of a two stages refrigeration system with chillers. The propane temperature in
chillers is maintained at approximately –24°C and about 17 psig (1.2 barg) to ensure an adequate

155
 temperature approach between the shell side and the tube side of the chiller. A two-stage compressor
is needed per propane loop to compress the propane from 17 psig to 261 psig and has a dedicated K-
O drum per stage and an economiser. In addition, a propane accumulator is necessary. The Khorewah
propane compressors power is 24 MW ISO (12 MW ISO for each stage). There is one compressor in
operation, one in stand-by, designed for ensuring 100% of the maximum required power during the
withdrawal phase. The cooled propane is split before being routed into the three chillers for Khorewah
UGS, one per treatment train.

11.2.9 Condensate Stabilisation System (Unit 050)

Three flash drums are used to stabilise the condensate at atmospheric pressure and 40°C in three
stages. The gas is flashed at 430 psig, 100 psig and atmospheric pressure. Off-gas at 100 psig are
collected as fuel gas, other off-gas are flared. The quantity of gas flared is about 250t/h for the
maximum flow at Khorewah decreasing to about 50t/h at the end of withdrawal, this will need to be
verified in the next phase. The light ends present in the condensate could be recovered by using a
stabilisation column before the flash drum to the atmospheric pressure and it can be investigated if
stabilisation could be done in two stages. This option should be studied during the next design phase.
Stabilised condensate is routed to atmospheric storage after metering. Condensate loading pumps are
provided to export condensate

11.2.10 Glycol Injection / Hydrate Inhibition System

During withdrawal, a lean MEG injection is made in the raw gas before cooling to avoid hydrate
formation. The rich MEG streams from the low temperature separators of each train are mixed before
feeding a common MEG flash drum, operating at 73 psig (5 barg) that ensures flashing of entrained
hydrocarbons, thus avoiding foaming in the regeneration part.

The liquid from MEG flash drum is filtered to remove hydrocarbon traces. Then a rich/lean MEG
exchanger and a re-boiler heat the MEG for regeneration. The remaining MEG in the water is
recovered thanks to a still column reflux drum. It shall be noted that the likelihood of hydrate
formation is deemed unlikely due to the high reservoir pressure of 100 Degree Celsius. The next
design phase (FEED Engineering) shall evaluate if the Glycol injection is necessary or not.

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12. PIPELINE AND METERING FACILITIES
PIPELINE ROUTING

The selected route corridor at Feasibility Stage is based on desktop study of available maps, as well as
latest Google Earth images. No site visit or ground investigations have been carried out. Based on
current project status, the identified corridors are expected to have +/- 5km accuracy. Total pipeline
length may vary +20%, considering potential re-routings due to localised requirements (e.g. land
ownership, ground characteristics, protection areas, existing infrastructure, etc).

Figure 60: 1, CPL-2 Overall Route Map (Scale 20km)

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 CPL-1
CPL-1 is within administrative Districts Hyderabad, Tando Muhammad Khan and Badin, Sindh
province. The start point is the new Custody Metering Station (CMS) located adjacent to existing SSGC
CS-Hyderabad (flow direction and KP-designation considering injection mode). The end point is at the
new Khorewah UGS. The selected CPL-1 route corridor has a total length of 93km based on current
mapping status.

100% of the corridor is considered flat terrain, ground type Indus Plain consisting of alluvium (stream
and flood plain deposits). The route follows the existing SSGC pipeline corridor E-NE for approximately
7km, before it turns S-SE for the remaining 86km. The route is partly aligned to existing secondary
roads, but mainly follows a new right-of way across flat terrain. Approximately 60% of the route is
considered arable farmland, 40% is non-productive soil.

Total 46 km of CPL-1 route in Hyderabad District is through built-up (or potential future residential/
commercial areas) for 8km, followed by mainly irrigated crop area. The route is selected to avoid or
skirt built-up urban, commercial and residential areas (and future areas) as far as possible. Where
necessary, the ROW runs parallel to existing infrastructure, e.g. SSGC pipeline ROW, public road
easement. In the south, the route is parallel to existing waterways, generally in minimum 300m
separation to avoid disruption to ecology or human activity during construction.

31 km with Tando Muhammad khan District is mainly irrigated crop area. Main crops are sugarcane,
rice, wheat and cotton. The route is partly parallel to existing waterways, generally in minimum 300m
separation to avoid disruption to ecology or human activity during construction. Much of the
agriculture is based on Rod Kohi (torrent-spate-irrigation), meaning that significant areas are subject
to flooding, and/or are designated ‘wet areas’. Where it is required for the pipeline to cross such
areas, construction shall be timed to avoid disruption to agricultural activities as far as possible, and
appropriate buoyancy protection will be provided for the buried pipeline.

16 km of CPL-1 route is within Badin District. The region is swampy and fertile for growing rice,
however, the selected route crosses mainly non-cultivated bare areas with sparse natural vegetation.

CPL-2
CPL-2 is within administrative Districts Hyderabad and Jamshoro. The start point is the new Custody
Metering Station (CMS) located adjacent to existing SSGC CS-Hyderabad (flow direction and KP-
designation considering withdrawal mode). The CPL-2 route corridor has a total length of 16km based
on current mapping status.

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 100% of the corridor is considered flat terrain, ground type Indus Basin sedimentary rock. The route
exits the new CMS boundary (elevation 23m) in north-west corner (pig launcher unit within CMS
boundary). The route follows the existing SSGC Compressor Station boundary fence north, then turns
west until it reaches the unpaved road (pipeline easement) running North-South parallel the Indus left
bank. The new pipeline ROW is planned within the existing easement, if permitted via regulations and
EIA. Alternatively, a re-routing to the East of the small village may be necessary, until the ROW
reaches the location for the Indus River HDD exit borehole (approx. 500m north of the existing
pipeline bridge crossing).

The approx. 2.7km 36” crossing of the Indus River by HDD is described in Section 5.3.5. The crossing
east-west axis is approx. 150m south of the RLNG-2 42” HDD crossing carried out in 2017. It is
proposed to also cross the smaller Indus Canal with the same HDD. The drilling direction will be from
west to east, with entry trench planned to the west of the Indus canal.

At KP06 there is a rail crossing (25m by augur or thrust bore). The route skirts the NE boundary of the
existing sewage treatment plant, before crossing the Indus Highway (40m by augur or thrust bore).
The route then runs north of the existing Jamshoro Thermal Power Station boundary, before turning
south-west for approx. 6km on slightly rising terrain to the boundary of the new NS-Pipeline
Compressor Station (elevation 55m). The route enters the new site boundary in north-east corner (pig
receiver unit within station boundary).

INDUS CROSSING
To interconnect to the new North-South Pipeline via the shortest distance, a crossing of the Indus
River would be necessary. The crossing is approximately 2.6km out of overall length for CPL-2 16km.
Alternatively, CPL-2 could run 115km on the left side of the Indus River (without crossing) to tie-in at
NS-Compressor Station Nawabshah, however, the route to Nawabshah is considered economically
prohibitive.

Crossing of the Indus River with a 36” pipeline (including flood plains on the left and right banks) is a
significant undertaking and would be one of the most difficult parts of the project. Previous crossings
of the Indus river near to Kotri barrage include:
• 1.5km pipeline bridge, approx. 2km upstream of Kotri barrage, extended for additional 30” and
16” gas pipelines in 2005
• 2.1km HDD for 42” gas pipeline, 25-30m below riverbed, approx. 3km upstream of Kotri barrage,
2017

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 It is understood that a crossing (by 1.2km bridge) is planned for the new North-South Pipeline at
Aamri, 50km south-west of Nawabshah. The IP-pipeline is also proposed to cross the Indus River by
pipe bridge at the same location.

PIPELINE OPERATION AND HYDRAULICS

Hydraulic calculations indicate that for a design flow rate of 792 mmscfd, pipeline length CPL-1 93km
and CPL-2 16km and assumed tie-in pressures as shown. In the table below, the optimum pipeline
diameter is 36”. Corresponding hydraulic calculations / pressure losses are shown below. For the
injection and withdrawal isolated cases are considered, nevertheless it will be possible to combine this
case

Table 49: Pipeline Operation

Pressure
Tie-in Location to Flowrate Temperature
Pipeline (psig/barg)
‘existing’ Network (mmscfd) (°) min/max
min/max

SSGC CS-Hyderabad 396 (injection to 870 / 1160

0 / 50
– discharge UGS) (60 / 80 barg)
CPL-1 (93km)
UGS<->CMS 580 / 870
SSGC CS-Hyderabad 792 (withdrawal
0 / 50
– suction from UGS) (40 / 60 barg)

NSGP CS-Hyderabad 396 (injection to 1015 / 1305

0 / 50
– discharge UGS) (70 / 90 barg)
CPL-2 (16km)
CMS<->NSGP 725 / 1015
NSGP CS-Hyderabad 792 (withdrawal
0 / 50
– suction from UGS) (50 / 70 barg)

INJECTION PHASE (BASE CASE) – NORTH SOUTH PIPELINE TO KHOREWAH

During summertime when gas loads are at low levels. Injection of RLNG in the proposed UGS will be
carried out. A maximum of approximately 400 mmcfd from the North South gas Pipeline will be
withdrawn. Under this case the starting pressure in proposed NS pipeline has been taken as 1190
psig, while the starting LNG flow considered as maximum of 1.6 BCFD. A lower throughput will be
beneficial for the pressure regime. At around KP120 a tie-in point is foreseen, which is starting point
of 36” 109-kilometre-long interconnection pipeline with Khorewah Gas Storage as the end point.
During injection phase the interconnection pipeline will carry around 400 MMcfd gas at 1050 psig
pressure and deliver this gas at Khorewah compression facilities at 1020 psig, which will be injected in
UGS. During this operation the midway off-take connection of Hyderabad CS will remain isolated.

160
 Figure 61: Injection Case (base case) – Flow from NSGP to Khorewah

INJECTION PHASE - FLOW FROM SOUTHERN SYSTEM

Though the possibility of this option is less likely because this system carries indigenous gas, which is
already on decline, even then this connection gives operational flexibility, may be in future.

In this scenario 400 MMcfd gas will flow from Hyderabad compressor station through 36” 93-
kilometre-long interconnection line towards Khorewah UGS. The starting pressure will be 870 psig and
833 psig at upstream of Khorewah compression facilities. The gas will be injected into Khorewah.
During this operation the 16-kilometre-long segment between Hyderabad compressor station and
North South Gas Pipeline tie-in point will remain isolated.

161
 Figure 62 Injection Case – Flow from Southern System to Khorewah

162
 WITHDRAWAL CASE (BASE CASE)- KHOREWAH TO NORTH SOUTH PIPELINE
Under this phase the starting pressure at RLNG terminal, Karachi, will is assumed 1100 psig and flow
will be reduced to a maximum of 800 mmcfd while the balance flow will be withdrawn around 800
mmcfd from UGS Khorewah at pressure 1188 psig, the pressure at tie-in point NS pipeline will be
around 1060 psig. The objective is to maintain a maximum flow of 1.6 Bcfd in the North South Gas
Pipeline through withdrawal from UGS to fulfil the additional demand of north during winter season.

Figure 63: Withdrawal Case (base case) – Flow from Khorewah to North South Gas Pipeline

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 WITHDRAWAL PHASE – KHOREWAH TO SOUTHERN SYSTEM
Since seasonality hits more the northern part as compared to southern, however, in case of any
requirement, there is a provision of diverting the storage gas towards southern net through
Hyderabad Compressor Station. The Consultant assumes that by the time UGS project gets in place
the domestic sources supplies will be on further decline which will create a spare capacity in southern
system to absorb additional supply of UGS. Otherwise SSGCL will have to go for
augmentation/upgradation of the system as per requirement.

Under this case the gas will flow from UGS to Hyderabad Compressor Station through 93-kilometre-
long 36” interconnection line carrying around 800 mmcfd natural gas. The starting pressure at
Khorewah UGS will be around 1000 psig and arriving pressure at Hyderabad CS will be 870 psig.
During this operation the 16-kilometre segment between Hyderabad Compressor Station and North
South Gas Pipeline tie-in point will remain isolated.

It is noteworthy to mention that 109-kilometre-long 36” interconnecting pipeline connects 3 main

points i.e. UGS-Southern system at Hyderabad and tie-in at NS pipeline at KP125. This arrangement
gives a wide range of operational flexibility. This way the Northern system, Southern system and
Khorewah UGS get connected with each other and gas can be flown in any direction and quantity
depending upon the requirement during injection and withdrawal phases.

Figure 64: Withdrawal Case – Flow from Khorewah to Southern System

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 FUTURE OPTION - ADDITIONAL FLOW FORM BUKHARI FIELD
To increase the capacity of storage to meet any future requirement, the proposed interconnection line
can be extended to Bukhari field, which is another potential candidate for storage and lies in the same
block.

For this case the starting pressure at RLNG terminal is taken as 1100 psig with flow 400 MMcfd. The
balance flow of 1200 MMcfd is taken from Khorewah (800) and Bukhari (400) respectively. Pressures at
Khorewah is calculated as 1315 psig and at Bukhari 1288 psig. Under this scenario total withdrawal from
both the storages comes out to be 1200 MMcfd.

Figure 65: Future Flow from Bukhari Field.

The calculation shows that the proposed 36” pipeline will be sufficient for future expansion measures.

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 CUSTODY METERING STATION (CMS)

To facilitate tariff payments, as well as flow scheduling/dispatching, a custody (fiscal) flow metering
and quality control is required at the interconnection to the existing gas networks. A new Custody
Metering Station (CMS) shall be located downstream (in injection flow direction) of the existing SSGC
CS-Hyderabad. To minimise potential metering discrepancies (such as due to losses), the CMS should
be located close to the tie-in location. Proposed site 150m x 125m directly east of existing CS is
selected on a preliminary basis – subject to further review and confirmation in the next design Phase
(e.g., FEED).

Figure 66: Location of CMS adjacent to existing SSGC Compressor Station - Hyderabad

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 SECURITY AND LOGISTICS

In a region were the twin axis of geopolitical and national security instability converge to create a
unique profile of high operational and global security risks; Pakistan, being an expanding economy and
a geographically vital strategic country on the world stage of international politics

Pakistan’s transition to modernity, as especially evidenced over the last two decades, has been
achieved within the cauldron of a relatively instable national security picture. Notwithstanding, several
medium and longer term socio-political and national security factors have come into play, which will
have direct operational security implications for the Plant. When we speak of security, it is a given that
it will always be placed within the wider context of Pakistan’s Critical National Infrastructure and
national security profile.

More than two decades ago, the industry faced quite different security threats. While considered
serious at the time, they did not threaten the critical infrastructures that an increasing number of
nations are so dependent upon. Many of these old threats remain, for example, fraud, theft and
criminal damage, but these have been overshadowed by a new collection of constantly evolving
complex threats whose aims are the disruption and destruction of economic interests.

12.4.1 Logistics

The project site is in district Badin at Sindh Province. It is located at about 212 KM from Port City
Karachi. It is accessible through roads from the port city. It is anticipated that the project related
equipment will be supplied through port city. The imported equipment will be landed at Port Qasim or
Karachi Port Trust and onward would be supplied through any of the following route:

1. Port City – Thatta (via N-5) – Baddin (via Thatta Bain Road) –Project Site (Via Project Road)
2. Port City – Hyderabad (via M-9) – Badin (Via Hyderabad Badin Road) - Project Site (Via Project
Road)

However, Route 1 seems shorter and thus the best option to for logistics and transportation of project
equipment from port city. However, some ordinary equipment and routine consumable items can also
be supplied from Hyderabad through Hyderabad-Badin Road. Both routes are carpeted up to Badin. The
Project specific road, which is operation at the moment, is also carpeted up to Mullah Hassan. The
equipment could transport to the site via through trucks, lorries, bowsers and vans etc. There is also a
possibility of transportation of equipment to project through railways. In case of transportation through
railways, the equipment could be transported from Port City to Badin railway station and onward such
equipment could be transported by road through trucks and vans etc.

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 During the construction phase the requirement for logistics would be high but in operation phase such
activities would be substantially reduced due to less labour-intensive working activities. Similarly, the
gas could be transported to the storage point via connecting pipelines from North South/Pakistan Stream
Pipeline. The nearby airport at Karachi will be mainly used for expatriate professionals visit to the site
for project related activities.

12.4.2 Security

For the long run operation of the project, safety and security over the lifetime of the project is highly
important. The safety and security would be in terms of both the safeguard of project and crew. The
safeguard should be from both natural and anthropogenic risks. Among natural risks, the potential
risks would be of seismicity, natural accident and flood etc. Similarly, human originated safety and
security concerns would be of insurgents, robbery, theft, sabotage and strike etc. By looking into
situation of the area, it is pertinent to highlight that there are already operating oil and gas fields in
the region and thus area could be comparatively safe with respect to western and northern part of
country. Even then, safety and security measures cannot be neglected.

This section provides a basic security plan for execution of the project. It is highly recommended that
a detailed security risk assessment and mitigation exercise is conducted at the later stages of the
project implementation. Subsequently, a policy guideline should be devised for safety and security of
the project and the crew. This can ideally be done by professional safety and security team. At a first
level, the safety would be implemented by the concerned surveillance and protection department.

OPERATIONAL THREAT PROFILE

Based on the threat drivers, the following are judged to be the core areas of concern for the Underground
Gas Storage facility and its allied infrastructure.

White Collar Crime – Fraud

Major opportunities will exist for fraudulent behaviour in a project of this magnitude. Fraud will
continue to pose a persistent risk which is closely linked to organized crime. However, there are also
opportunities for accounting fraud if there are poor internal controls. Departments involved in
procurement and finance are particularly vulnerable to fraud. Fraud may also take place in collusion
with outside parties, for example a procurement officer setting up false invoicing systems with a sub-
contractor. Payments recorded as taxation or invoices may be re-directed to private accounts. HR
departments also pose a fraud risk in terms of identity theft and corrupt hiring practices.

Theft
Theft of materials by individuals remains one of the biggest threats to the projects and significant
barriers need to be in place to avoid such incidents.

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 Industrial and Civil Unrest
Generally poor work and living conditions for the large pools of ethnic labour is an ongoing issue
within Pakistan.

Insider Threat
Sabotage by disgruntled employees is a growing threat to industry worldwide. Particularly the
sabotage of vital computer-controlled processes or equipment and software. This is an area were strict
policies of secure dismissal and staff security clearances, given access to sensitive areas, must be
enforced.

Pressure Groups
Local population may form pressure group against the project company if not provided at least some
employment in the facility. If not handled sensitively, this local pressure will impact upon the
commercial and reputation of activities; bad press rather than direct pressure group actions, such as
protests.

Terrorism
Terrorism has become a fixture within the global scene of commercial activity. The security situation in
Pakistan has improved rapidly over the past couple of years. However, the threat persists at least in
some shape or form and should be considered when devising a detailed security plan.

The modes and threats put forward are not exhaustive but represent a summary of the key prevailing
threat climate within which the facility must position itself.

SPECIFIC THREAT SCENARIOS

Threat Threat Method of Intended

No. Intended Targets
Category Scenario Delivery Consequences

Personal
enrichment
Insider knowledge, usually
White Collar Crime – Large projects with large causing loss of
employees in positions of
Fraud amounts of investment/cash revenue.
T1 Criminality management or access to
available through the body
management financial Identity theft.
corporate as an entity.
control systems.
Corrupt hiring
practices.

Opportunist and Offices

planned/organised theft
Workshops
Theft from outside entities.
Personal
T2 Construction sites
Theft, pilfering from enrichment
employees and contractors. Plant Offices
A combination of the above Staff Housing

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 Improvement in
Protests and severe public Management and the body
T3 Civil Unrest Industrial Unrest pay and working
disorder(rioting). corporate as an entity.
conditions.

Office spaces.
Sabotage of production
related operations, IT Employees and contractors High value
Insider
systems, or high-value with access to sensitive equipments/systems. Loss of
T4 Threat
equipment, by areas of the company. production.
Control rooms.
(Sabotage) disgruntled Sabotage of vital operations.
employee(s). Management and the body
corporate as an entity.

Environmental pressure
Pressure group blockading the Through use of small or
T5 Main land access to the
Groups entrances to the large vehicles.
facility.
facility. Sustained long-
Management and the body term attack on
Physical Protests at corporate as an entity. reputation
Through use of small cars or
main entrances,
T6 trucks blocking the roads in Government
preventing or slowing
and out of main entrance(s)
vehicular access

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13. FINANCIAL FEASIBILITY
This financial feasibility forms part of an update/revision of the techno-economic feasibility study of
the Project previously conducted in 2005-2007 by Sofregaz. The previous Feasibility Study conducted
by Sofregaz was aimed assessing the potential Underground Gas Storage sites for modulation
purposes (Northern Pakistan) and the potential Underground Gas Storage sites for security of supply
for the whole country.

This report is the continuation of the assessments and results of the framework conditions from the
interim report. The financial section of the interim report laid out the basic assumptions and
parameters which were finalised moving to the next phase.

VALUE CREATION BY THE UNDERGROUND GAS STORAGES

Underground gas storage (UGS) is one of the most critical components of the natural gas market.
Along with other forms of storage such as line pack, LNG ships, or storage at LNG receiving terminals,
UGS provides a range of functions needed for proper functioning of the gas market. Efficient matching
of demand with supply ensures optimal use of the gas chain infrastructure, notably the transportation
and distribution networks, and it permits technically and economically sensible long-term management
of upstream gas reserves and resources. Further, with adequate levels of storage security of supply is
enhanced with respect to either demand surges for unanticipated supply interruptions.

Underground gas storage provides flexibility to the natural gas (and indirectly electricity) system on all
timescales. The traditional use of storage resides in modulating a relatively stable annual supply and
highly variable seasonal demand for gas. During periods of lower demand (typically in summer),
natural gas is injected into storage, and when demand is higher (typically in winter), the stored gas is
withdrawn and added to the supply. Similarly, given the higher demand in winter, gas prices on the
market increase while the prices decline in summer - storage can help reduce this summer-winter
price spread.

Gas storage also provides flexibility to the energy system on shorter timescales - across hours, days,
or weeks. In particular, increasing volatility in gas demand can be observed in the power sector due to
the advancing penetration of variable renewable energy resources that require more (gas) peaking
power plants or other means of grid energy storage. This must be taken in conjunction with the
Renewable Energy targets set by GoP (30% by 2030) through the recent ARE policy.

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 As an essential function, gas companies need to provide a constant supply of gas throughout the year
to the end users. The gas supply chain (and the electricity supply chain as well) is continuously being
optimized to deliver this core function effectively and (cost) efficiently. However, gas production
cannot easily follow demand, being restricted by limited flexibility in capital cost-intensive production
sites and long-distance transportation. This lack of flexibility can result in network overcapacity (to
meet peak demand) in both gas and electricity systems and problems in gas congestion management.
Gas storage creates value by decreasing the need to overbuild the networks, thus preventing
additional investments in the gas and electricity infrastructures to meet peak demand. Without this
resource, the gas and electricity systems would need to invest in increased flexibility and/or additional
generation at an added expense.

COST ESTIMATION

Cost Estimation is based on (i) the recommended practice of AACE International (IR-97), which
provides guidelines for applying general principles of estimate classifications to project cost estimates;
(ii) in-house data from previous projects and (iii) current commodities cost for materials.

This guideline reflects generally accepted cost engineering practices and is based upon methodologies
of a wide range of companies in the process industries around the world, as well as published
references and standards.

Within the scope of the work, the current stage of design and the time involved into the CAPEX
estimate, Class 3 is chosen for the best fit for the proposed scope of work as per AACE standard.

Table 50: Capital Expenditure excluding cushion gas are estimated to be 426.25 Million USD.

Summary – Total Project Capex

Pipeline CPL-1 87.11 Mio. USD

Pipeline CPL-2 21.45 Mio. USD

UGS Sub-Surface Facilities 158.56 Mio. USD

UGS Aboveground facilities (including Long Lead Items) 159.13 Mio. USD

TOTAL COSTS 426.25 Mio. USD

Cushion Gas to be purchased will remain one of the biggest cost drivers for the UGS. Natural gas can
be either purchased via LNG or from domestic fields. The amount of cushion gas needed is 2398
Million sm3 or 84 Bscf. It is the understanding of the Consultant that LNG will be used as Cushion Gas
due to the limited supply of indigenous resources.

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 For Operating Expenditures are divided for the different lots (pipeline, subsurface and UGS Plant) in
variable and fixed OPEX. For Pipelines and associated facilities (pig stations, block valves, metering),
OPEX is assumed to be 1.0% of CAPEX in line with best practice and similar projects, i.e. 1,085,000
USD per year. In addition, Consultant estimates that every 7-10 years a pigging operation for the
pipeline shall be performed. Cost range around 100,000 USD. For subsurface facilities there will be no
cost for re-completion. It is assumed that the wells are newly drilled and therefore within the lifetime
of the project no re-completion is required. OPEX will be limited to logging and workover which are
variable, but a provision shall include in the order of 200,000 USD per year. Operating cost for the
UGS are divided into the annual variable energy cost for injection and withdrawal (3.532 Million USD
per year and fixed cost related to e.g. O&M and Personnel (1.583 Million USD)

Table 51: Total Project – OPEX

Summary – Total Project Opex

Pipeline Fixed Cost (includes Pigging cost every 7-10 years with 15.000
1.1 Mio. USD
USD yearly provision)

UGS Sub-Surface Facilities Fixed/Variable Cost 0.2 Mio. USD

UGS Facilities Fixed Cost 3.53 Mio. USD

UGS Facilities Variable Cost 1.58 Mio. USD

TOTAL COSTS (on average) 6.41 Mio. USD

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14. TRANSACTION STRUCTURE
In determining the optimal transaction structure, the full range of options has been considered right
from the prospect of the project being implemented by the public sector itself right up to the
possibility of it being carried out through private sector intervention. In doing so, various options
being considered, has enabled the identification of the most optimal structure. The results identified
are as follows:

IF PROJECT WAS UNDERTAKEN BY GOP ITSELF

The possibility of GoP undertaking the Project itself while ensuring that returns to GoP would be
optimized, however, the likelihood of this option is not considered since GoP lacks financial resources
to execute such projects. In this case, the GoP will finance the project through the Gas Infrastructure
Development Cess (GIDC) funds already collected for the development of Gas infrastructure of the
country. However, this option is not the preferred option as GoP faces serious budget constraints and
taking into account the investment quantum, public financing might not be the right financing type for
this project.

IF PROJECT IS UNDERTAKEN UNDER PUBLIC PRIVATE PARTNERSHIP

The most likely option for the implementation to be undertaken through a hybrid of public and private
participation i.e. is on public private partnership (PPP) modality whereby while retaining the ownership
of its land and ensuring commitment to the overall objectives of the transaction, GoP can provide the
right of use to the private partner to develop the facility and operate the same for such period
necessary to recover their investment plus reasonable return and then transfer the project back to
GoP. Therefore, it seems to be most likely arrangement for the transaction to be undertaken.

POSSIBLE BUSINESS MODELS

Option 1: The overall project shall be divided into multiple lots. Ideally, the EPC contract shall be
undertaken by one party which will ideally consist of lead international contractor along with local
participation by such companies which are already involved in the exploration activities in the country.
Once the EPC stage is completed, Government will have two options:

• Undertake the responsibility of first gas fill i.e., Cushion Gas, which is almost 65% of the total
project cost based on the current Gas price assumption. In this case after the first gas fill,
Government can bring onboard a SSO who shall be responsible for import and supply of Gas.
The operator can then be allowed to import and supply Gas to the consumers based on market

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 prices with no Government intervention. As a second option, the operator can also be allowed
a fixed negotiated return; or;
• Shift the responsibility of first Gas fill to the Operator. This option will save the government a
lot of upfront investment which will otherwise need to be made. The operator will be allowed a
fixed capacity return for the investment.

Option 2: In this option, a single consortium will be responsible to cover the entire life cycle of the
project. The chosen consortium will be responsible for the following activities:

• Front End Engineering Design (FEED),

• Engineering, Procurement and Construction (EPC)
• Filing of Cushion Gas
• Operations of the Underground Gas Storages facility.

While it may prove difficult to attract a single consortium which will have both, technical and financial
resources to undertake a project of such magnitude, it presents a lot of benefits such as reduction in
implementation timelines. In this scenario, a fixed negotiated rate of return will be provided to the
private operator which will consist of the capacity and injection/withdrawal tariff.

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15. CAPITAL COST
Cost Estimation is based on (i) the recommended practice of AACE International (IR-97), which
provides guidelines for applying general principles of estimate classifications to project cost estimates;
(ii) in-house data from previous projects and (iii) current commodities cost for materials

This guideline reflects generally accepted cost engineering practices and is based upon methodologies
of a wide range of companies in the process industries around the world, as well as published
references and standards.

Within the scope of the work, the current stage of design and the time involved into the CAPEX
estimate, Class 3 is chosen for the best fit for the proposed scope of work as per AACE standard.

The cost estimate is prepared from five sources of data:

• Similar project costs
• Proprietary cost data files
• Published cost information
• Vendor Requests / Budget Prices to reflect current market conditions
• Company Cost Information (in-house database)

The design documents used for preparation of the cost estimate are:
• Basis of Design (including):
o Plot Plan
o Block Diagram
o Process Flow Diagram
o Master Equipment List
• Pipeline Basis of Design
• Driver Selection Study

The total capital cost of the Project incorporates the cost of the main project EPC packages:
• EPC Cost
o Pipeline CPL-1 (including pig stations, block valves and Custody Metering Station)
o Pipeline CPL-2 (including pig stations, block valves and Custody Metering Station)
o UGS Sub-Surface Facilities
o UGS Aboveground facilities (including Long Lead Items)
• Non-EPC Cost (Land Cost)

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 • Development Costs (Including Project Management, Engineering, Site Supervision,
Topographical survey, Soil Investigation, Fees, Permits and Insurance cost)
• Cushion Gas
• Debt Service Reserve
• Insurance During Construction
• Financing Fees and Charges
• Contingencies
• Interest During Construction

Total Project Cost for the establishment of the underground gas storage while taking into
consideration the candidate site is given below. The most significant heads of the project cost are EPC
and Cushion Gas with combine weightage of approximately 95% of the total Project cost.

Breakup of the Project cost is provided hereunder:

Table 52: Total Project Cost Estimate

Khorewah Bukhari Turk

PROJECT COST
US$ Mn US$ Mn US$ Mn

EPC Cost 415.49 366.87 397.80

Non-EPC Cost (Land Cost) 1.92 1.92 1.92

Development Costs 9.49 8.45 9.01

Cushion Gas 898.80 449.4 823.9

Debt Service Reserve - - -

Insurance During Construction 6.26 5.53 6

Financing Fees & Charges - - -

Contingencies - - -

Project Cost Before IDC 1,331.95 832.17 1,238.62

Interest During Construction 56.87 44.92 53.87

Total Project Cost 1,388.82 877.09 1,292.49

The bifurcated EPC and Non-EPC cost is provided hereunder:

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 Table 53: Total Project Infrastructure Cost Estimate bifurcated into EPC and Non-EPC Cost

Khorewah Bukhari Turk

Project Cost Estimate
US$ Mn US$ Mn US$ Mn

Onshore EPC Cost 415.49 366.87 397.80

Non-EPC Costs - - -

Land Cost 1.92 1.92 1.92

Total Project Infrastructure Cost 417.41 368.79 399.72

Table 54: Pipelines Capital Cost Estimate

Khorewah Bukhari Turk

Summary Pipeline
US$ Mn US$ Mn US$ Mn

Pipeline CPL-1 40.07 29.73 35.33

Pipeline Material 93km 36" (Line pipe, bends) 1.83 1.36 1.61

Fibre Optic Cable 0.23 0.17 0.21

Cathodic Protection 26.77 19.86 23.61

Construction (incl. crossings) 0.00 0.00 0.00

Survey, soil investigation, EIA, archaeological costs (incl. in PM, Eng.) 7.58 5.63 6.69

Right of Way (RoW), Land acquisition, crop remuneration 0.00 0.00

Above Ground Installations (AGI) 1.90 1.90 1.90

Pig Stations (x2) 3.00 2.25 3.00

Block Valve Stations (x4) 1.70 1.70 1.70

Custody Metering Station (CMS) 4.02 2.98 3.54

Project Management, Engineering, Site Supervision 0.00 0.00 0.00

Fees, permits, insurance (incl. in PM, Eng.) 87.11 65.58 77.58

TOTAL COSTS

Summary - Pipeline CPL-2

Pipeline Material 16km 36" (Line pipe, bends) 6.89 6.89 6.89

Fibre Optic Cable 0.32 0.32 0.32

Cathodic Protection 0.04 0.04 0.04

Construction (incl. crossings, except Indus HDD) 4.61 4.61 4.61

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 Survey, soil investigation, EIA, archaeological costs (incl. in PM, Eng.) 0.00 0.00 0.00

Right of Way (RoW), Land acquisition, crop remuneration 1.30 1.30 1.30

Above Ground Installations (AGI) 0.00 0.00

Pig Stations (x2) 1.90 1.90 1.90

Indus HDD Crossing 5.70 5.70 5.70

Project Management, Engineering, Site Supervision 0.69 0.69 0.69

Fees, permits, insurance (incl. in PM, Eng.) 0.00 0.00 0.00

TOTAL COSTS 21.45 21.45 21.45

Note: Costs for Pipeline CPL-1 and CPL-2 (including Indus HDD-crossing) are shown separately, since
it is not yet confirmed if tie-in to NSGP will be implemented.

Table 55: UGS Sub-Surface Facilities Capital Cost Estimate

Khorewah Bukhari Turk

Summary - Sub-Surface Facilities
US$ Mn US$ Mn US$ Mn

Approx. total costs for drilling of storage wells 79.20 61.20 72.00

Approx. total costs for drilling of other wells 21.60 21.60 21.60

Approx. total costs for completion of storage wells 15.84 12.24 14.40

Approx. total costs for completion of storage wells 3.76 3.76 3.76

Drilling Rig mob / demob 1.00 1.00 1.00

Drilling Rig moving 2.90 2.90 2.90

Cluster Manifolds, Infrastructure 4.70 3.76 4.70

Flowlines/water reinjection lines 24.00 19.00 24.00

Engineering and related services 3.26 2.67 3.26

Land acquisition 1.50 1.50 1.50

Topographical survey, soil investigation 0.15 0.15 0.15

Fees, permits, insurance 0.65 0.65 0.65

TOTAL COSTS 158.56 130.43 149.92

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 Table 56: UGS Aboveground facilities (including Long Lead Items) Capital Cost Estimate

Khorewah Bukhari Turk

Summary - UGS Aboveground Facilities
US$ Mn US$ Mn US$ Mn

Long Lead Items 0.00 0.00 0.00

Tucos 46.00 46.00 46.00

LTS package / Withdrawal equipment / vessels / coolers 49.27 49.27 49.27

Civil material and works 6.64 6.64 6.64

Process/Mechanical material and works 0.00 0.00

Mechanical Utilities (excl. LLIs as above) 6.97 6.97 6.97

Piping 4.41 4.41 4.41

Valving 7.55 7.55 7.55

Electrical material and works (incl. OHL power supply) 10.23 10.23 10.23

Control and Instrumentation material and works 6.19 6.19 6.19

Engineering and related services 18.12 18.12 18.12

Land acquisition 0.42 0.42 0.42

Topographical survey, soil investigation 0.06 0.06 0.06

Fees, permits, insurance 3.27 3.27 3.27

TOTAL COSTS 159.13 159.13 159.13

PROJECT IMPLEMENTATION TIMELINE

The total timeframe for implementation/ construction of the Project is estimated at 6 years, during
which a complete facility with covered area shall be constructed and the cushion gas will be filled. It is
estimated that the execution spread of the construction shall be undertaken in the first 5 years and
thereafter cushion gas will be filled in the 6th year.

FIRST GAS FILL

Cushion Gas to be purchased will remain one of the biggest cost drivers for the UGS. Natural gas can
be either purchased via LNG or from domestic fields. Domestic Price varies field to field as per
concession agreements. The estimated weighted average cost of gas (indigenous) is Rs 700/MMBTU
(US$ 4.375/MMBTU) for SSGCL and Rs 790.00/MMBTU (US$ 4.94/MMBTU). The imported LNG price,
on the other side varies monthly (recently US$6.5 - 15/ MMBTU) It is the understanding of the
Consultant that LNG will be used as Cushion Gas due to the limited supply of indigenous resources.

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 The amount of cushion gas needed is 2,398 Million sm3 or 84 Bscf for Khorewah gas field. The
calculated BTU content per standard cubic feet is approximately 953. Considering this, the table below
gives an overview of different price scenarios for purchased LNG. Cost do not consider any
transportation cost from the LNG import facility to the UGS. Determination of RLNG weighted average
sale provisional price for the month of March 2021 shows that for the transmission network of SNGPL
it is 9.04 USD/MMBTU and for the distribution network 9.59 USD/MMBTU.

Price Level Cost in Million USD

4 USD per MMBTU 320

5 USD per MMBTU 400

6 USD per MMBTU 480

7 USD per MMBTU 560

8 USD per MMBTU 640

9 USD per MMBTU 720

10.70 USD per MMBTU (Base Case) 898

CAPEX ASSUMPTIONS

GENERAL

2021 prices are taken as basis. If any delay in award of FEED and/or EPC Contracts, appropriate
escalation needs to be taken into account.

Exchange rates: 1 USD = 154.85 PKR; 1 USD = 0.83 EUR

There are currently significant holds within the project design that might affect capital cost, including
but not limited to:

• Tie-in location(s) to existing gas network

• Actual # of required wells based on current reservoir characteristics
• Costs for provision of electric power supply (overhead line)

Following costs are estimated as percentage of capital costs, as per international best practice, as well
as similar projects:

• Project Management, Procurement, Engineering, Site Supervision

• Land acquisition

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 • Topographical survey, soil investigation
• Fees, permits, insurance

COST COMPARISON OF MOST PROMISING CANDIDATES.

Based on the reservoir selection performed Consultant identified the most promising candidate to be
located in the Lower Indus Basis. Besides the Khorewah field, which was studied in detail for the
conversion into gas storage, also the fields Turk and Bukhari were identified as promising candidates.
The basic parameters relevant for gas storage are listed below

Table 57: Basic Comparison Khorewah, Bukhari and Turk field

Initial
Inventory Depth WGV CGV k*h No. of
Pressure
[Bscf) [m] [Bscf] [Bscf] [mD m] Wells
[bar]

Khorewah 188 1,947 196 104 84 9,800 22

Bukhari 90 2,000 194 48 42 40,000 17

Turk 167 1,997 195 90 77 17,300 20

All three fields have the Lower Goru sandstone as reservoir rock and are located in the same region.
The reservoir depth is almost the same with 2,000m, the initial reservoir pressure around 195 bar.
Difference is in size and permeability. The permeability or capacity k.h determines the deliverability
of a well. The necessary number of wells was calculated for the withdrawal rate of 792 MMscf/d. The
number of wells shown above was not only correlated to k.h but also to the parameters like the well
completion. These values must be reviewed in a FEED study using more consolidated data.

The working gas volume WGV for Bukhari almost meets the minimum required value of 44 Bscf,
whereas the Turk and Khorewah field have almost twice this WGV.

The best ratio of cushion gas to working gas is obtained if the storage is operated at the maximum
possible pressure. As all 3 fields have almost the same characteristic it remains an economic
decision, which option shall be realized.

Since Turk and Bukhari are located north of the proposed pipeline corridor (see figure below), most of
the existing route already under investigation can be used. If Turk or Bukhari Gas Field are selected
that can tie into the proposed pipeline route. Since both fields are located north of Khorewah, the
overall pipeline length will be reduced. Since there will be no changes for the injection and withdrawal
capacity, pipeline sizing will remain valid.

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 Table 58: Pipeline length for Khorewah, Bukhari and Turk fields

CPL-1 (Km) CPL-2 (km) Indus Crossing

Khorewah 93 16 Yes

Bukhari 69 16 Yes

Turk 82 16 Yes

Surface facilities will remain categorized into main operating modes which are injection and
withdrawal. The main operating modes will be injection and withdrawal. There is no change in the
process parameters, or the process design expected due to similarities of the reservoirs. Only the
number of wells will determine the number of clusters needed for conversion of the fields into gas
storages.

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 Comparing absolute CAPEX Bukhari can be considered as most optimal solution with overall CAPEX
below 400 Million USD. This is mainly due to a shorter pipeline length and due to the slightly higher
deliverability of the reservoir which allows less wells to be drilled.

On the contrary, Bukhari does not allow to expand the facilities to accommodate additional demand
(FY45 scenario), since it only has approximately 48 Bscf working gas volume.

Apart from absolute Capex it is worth considering a relative approach, which compares the amount of
USD be spent of 1,000 scf. In this comparison Khorewah offers the best ratio with around 4.1
USD/1000 sfc. This is nearly half the cost of Bukhari.

Table 59: Relative comparison most promising fields

Reservoir CAPEX (in Mio USD) Working Gas Volume (in Bscf) Ratio (USD/1000 scf)

Khorewah 426.25 104 4.10

Bukhari 376.58 48 7.85

Turk 408.09 90 4.53

PIPELINE

Line Pipe material cost calculation is based on selected pipeline outer diameter (OD) and wall
thickness (WT) as defined in the Pipeline Basis of Design. Pipeline steel, external and internal coating
costs are based on current international prices for a project on the sub-continent. Rail/road transport
costs to EPC Contractor yard is included extra (further cost for stringing is included in construction
cost for pipeline).

Estimate for weight coating assumes 10km of CPL-1 is installed in potential flood areas (Rod Kohi –
torrent – spate – Irrigation); this must be confirmed based on final route selection.

Pipeline construction cost is based on current international prices for a project on the sub-continent;
special crossings (such as Indus HDD) are treated separately. Construction cost is based on
preliminary soil conditions as identified from desk-top studies (see Pipeline Basis of Design). No
significant geo hazards which might require special construction techniques are foreseen based on
currently available information.

Other costs associated with Pipeline, such as fibre-optic cable, cathodic protection, block valve
stations, pigging stations, and are estimated as individual line items .

184
 UGS SUB-SURFACE FACILITIES

As per Basis of Design, 22 storage wells are assumed. These shall be arranged in clusters of 4-5 wells,
serviced by a common flowline and manifold. Wells are assumed to be within 3-5km distance of the
existing Khorewah site, resulting in 5 flowlines of average 4km length and 5 common manifolds.

In addition to the storage wells, five water disposal wells are foreseen, as well as three observation
wells.

Related items and relevant dimensions, depths, etc. for Drilling design are given in the Basis of
Design. All estimated costs are based on information from related projects and may differ depending
on special requirements or changing market prices. The following elements are considered:

Upper Completion
All parts above the production packer are part of the upper completion, in this case the tubing string
and the safety valve.
• Wellhead
• Tubing
• Surface Controlled Subsurface Safety Valve (TRSV)

Lower Completion
All parts below the packer and the production packer itself are known as lower completion of the well.
• Packer (incl. tailpipe)
• Tubing-conveyed perforating (TCP)

UGS ABOVEGROUND FACILITIES

It is recommended that Long Lead Items are purchased by ISGS and novated to the USG EPC –
Contractor. As these are high value items, additional effort has been made to characterise equipment
and obtain market costs. For the turbine-compressors, three vendors have carried out preliminary unit
selections and provided budget prices. For the withdrawal facilities (including pressure vessels,
coolers, refrigeration system, glycol regeneration, etc.), equipment weights have been estimated
based on the Master Equipment List and corresponding market steel price used. Appropriate factors
for installation in Pakistan and local labour costs have been considered.
Costs for other disciplines are based on similar projects, considering appropriate factors for
construction in Pakistan (local materials) and local labour costs.
• Civil material and works

185
 • Process/Mechanical material and works
• Mechanical Utilities
• Piping, Valving
• Electrical material and works (incl. OHL power supply)
• Control and Instrumentation material and works

LAND COST

The cost of land acquisition for in the total project cost as is approximately USD 0.4 Million for all
sites.
YEARLY INVESTMENT BREAKDOWN

The yearly investment breakdown is in line with the implementation schedule and shall further
detailed during the next design phase. It is considered that already in 2021, the FEED
engineering will be started. It is considered that there will be three lots (Subsurface, Surface and
pipeline) which will be executed independently. The construction and commissioning of the
project is finalized in 2025. First gas fill shall be in 2026 and finalized early 2027.

Table 60: Yearly Investment Breakdown

Lot 2021 2022 2023 2024 2025

Year 0 Year 1 Year 2 Year 3 Year 4

Pipeline (in Million USD) 1% 3% 24% 70% 2%

Sub Surface (in Million USD) 1% 3% 25% 54% 17%

Above Ground (in Million USD) 1% 3% 24% 62% 10%

INTEREST DURING CONSTRUCTION

Interest arising on loans during the construction period is projected to be accrued and rolled over into
the debt principal and carried forward up to the completion of the Project. Accordingly, it is capitalized
as part of Project Cost. Interest during construction is calculated on the basis of the total debt
outstanding at each month end during the development period. The financing rate used for
computation of this cost is as per the secured terms of financing, taken at 3-month LIBOR interest
rate of 0.131% + 4.50% Spread.

Table 61: Interest During Construction (IDC)

Khorewah Bukhari Turk

Interest During Construction
US$ Mn US$ Mn US$ Mn

Interest During Construction 56.87 44.92 53.87

186
16. FINANCING PLAN
FINANCING STRUCTURE

The Project is proposed to be financed through a combination of debt and equity with the expectation
of a debt-to-equity ratio of 80:20. Given that almost all the costs shall be incurred in foreign currency,
therefore financing arrangements have principally been denominated in foreign currency and reflected
as follows to cover the Project cost requirements.

Table 62: Financing Structure

Khorewah Bukhari Turk

Source of Finance Percentage Share
US$ Mn US$ Mn US$ Mn

Debt 80% 1,111.06 701.67 1,034.00

Equity 20% 277.76 175.42 258.50

Total 100% 1,388.82 877.09 1,292.49

FINANCING FRAMEWORK

The most likely option for the implementation to be undertaken through a hybrid of public and private
participation i.e. is on public private partnership (PPP) modality whereby while retaining the ownership
of its land and ensuring commitment to the overall objectives of the transaction, GOP can provide the
right of use to the private partner to develop the facility and operate the same for such period
necessary to recover their investment plus reasonable return and then transfer the project back to
GOP. Therefore, it seems to be most likely arrangement for the transaction to be undertaken.

EQUITY FINANCING

20% of the Project cost shall be financed through equity component. This requirement shall be met
through the injection of equity during implementation phase and is deemed to be invested at the time
of Project execution. The investor shall invest in the Project in terms of cash or equipment or provision
of services of installation activities.

DEBT FINANCING

Since this is an Energy sector project, which ensures the payment of debt as part of the tariff regime
under capacity charge, there is a good possibility of securing long term debt financing. However, the

187
 terms of the debt are likely to be at the rates which reflect a higher level of risk and exposure. It is
estimated that the financing facility made available would be at the following terms:

• Draw Down Period: Six Years (6) years i.e. during the construction period + filling of cushion
gas;
• Grace Period on Repayment of Principal: Grace period of 6 years during rehabilitation phase is
assumed for this project as the rehabilitation phase is started in first month and cash inflows start
in the next year.
• Interest / Mark Up @ Three (3) month LIBOR @ 0.131% + 4.5 basis points i.e. 4.63% per
annum payable on quarterly basis;
• The debt will be secured by the investor on the strength of its future cash flows and concession
agreement.

The computation of debt repayment is based on the provision of equalized repayment of principal over
40 equal quarterly instalments while interest is computed on the balance outstanding at the beginning
of each period.

Table 63: Details of Debt Financing

Particulars Terms

Debt Facility Local Long-term debt

Period of Debt Facility 10 Years

Three-month LIBOR 0.131%

Spread 4.5%

Interest Rate / Financing Rate 4.63%

For this Project, the international financing has been assumed because if the investor injects the
international debt, cost of debt would be lower due to the usage of LIBOR rate plus spread.

PROJECT DRAWDOWNS

Project cost has been distributed over the construction period of 6 years based on actual
disbursements during the period. The disbursement of project cost is made from the debt and equity
components in proportion to the debt equity mix assumed in financing plan. The rationale for the
proportional usage of debt and equity component is that the equity only cannot be used due to high
cost associated with it, Therefore, a mix of equity and debt needs to be employed. Similarly, project
cost cannot be financed solely from debt facility because lenders may be reluctant to provide the debt
in the absence of matching equity injections.

188
 WEIGHTED AVERAGE COST OF CAPITAL (WACC)

This is defined as the weighted average of the various capital forms used for financing of the Project.
Based on the consultative session by NEPRA with regards to the determination of Rate of Return, the
rate of 15% is adopted as return on equity for imported Gas RLNG as current return in USD and debt
carrying a cost of 4.63% the weighted average cost of capital is calculated at 5.59%.

Table 64: Weighted Average Capital Cost (WACC)

Particulars Weightage Required Return

Debt 80% 4.63%

Equity 20% 15%

WACC 5.59%

This WACC has been used to discount post tax cash flows to arrive at the NPV of the Project.

RETURN ON EQUITY (ROE)

For reference purposes, ROE mechanism generally applied in the Power sector has been used.

NEPRA decided to review the return offered to power sector for which NEPRA obtained opinion of
general public and stakeholders on the returns worked out to for different technology and accordingly
decided to hold a consultative session on 14 November 2018.

A concept paper was developed & placed on NEPRA’s Official website seeking comments from
stakeholders. Major parameters used to quantify IRR were:

Return = RF + Beta (MRP) + CRP = 8.59% to 13.57%

In response following comments were received on the paper by several organizations:

ORGANIZATION SALIENT RECOMMENDATIONS

CPPA-G: Risk Free Rate to be aligned with project life. (5 – Years)

WAPDA: CDS supported with caveat to review if breached +0.5%
K-Electric: Normalized Rate of Return of 10-15 years may be considered for market risk
premium
Asia Petroleum: A PKR based return to be considered (RF & RM)
Gharo Solar: While using beta (According Pakistan Environment) there is no need to separate
country risk premium

189
 Bridge Factor: NEPRA to provided returns close to be offered neighbouring countries (14% -
23%)
Aequitas Pvt Ltd: Model does not account for Unsystematic Risk (Green Field Projects)

Based on the recommendation NEPRA calculated the base return by using Pakistani Data as follows:
• Rf: 9.95% current yield of 10-yr Pakistan Investment Bond Issued 08.08.2018
• 0.84 (US Power Market)
• (Rm-RF): 6.5% market consensus 6% to 7%. Historic 6.43%
• Return: 15.47%

Then NEPRA used US Data to verify/check the result as follows:

Risk free rate (Rf): 2.96 % Risk free rate of US Treasury bond issued Aug 15, 2018 for 10
years: 0.84 US Power Market
(Rm-RF): 5% generally used (Historic 4.77%)
Country Risk 5.15% (8.10%-2.96%)
Premium
(Bond Market):
Return: 12.30% (US$ Based)
Return: 15.41% (PKR converted)

Conclusion: The return of 15.47% using Pak data is similar to return of 15.41% arrived using US Data.

At the end NEPRA made a detailed summary of proposed return for the major Tech/Fuel Industries as
follows:

Technology Proposed Return Current Return

Imported Coal 12.50% -15.67% 17.00% - 20.30%

Imported Gas RLNG 13.25% -16.44% 15.00% - 18.24%

Local Gas 14.00% -17.21% 15.00% - 18.24%

Thar/Local Coal 14.00% - 17.21% 18.00% - 21.33%

Bagasse 14.00% - 17.21% 15.00% - 18.24%

Solar/Wind 14.00% - 17.21% 14.00% - 17.21%

Small Hydro (Take or Pay) 14.25% - 17.47% 17.00% - 20.30%

Small Hydro (Take & Pay) 14.50% - 17.73% 17.00% - 20.30%

Large Hydro (Take or Pay) 15.00% - 18.24% 17.00% - 20.30%

Large Hydro (Take & Pay) 16.00% - 19.27% 17.00% - 20.30%

As per the above schedule given by NEPRA we have adopted the rate of 15% for current return on
equity.

190
17. OPERATION COST
Tables below show the estimated operating costs for the new facilities.

Table 65: Operating Cost Estimate

Withdraw
Injection
al Mode
Mode with Withdraw Stand Total (USD
Energy Cost - UGS with
compressi al Mode by Mio.)
compressi
on
on

Hour
Annual operation 2,667 314 1,020 4,760
s

Driver Energy kW 16,170 7,010 0 0

Site electrical energy kW 500 1,000 1,000 200

Gas cost $/a 2,875,026 158,482 3.03

Electricity cost - capacity $/a 0.06

116,72
Electricity cost - variable $/a 163,519 38,504 125,015 0.44
6

Annual Energy Cost $ 3.53

O&M - UGS

Tuco Fixed $/a 0.61

Tuco Variable $/a 215,627 11,006 0 0 0.23

Withdrawal Fixed $/a 0.40

Withdrawal Variable $/a 0 62,800 203,900 0 0.27

O&M Personnel (incl. temp.

# 12 12 12 4 0.05
shift)

Admin Personnel # 6 6 6 6 0.04

Annual O&M Cost $ 1.58

For Pipelines and associated facilities (pig stations, block valves, metering), OPEX is assumed to be
1.0% of CAPEX in line with best practice and similar projects, i.e., $1,085.000 per year.

Table 66: OPEX Assumptions

Gas Tariff USD/MWh (US$ Mn.)

Electricity tariff - capacity charge USD/MW/a 27,648 0.50

Electricity tariff - variable charge USD/MWh 122.6 5.30

GT Driver efficiency injection % 27 0.00

GT Driver efficiency withdrawal % 25 0.00

Power Supply Capacity MVA 2 0.00

191
 TuCo Installed capacity MW 38 0.00

TuCo fixed O&M USD/kW-a 16 28.80

TuCo variable O&M USD/MWh shaft power 5 0.01

Withdrawal Installed capacity MW 20,0 0.00

Withdrawal fixed O&M USD/kW-a 20,0 3.60

Withdrawal variable O&M USD/ MWh shaft power 10,0 0.00

Cost Personnel USD/a 6000,0 0.01

(75,000 PKR/month oil & gas industry) 38.22

Total O&M 43.34

There is uncertainty particularly in regard to gas and electricity tariffs that would be applied to the
new UGS. Current assumptions are based on published internet tariffs from public energy supply
companies in Pakistan. ISGS may be able to negotiate better tariffs.

Table 67: Total Variable and Fixed O&M

Total Variable & Fixed O&M US$ Mn

Electricity cost – variable 0.44

Tuco Variable 0.23

Electricity tariff - variable charge 0.22

Tuco Variable O&M 0.01

Withdrawal variable O&M 0.00

Total Variable O&M 0.90

Fixed O&M Charge 42.43

Total O&M 43.34

192
18. TARIFF REGIME
Various tariff options were considered at the interim stage of this feasibility. Amongst all, Cost-plus
regime was selected to be the most preferred option. The typical Cost-plus tariff consists of actusl cost
and an agreed return to be paid to the investor. In Pakistan, this type of tariff is generally used in the
Power sector where Independent Power Producers (IPPs) operate under this tariff regime.

In the Cost-plus tariff regime, the project revenues are primarily derived from the capacity charge and
the energy cost which are the two main components of “Cost-Plus” regime. Such tariff is usually the
multiple of fixed and variable cost factors combining the Capacity requirement aligning with fixed cost
and the variable cost related to the injection and withdrawal aligning with the variable factor. Added to
this is the allowed rate of return (“IRR”) on investment which will be calculated to reflect the weighted
cost of capital (“WACC”), i.e. the expected cost of capital relates to equity investors and cost of capital
related to debt such as interest rate from the debt investors.

The cost-plus method requires that the cost is allocated to the specific user according to their related
activity and the cost associated therewith. Therefore, a tariff is appropriately calculated for each type
of user and hence the cost allocation depends on the user type of storage.

The table below provides a brief overview of the tariff heads where the costs have been levelised over
a period of 25 years. During the early years of operation, tariff will generally tend to be on the higher
side based on factors such as Debt repayments which will end in year 10.

Table 68: Tariff Calculation

Levelized Tariff- USD/kWh Khorewah/MMBTU Bukhari/MMBTU Turk/MMBTU

Capacity Charge

Debt Principal Repayment -

0.9030 1.2357 0.9711
Foreign

Debt Interest Payment - Foreign 0.4358 0.5963 0.4686

Debt Principal Repayment - Local 0.0000 0.0000 0.0000

Debt Interest Payment – Local 0.0000 0.0000 0.0000

Fixed O&M 0.0398 0.0862 0.0460

Insurance tariff 0.0050 0.0096 0.0056

ROE 0.0334 0.0457 0.0359

Total Capacity Charge 1.4170 1.9735 1.5272

193
 Energy Charge

Gas Cost 11.5613 11.5613 11.5613

Variable O&M 0.0008 0.0018 0.0010

Total Energy Charge 11.5621 11.5631 11.5622

Total Base Tariff 12.9791 13.5365 13.0895

PROJECT NET EARNINGS

The Project net earnings are generated as a difference between income from its core operations and
expenditures incurred to meet its operations and the other non-operating expenditures principally the
Project financing cost. The results indicate a substantially viable Project as is demonstrated through
the summary results of the income and expenditure flows in the periodical average results shown
below:

Table 69: Projected Income Statement

PROJECTED INCOME STATEMENT (25 Years Khorewah Bukhari Turk

Average) US$ Mn US$ Mn US$ Mn

REVENUE 2,451.69 1211.25 2152.36

OPERATING COSTS 2283.1 1080.38 1991.19

Gas Cost 2234.2 1032.23 1942.57

O&M Costs 42.62 42.62 42.62

Insurance 6.26 5.53 6.00

EBITDA 168.6 130.87 161.17

Depreciation - - -

Other Income - - -

Financing Fees - - -

EBIT 168.6 130.87 161.17

Interest on Long term Debt 7.56 4.77 7.03

Interest on Short term Debt - - -

Profit Before Tax 161.04 126.1 154.14

Taxation 41.9 32.36 40.10

Net Profit 119.15 93.75 114.04

194
 Detailed Financial Statements attached at the end of financial part of the report

PROJECT REVENUE ASSUMPTIONS

Following are the assumptions that have been used to estimate project revenues:

Table 70: Revenue Assumptions

Plant Assumptions

Cushion Gas BCF 84

Working Gas BCF 104

Capacity BCF 188

Capacity MMBtu 188,000,000

Cushion Gas MMBtu 84,000,000

Yearly Sales 104,000,000

Total Hours 8,760

Plant Life (Years) 25.00

195
19. FINANCIAL ANALYSIS
QUANTITATIVE ASSESSMENT OF THE PROJECT

In this section, a comprehensive analysis has been carried out of the Project to assess its economic
and financial viability and to determine its feasibility with reference to various risks present and
mitigation of such risks thereof. Different basis has been used, relying primarily on the results of the
financial model.

BASE CASE PARAMETERS AND FINANCIAL PROFITABILITY ANALYSIS

Free Cash Flows (FCF) and free cash flow to equity (FCFE) of the Project have been used to
determine the key financial indicators of the Project and of the equity holders respectively. The
financial model based on free cash flows, both for the Project and the investor, is provided
separately.

Using the free cash flow model, following are the key financial indicators for the Project appraisal:

Table 71: Key Financial Indicators (Project)

Key Financial Indicators

Khorewah Bukhari Turk
(Project)

Net Present Value (NPV – US$) 3,171,644,907 1,492,398,993 2,885,153,610

Internal Rate of Return (IRR –

4.00% 7.1% 4.8%
%)

Project Payback Period (Years) 14.67 11.81 14.21

Net Present Value (NPV) of the Project is calculated without considering cash flows beyond
project life if any in form of terminal value and are based on the net benefit arising from the Project
after meeting all the liabilities and commitments as well as the cost of operations and other
expenditures during the 25 years life of the project.

Internal rate of return (IRR) of the Project is calculated well above the Project. WACC
estimated at 5.59% thereby indicating financial viability of the Project.

Payback Period of the Project is estimated at 14.67 years for Khorewah, 11.81 years for Bukhari
and 14.21 years for Turk from COD.

196
20. FINANCIAL MODEL MANUAL
Financial Model/Feasibility is developed on the basis of numbers/data/charts/figures/calculations
provided by the lead consultant. All figures’ numbers/data/charts/figures/calculations contained in
excel based financial model are computed by consultants based on best estimates and market studies.
Actual figures and results may vary and consultants shall bear no responsibility.

This financial model is developed keeping in view international best practices and requirement of
ISGS. Basis of development of financial model is appended as follows.

Consultant is providing in total 9 scenarios (three for each field) which can be run through the financial
model.

The scenarios are based on anticipated Working Gas/Sales Volumes in BCF. In scenario 1, the Working
Gas/Sales Volume is the maximum Working Gas Volume to be stored in the reservoir. Scenario 2 bases
its forecast on the 25 % excess gas demand forecast described in Chapter 5 Gas Demand and Supply
of the Main Report. It is expected that the gas demand will increase and therefore the requirement for
25 % excess gas demand will increase accordingly. Scenario 3 is based on the forecast of 100% excess
gas demand. However, the working gas volume cannot exceed the maximum capacity of the reservoir,
therefore the figures for working gas volume for Base Case (Scenario 1) and 100 % Excess Gas (Scenario
3) are the same (Khorewah Base Case Scenario)

The three scenarios reflect the outcome of the meetings held between Consultant and ISGS. Initially it
was agreed that the Working Gas Volume shall be based on the most favourable ratio between working
gas and cushion gas, which was considered as reservoir optimization. Later, Consultant was asked to
also consider actual sales volume provided in Chapter 5 of this report which correspond to Scenario 2
(25% excess gas) and Scenario 3 (100% excess volume). Therefore, the demand growth forecasted in
the report has been translated into the financial model in Scenario 2 (25% Excess Gas demand) &
Scenario 3 (100% excess gas demand). Multiple scenarios have been provided and a dynamic financial
model has been provided to offer flexibility to ISGS to perform its own analysis as and when required.

For the purpose of invoicing and computing monthly revenues, corresponding tariff for the said month
is used (For instance, January 2030 withdrawal revenues will be calculated using tariff for the month
of January 2030). Levelized tariff is only the present value of average tariff to be charged on monthly
basis. In any case or scenario, levelized tariff shall not be used to compute revenues or costs.

197
 DASHBOARD

Under Ground Gas Storage Facility

Triggers Project Cost EPC Cost Financial Highlights

Gas Cost USD /MMBTU 10.70 <<<<
4,000,000
Cushion Gas Cost 823,900,000 Non-EPC Cost
3,500,000
Levelized Taiff per mmbtu 13.0895 3,000,000
Development
Levelized Storage Tariff / mmbt 1.53 Costs
2,500,000
2,000,000
Cushion Gas 1,500,000
Select Site from Drop Down List Turk <<<< 1,000,000
Gas Sale Scenario Scenario 1 Base Case Debt Service 500,000
Reserve -
Financing Type PPP <<<<

Year 1
Year 3
Year 5
Year 7
Year 9
Year 11
Year 13
Year 15
Year 17
Year 19
Year 21
Year 23
Year 25
Insurance
Debt 80% 100% Debt in G2G Mode During
Equity 20% 0% Equity in G2G Mode Construction
Financing Fees &
Charges Revenue (USD '000) EBITDA (USD '000)

Descriptioon Details % USD PKR Net Income (USD '000) Dividends (USD '000)
Total Poject Cost 1,292,494,655 200,142,797,263
Project IRR 4.8%
Equity IRR 6.3%
Financing Ratios EBITA & Net Income Margins
Pay Back Period 14.21 25%
Projecr NPV 2,885,153,610 446,766,036,581 140.00
Terminal Value Part of NPV (Cushion Gas) 2,856,333,813 442,303,290,872 120.00 20%
100.00
15%
Only for Project Sensitivity Analysis (Automatic Results) 80.00
60.00 10%
0% Project Cost <<<<
40.00
0% Gas Cost <<<< 20.00
5%
0% CAPEX VGF <<<< - 0%

Debt to Equity Times Interest Earned

Debt Service Coverage Loan Life Cover Ratio EBITDA (USD '000) Net Income (USD '000)
CS WG
Khorewah 84 104

Project dashboard provides all the necessary information pertaining to project and financial appraisals.
Only red highlighted items in the dashboard are hard coded items and subject to changes for results
computations.

Financial model has been developed on scalable assumptions and can be run on different scenarios
and three different sites i.e. Khorewah, Bukhari and Turk. These three sites can be selected from
dropdown menu developed in dashboard.

Cushion gas has been set at prevailing LNG prices at the time of development of financial model and
can be changed to adjust for current prices. Cushion gas price and working gas price both operate
from gas cost cell present in the dashboard. Cushion gas is anticipated to be fully recoverable.

Financial model has also been developed to account for sensitivities and of major cost items pertaining
to CAPEX and OPEX items. Sensitivities triggers also incorporated in the dashboard menu of the
financial model

A glance of levelized tariff has also been incorporated. However, a more detailed levelized tariff has
been provided in the assumptions sheet providing various cost heads and their impacts on the
consolidated tariff. A detailed calculation of tariff on monthly has also been provided as a separate
module in the financial model.

198
 ASSUMPTIONS

Financial Model Assumptions

Key Model Inputs Project Cost Assumptions USD PKR General Assumptions
Assumed Upfront ROE (Subject to ISGS Discretion) 15% Total EPC Cost USD 415,485,175 64,337,879,357 Annua l Increa s e i n O&M Ta ri ff 0.00%
Gas Cost /MMBTU (USD) 10.70 Ons hore EPC Cos t USD 415,485,175 64,337,879,357 PKR USD Ra te 154.85
Discount Rate for Levelized Tariff (WACC) 6% Offs hore EPC Cos t USD 0 0 Annua l PKR Deva l ua ti on 3.00%
Ta xes on EPC (% of EPC) 0.00% 0.00% US CPI-Pre COD 4.20%
Yes Ta xes on EPC USD 0 Pa k CPI- Pre COD 10.87%
Plant Assumptions Non-EPC Costs USD 1,920,000 297,312,000
Cus hi om Ga s BCF 84 BCF La nd Regi s tra ti on a nd Adva nce Rent USD 1,920,000 297,312,000
Worki ng Ga s BCF 104 BCF Res i denti a l Ci vi l Works USD 0 0
Tota l Ga s for UG Fa ci l i ty 188 MMBTU
Ca pa ci ty mmbtu 188,000,000 MMBTU Development Costs USD 9,485,859 1,369,167,517
Cus hi on Ga s mmbtu 84,000,000 MMBTU Ins ura nce Duri ng Cons tructi on (% of EPC) 1.50% 0.00%
Yea rl y Sa l es 104,000,000 MMBTU Ins ura nce Duri ng Cons tructi on USD 6,261,078 0
Tota l Hours 8,760 Fi na nci ng Fees & Cha rges USD 0 0
Conti ngenci es 0.00% 0.00%
Project Opera ti ona l Li fe 25.00
Financing Assumptions (USD)
Project Cost USD 1,388,820,858 #############
Debt % 80.0% 80.0%
Levelized Tariff - USD/MMBTU Equi ty 20.0% 20.0%
Capacity Charge Equity USD 277,764,172 43,011,781,972
Debt Pri nci pa l Repa yment - Forei gn 0.9030 Forei gn Debt % of Project Cos t 80.0000% 80.0000%
Debt Interes t Pa yment - Forei gn 0.4358 Foreign Debt USD 1,111,056,686 #############
Debt Pri nci pa l Repa yment - Loca l 0.0000 Ba s e ra te: 3 Month LIBOR 0.131% 0.131%
Debt Interes t Pa yment - Loca l 0.0000 Sprea d 4.50% 4.70%
Fi xed O&M 0.0398 Total Cost of Foreign Debt 4.63% 4.83%
Ins ura nce ta ri ff 0.0050 Tenor (Yea rs ) 10.00 10.00
ROE 0.0334 Pa yments per Annum 4.00 4.00
Total Capacity Charge 1.4170 Annua l Ins ta l l ment USD 139,439,792 21,795,278,967
Energy Charge Loca l Debt % of PC 0.00% 0.00%
Ga s Cos t 11.5613 Loca l Debt USD - -
Va ri a bl e O&M 0.0008 Ba s e Ra te 12.00% 12.00%
Total Energy Charge 11.5621 Sprea d 4.00% 4.00%
Total Base Tariff 12.9791 Total Debt Cost as per SBP Refinance 16.00% 16.00%
Three Months ' KIBOR 7.45% 1.00%
Sprea d 3.00% 1.00%
Total Local Debt Cost linked to KIBOR 10.45% 2.00%
Tenor (Yea rs ) 7.45% 10.00
Pa yments per Annum 3.00% 4.00 Operational Years Macroeconomic Assumptions
Annua l Ins ta l l ment USD - - Inflation-US
Cos t of Equi ty 15%
WACC 5.59% 1 2.1%
Working Capital Assumptions Debt Service Reserve 2 2.1%
Account Recei va bl e Da ys - Months - 3 2.2%
Sprea d 1.50% Fundi ng Ca s h Fl ow Ca s h Fl ow 4 2.1%
Worki ng Ca pi ta l Ra te 8.95% DSRA Amount USD 0 5 2.0%
L/C Cos t Per Annum 1.00% 1.00% 6 2.0%
Annua l Profi t on Ca s h (3 month KIBOR l es 4.45% -2.00% 7 2.0%
Taxation Assumptions 8 2.0%
Wi thhol di ng ta x on di vi dends 15.00% 9 2.0%
Income Ta x 30.00% 10 2.0%
11 2.0%
12 2.0%
Investment Breakdown 13 2.0%
Lot Year 0 Year 1 Year 2 Year 3 Year 4 14 2.0%
Pipeline (in Million USD) 1% 3% 24% 70% 2% 15 2.0%
Sub Surface (in Million USD) 1% 3% 25% 54% 17% 16 2.0%
Above Ground (in Million USD) 1% 3% 24% 62% 10% 17 2.0%

UGS Financial Model (“FM”) is controlled from the assumption sheet while gas costs, site selection and
sensitivities can be selected from dashboard. All the items in the blue highlighted cells in assumptions
are manual inputs/hardcoded values and can be changed based on the requirements of desired
results. Levelized tariff table is linked with monthly tariff sheet and can only be changed when manual
input items are revised/changed.

Financial model end user can only change base numbers and data from dashboard and assumption
sheet only. All other modules/sheets in the financial model are calculated from the dashboard and

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 assumptions and any changes made other than assumptions and dashboard may lead to
malfunctioning of the financial model.

*Note: Do not change any value or input any number other than assumptions and
dashboard. Manual inputs have been shown separately as red in dashboard and blue
highlighted cells in assumption.

Tariff Module
Monthly tariff calculations and levelized tariff has been calculated taking account all the necessary cost
items and inputs from assumption and dashboard. Changes which impact tariff calculations are
already linked to the tariff calculations and automatically update the tariff. No change need to be
made in the monthly tariff sheet/module

Project Cost and IDC

Project cost and IDC provides CAPEX requirements including interest during construction on monthly
basis and compounded on quarterly basis. Site selection and changes in assumption and/or dashboard
on capital nature will updated project cost and IDC sheet. Project cost and IDC also highlight
investment breakdown month on month basis for all CAPEX items.

Interest during construction has been calculated keeping in the financial framework of the project
sources of finances i.e. equity and debt. Project cost has been built on the basis that for any month
the capital cost will be first financed from equity and then via loan disbursement to minimize the
interest during construction (‘IDC”).

Financial Statements
Projected financial statement make the most important part of the financial model. These financial
statements have been developed taking all the necessary inputs from all the modules/sheets of the
financial model.

Projected profit and loss, cash flow statement and balance sheets have been providing separately in
financial statement module of the model. Furthermore, financial model also accounts for monthly and
yearly financial statements for the said project.

All the numbers provided in financial statements have converted to nearest thousand dollars (USD
‘000). Project free cash flows, internal rate of return and payback have also been computed at the end
of financial statements in the financial statement sheet. Ratio analysis has been separately calculated
in the ratio analysis sheet.

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 Financial model also includes a detailed debt schedule for the project. Changes made to interest rates,
debt tenor, debt amounts, CAPEX items will also update projected debt schedule.

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 PROJECTED FINANCIAL STATEMENTS

KHOREWAH

Projected Profit and Loss

(Year 1 to Year 12)
PROJECTED INCOME STATEMENT (USD '000) Yearly Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12

REVENUE 1,376,723 1,542,020 1,607,198 1,685,622 1,736,234 1,821,202 1,899,388 1,993,940 2,054,705 2,157,556 2,031,463 2,144,951
OPERATING COSTS 1,106,575 1,261,484 1,323,533 1,399,061 1,446,971 1,529,387 1,605,143 1,697,355 1,755,848 1,856,469 1,948,960 2,061,541
Gas Cost 1,057,803 1,212,699 1,274,743 1,350,265 1,398,170 1,480,579 1,556,328 1,648,532 1,707,019 1,807,632 1,900,113 2,012,685
O&M Costs 42,511 42,523 42,529 42,535 42,540 42,547 42,554 42,562 42,567 42,576 42,585 42,595
Insurance 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261

EBITDA 270,148 280,537 283,665 286,561 289,264 291,815 294,245 296,585 298,857 301,087 82,504 83,410
Depreciation - - - - - - - - - - - -
Other Income - - - - - - - - - - - -
Financing Fees
EBIT 270,148 280,537 283,665 286,561 289,264 291,815 294,245 296,585 298,857 301,087 82,504 83,410
Interest on Long term Debt 33,274 30,461 27,517 24,433 21,204 17,823 14,283 10,576 6,694 2,629 - -
Interest on Short term Debt - - - - - - - - - - - -
Profit Before Tax 236,874 250,075 256,149 262,128 268,060 273,992 279,962 286,009 292,163 298,457 82,504 83,410
Taxation 50,200 57,888 61,700 65,197 68,433 71,457 74,310 77,027 79,640 82,178 20,164 20,954
Profit After Tax 186,675 192,187 194,449 196,931 199,626 202,535 205,653 208,982 212,523 216,279 62,340 62,455

(Year 13 to Year 25)

PROJECTED INCOME STATEMENT (USD '000) Yearly Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25

REVENUE 2,217,219 2,340,883 2,454,591 2,592,809 2,680,753 2,831,489 2,970,108 3,138,683 3,245,907 3,429,820 3,598,959 3,804,691 3,935,538
OPERATING COSTS 2,132,955 2,255,804 2,368,725 2,506,177 2,593,366 2,743,352 2,881,217 3,049,031 3,155,481 3,338,598 3,506,918 3,711,802 3,841,766
Gas Cost 2,084,092 2,206,929 2,319,840 2,457,278 2,544,458 2,694,429 2,832,281 3,000,079 3,106,517 3,289,616 3,457,919 3,662,783 3,792,732
O&M Costs 42,602 42,614 42,625 42,638 42,647 42,661 42,675 42,691 42,703 42,721 42,738 42,759 42,773
Insurance 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261 6,261

EBITDA 84,264 85,079 85,866 86,632 87,387 88,137 88,890 89,651 90,427 91,222 92,041 92,889 93,771
Depreciation - - - - - - - - - - - - -
Other Income - - - - - - - - - - - - -
Financing Fees
EBIT 84,264 85,079 85,866 86,632 87,387 88,137 88,890 89,651 90,427 91,222 92,041 92,889 93,771
Interest on Long term Debt - - - - - - - - - - - - -
Interest on Short term Debt - - - - - - - - - - - - -
Profit Before Tax 84,264 85,079 85,866 86,632 87,387 88,137 88,890 89,651 90,427 91,222 92,041 92,889 93,771
Taxation 21,656 22,281 22,844 23,355 23,821 24,252 24,654 25,033 25,392 25,739 26,077 26,409 26,739
Profit After Tax 62,608 62,798 63,021 63,277 63,565 63,885 64,236 64,618 65,035 65,483 65,964 66,480 67,032

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 Projected Balance Sheet

(Year 1 to Year 12)

PROJECTED BALANCE SHEET ((USD '000)) Yearly Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Cash (3,210) 90,094 180,979 279,751 355,478 439,038 520,088 611,149 674,412 747,539 801,830 871,186
Inventory 100,359 105,493 110,891 106,261 122,528 128,796 135,386 129,733 149,593 157,247 165,292 158,390
Fixed Assets 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821
DSRA - - - - - - - - - - - -
Account Receivable - - - - - - - - - - - -
Assets 1,485,970 1,584,408 1,680,691 1,774,833 1,866,826 1,956,655 2,044,295 2,129,703 2,212,826 2,293,607 2,355,943 2,418,397
Long Term Debt 1,021,527 927,780 829,615 726,824 619,191 506,486 388,470 264,894 135,496 - - -
Accrued Interest - - - - - - - - - - - -
Working Capital Loan - - - - - - - - - - - -
Paid Up Capital 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764
Retained Earnings 186,678 378,864 573,312 770,244 969,871 1,172,405 1,378,060 1,587,044 1,799,566 2,015,843 2,078,179 2,140,633
Equity 464,442 656,628 851,076 1,048,008 1,247,635 1,450,169 1,655,824 1,864,808 2,077,330 2,293,607 2,355,943 2,418,397
Liabilities & Equity 1,485,970 1,584,408 1,680,691 1,774,833 1,866,826 1,956,655 2,044,295 2,129,703 2,212,826 2,293,607 2,355,943 2,418,397

(Year 13 to Year 25)

PROJECTED BALANCE SHEET ((USD '000)) Yearly Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25
Cash 909,547 963,000 1,016,199 1,087,902 1,121,863 1,174,339 1,226,583 1,301,492 1,330,382 1,381,935 1,433,255 1,512,295 1,535,200
Inventory 182,638 191,982 201,804 193,378 222,982 234,390 246,382 236,095 272,237 286,166 300,806 288,247 332,373
Fixed Assets 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821 1,388,821
DSRA - - - - - - - - - - - - -
Account Receivable - - - - - - - - - - - - -
Assets 2,481,006 2,543,803 2,606,824 2,670,101 2,733,665 2,797,550 2,861,785 2,926,407 2,991,440 3,056,921 3,122,882 3,189,362 3,256,394
Long Term Debt - - - - - - - - - - - - -
Accrued Interest - - - - - - - - - - - - -
Working Capital Loan - - - - - - - - - - - - -
Paid Up Capital 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764 277,764
Retained Earnings 2,203,242 2,266,039 2,329,060 2,392,337 2,455,901 2,519,786 2,584,021 2,648,643 2,713,676 2,779,157 2,845,118 2,911,598 2,978,630
Equity 2,481,006 2,543,803 2,606,824 2,670,101 2,733,665 2,797,550 2,861,785 2,926,407 2,991,440 3,056,921 3,122,882 3,189,362 3,256,394
Liabilities & Equity 2,481,006 2,543,803 2,606,824 2,670,101 2,733,665 2,797,550 2,861,785 2,926,407 2,991,440 3,056,921 3,122,882 3,189,362 3,256,394

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 Project Cash Flow

(Year 1 to Year 12)

PROJECTED CASH FLOW ((USD '000)) Yearly Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12
Net Income 186,678 192,186 194,448 196,932 199,627 202,534 205,655 208,984 212,522 216,277 62,336 62,454
Depreciation - - - - - - - - - - - -
DSRA - - - - - - - - - - - -
WC Changes (100,359) (5,135) (5,397) 4,630 (16,267) (6,269) (6,589) 5,653 (19,860) (7,653) (8,045) 6,901
Account Receivable - - - - - - - - - - - -
Account Payable - - - - - - - - - - - -
Accrued Interest - - - - - - - - - - - -
Net Operating Cash Flow 86,319 187,051 189,051 201,562 183,360 196,265 199,066 214,637 192,662 208,624 54,291 69,355

Net Investing Cash Flow - - - - - - - - - - - -

Working Capital Loan - - - - - - - - - - - -

DSRA Disbursement - - - - - - - - - - - -
Change in Long Term Debt (89,529) (93,748) (98,165) (102,790) (107,634) (112,705) (118,015) (123,576) (129,399) (135,496) - -
Net Financing Cash Flow (89,529) (93,748) (98,165) (102,790) (107,634) (112,705) (118,015) (123,576) (129,399) (135,496) - -
Net Cash Flow (3,210) 93,304 90,886 98,772 75,726 83,560 81,050 91,061 63,263 73,128 54,291 69,355
Opening Cash - (3,210) 90,094 180,979 279,751 355,478 439,038 520,088 611,149 674,412 747,539 801,830
Closing Cash (3,210) 90,094 180,979 279,751 355,478 439,038 520,088 611,149 674,412 747,539 801,830 871,186
Dividend Paid
Cash After Dividends (3,210) 90,094 180,979 279,751 355,478 439,038 520,088 611,149 674,412 747,539 801,830 871,186

(Year 13 to Year 25)

PROJECTED CASH FLOW ((USD '000)) Yearly Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24 Year 25
Net Income 62,609 62,797 63,021 63,277 63,564 63,885 64,235 64,622 65,033 65,481 65,961 66,480 67,032
Depreciation - - - - - - - - - - - - -
DSRA - - - - - - - - - - - - -
WC Changes (24,247) (9,344) (9,822) 8,426 (29,604) (11,408) (11,992) 10,287 (36,143) (13,928) (14,641) 12,560 (44,127)
Account Receivable - - - - - - - - - - - - -
Account Payable - - - - - - - - - - - - -
Accrued Interest - - - - - - - - - - - - -
Net Operating Cash Flow 38,362 53,453 53,199 71,703 33,960 52,477 52,243 74,909 28,890 51,553 51,320 79,040 22,905

Net Investing Cash Flow - - - - - - - - - - - - -

Working Capital Loan - - - - - - - - - - - - -

DSRA Disbursement - - - - - - - - - - - - -
Change in Long Term Debt - - - - - - - - - - - - -
Net Financing Cash Flow - - - - - - - - - - - - -
Net Cash Flow 38,362 53,453 53,199 71,703 33,960 52,477 52,243 74,909 28,890 51,553 51,320 79,040 22,905
Opening Cash 871,186 909,547 963,000 1,016,199 1,087,902 1,121,863 1,174,339 1,226,583 1,301,492 1,330,382 1,381,935 1,433,255 1,512,295
Closing Cash 909,547 963,000 1,016,199 1,087,902 1,121,863 1,174,339 1,226,583 1,301,492 1,330,382 1,381,935 1,433,255 1,512,295 1,535,200
Dividend Paid
Cash After Dividends 909,547 963,000 1,016,199 1,087,902 1,121,863 1,174,339 1,226,583 1,301,492 1,330,382 1,381,935 1,433,255 1,512,295 1,535,200

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21. ENVIRONMENTAL SCREENING OF THE PROJECT

PURPOSE AND SCOPE

The Environmental and Social Impact Assessment (ESIA) report for the proposed UGS project
has been carried out as part of feasibility study of the project. ESIA study has been conducted in
accordance with the Guidelines of Sindh Environmental Protection Agency (SEPA) and other
international environmental legislation and guidelines including World Bank Environmental and
Social Safeguard Policies. In addition, the aim of the ESIA study is to ensure sustainable

development in Pakistan.

Detailed ESIA report submitted separately; Summary of the report is presented in this section.

In 2010, through the 18th Amendment to the Constitution of the Islamic Republic of Pakistan-
1973, environment became a provincial subject, empowering each province to make its own
laws. In 2014, Sindh adopted the Federal Act with minor amendments, calling it Sindh Laws
(Amendment) Act. Section 12 of the Federal and Section 17 of Sindh Environmental Protection
Act require the filing of an EIA for projects that are likely to cause adverse environmental effects.

This ESIA report provides an assessment of anticipated positive and negative environmental and
social impacts of the proposed project, along with the appropriate measures.

ENVIRONMENTAL AND SOCIAL IMPACT ASSESSMENT

The objective of conducting ESIA study is to demonstrate compliance of National Environmental

Quality Standards (NEQS) during construction and operation of the project. The project is
expected to bring significant positive social impacts in the area. New job opportunities will be
created for un-employed individuals. Local people will receive lifetime benefits through skill
training, capacity building and poverty alleviation. Semi-skilled and un-skilled workers in project
area will be hired during the project construction. Better awareness about health care among
labour and local community shall be created during operational phase of the project.

In conclusion many positive socio-economic impacts are expected to appear on quality of life of
people in the area due to implementation of this power project. These include generation of
direct and indirect employment, business opportunities, infrastructure development and
improvement of living standards. Through environmental management and mitigation plan
positive impacts of projects are optimized and negative impacts of the projects are minimized on
the environment and surrounding community. Hence, development of this project in Khorewah
has neither resulted into unacceptable impacts on environment in construction phase nor will
impose any threat to environment in subsequent operation phase.

ENVIRONMENTAL REGULATIONS

Provincial and national environmental laws, regulations, guidelines and policies applicable to

proposed project have been provided below:

• Pakistan Environmental Protection Act 1997 is the supreme environmental legislation in

Pakistan.

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 • Sindh Environmental Protection Act, 2014 is applicable to site as area falls in the
jurisdiction of Sindh
• “Pak-EPA Review of IEE and EIA Regulations, 2000” make the provisions for the
preparation, submission, review and approval of the Initial Environmental Examination
(IEE) and the Environmental Impact Assessment (EIA) reports and post monitoring of
environmental approvals by Pak-EPA. Regulations, 2000 also provide the classification of
projects requiring IEE and EIA. According to the classification provided by the
Regulations, 2000, the Underground gas storage requires an IEE to be conducted.
However, the UGS projects which expected to have impacts of high significance are
expected then EIA is to be carried out.
• Pak-EPA Policy and Procedures for Filing, Review and Approval of Environmental
Assessment establish a policy context and administrative procedures for environmental
assessment in Pakistan.
• Pak-EPA Guidelines for “Preparation and Review of Environmental Reports” is confined to
general aspects of the environmental reports.
• Pak-EPA Guidelines for Public Consultation during IEE/EIA.
• Pak-EPA Sectoral Guidelines for Hydropower Projects.
• National Environmental Institutions in Pakistan.

PROVINCIAL ENVIRONMENTAL SETUP IN SINDH

Sindh Provincial EPA enacted the Provincial Environmental Protection Act in February 2014 by
making appropriate amendments in PEPA, 1997. The EPA; Sindh now undertakes functions as
delegated under the Sindh Environmental Protection Act, 2014. EIA/ESIA related functions are
performed through Environmental Approval Section of the Sindh, EPA.

INTERNATIONAL ENVIRONMENTAL REQUIREMENTS

Provided below is a listing of international environmental and social requirements relevant to the
proposed project.

IFC ENVIRONMENTAL REQUIREMENTS

• IFC Sustainability Framework.
• IFC Performance Standards on Environmental and Social Sustainability.
• IFC Environment, Health and Safety (EHS) Guidelines.
• IFC's “Environmental and Social Review Procedures.

ADB ENVIRONMENTAL ASSESSMENT GUIDELINES

ADB Environmental Assessment Guidelines describe how to fulfil the requirements outlined in
ADB's Environment Policy and Operations Manual on Environmental Considerations in ADB
Operations. Information on ADB's policies and procedures for conducting and reporting on the

environmental assessment is also provided for all types of projects.

WORLD BANK ENVIRONMENTAL AND SOCIAL SAFEGUARD

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 The World Bank's environmental assessment policy and recommended processing are described
in Operational Policy (OP)/Bank Procedure (BP) 4.01: Environmental Assessment. This policy is
the umbrella policy for the Bank's environmental 'safeguard policies.

PROJECT INTRODUCTION

Underground Gas Storage project is the part of efforts of Government of Pakistan to fulfil the
energy demands by exploiting the existing storage potential of depleted gas fields to make
available gas in the country at low cost all year round. With this view to ISGS took initiative for
development of Underground Gas Storage Project. Total design capacity of the proposed site
envisages about 70 BCF. Primary source of gas will be imported LNG converted into gas on Port
Qasim at already established regasification unit.

The Underground Gas Storage Project is in district Badin and to be carried out at Khorewah-01.
The Underground Gas Storage Project is located on main Khorewah- Golarchi Road and is easily
accessible. Storage site is proposed on Khorewah-01 located 10 Km SSE of Turk field and about
80km south of the town of Hyderabad, near Mullah Hassan village which is about 1 Km toward

East Side of Khorewah City, District Badin.

21.4.1 Key Features of the Project

Underground Gas Storage Project is proposed to be constructed on depleted Khorewah-1 gas
reserve. The proposed site is porous having some degree of permeability. The former allows the
gas to be contained within medium and later enables the gas to move from point to point within
the medium. The expected storage capacity of the project is 70bcf which is flexible depending
upon the market demand/supply.

The gas imported from Turkmenistan - Afghanistan - Pakistan - India (TAPI) Gas Pipeline, Iran -
Pakistan Gas Pipeline (TAPI/IP) will be transported to the storage site through SSGC pipeline.
Initially, certain amount of gas would be stored in the storage as a cushion gas which is the
volume of gas required as permanent inventory to support the technical operation of a UGS.
Other technical features of the project include:

• Working Gas Capacity: minimum 44bcf

• Peak Withdrawal Capacity: minimum 792mmcfd
• Injection Capacity: minimum 396mmcfd

Working gas is the volume of gas in the storage facility above the cushion gas. Injection capacity
is the amount of gas that can be injected into a storage facility daily. Withdrawal capacity is the
amount of gas that can be withdrawn from a storage facility.

While the injection capacity and Withdrawal capacity of a given storage facility is variable and
depends on the total amount of gas in storage. Injection capacity is lowest when the reservoir is
fullest and increases as working gas is withdrawn. While withdrawal capacity is highest when the
reservoir is fullest and declines as working gas is withdrawn.

It is expected that SNGPL (Sui Northern Gas Pipelines Limited) area has a swing factor of 2.9 and
the SSGC (Sui Southern Gas Company) area has a swing factor of 2.1; defined as the ratio of
Peak Daily Demand / Average Daily Demand over a year.

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 Objectives of the proposed hydropower project are as follows:

• To share power generation efforts of Government of Pakistan at low cost save by storing
the imported gas on previously depleted gas reserve as a natural storage facility.
• To provide an input to cope with the gas demand generally in Pakistan and particularly in
Sindh;
• To enhance the security of supply of the gas consumers in case of a major failure of the
regular supply system

BASELINE CONDITIONS
Details of physical and ecological baseline are following:

21.5.1 Physical Environment

TOPOGRAPHY

Badin district is in the central alluvial plain of Sindh Province in Indus Basin. The topography is
very uniform and is not intersected by rivers and hills. The elevation at Badin is 10m above mean
sea level AMSL. The southern part of Badin district is close to the delta of Indus Basin.

LAND USE AND LAND SHAPE

Storage site is surrounded by fertile/semi fertile agricultural fields. Rainfall fills the nearby canals
which are the source of irrigation of the agricultural fields. Project area offers the typical rural
view of Sindh Province. The area is comprised of plains which is modified by anthropogenic
intrusions. Landscape at site is the combination of agricultural fields, scattered trees and human
settlements.

CLIMATIC CONDITION

Like most of the southern Plains of Sindh, Khorewah has a typical subtropical monsoon with a
maximum temperature of about 40oC in May and June months and minimum average
temperature is 1oC in January.

Average annual rainfall varies from 125 to 250mm with maximum rainfall occurring during
Southwest monsoon from June to September.

AIR AND NOISE QUALITY

Badin and Hyderabad districts are agro industrial districts. Gas production, rice mills and

urban transport are the major sources of air quality pollution in this area. The air quality analysis
reports are attached in the ESIA report.

WATER RESOURCES

Though Badin and Hyderabad districts are in Indus River Basin, no major rivers or stream are
flowing through these districts. The Indus River and its tributaries, on an average, bring 154
million-acre-feet (MAF) of water annually. This includes 144.91 MAF from the three Western
rivers and 9.14 MAF from the Eastern rivers. The waters of

208
 the Indus Basin Rivers are diverted through reservoirs/barrages into canals, classified as Main
Canals. These main canals then distribute the irrigation water into their command areas through
a network of branch canals. The Indus Basin Irrigation System comprises of three major
reservoirs, 16 barrages, 2 head-works, 2 siphons across major rivers, 12 inter river link canals,
44 canal systems (23 in Punjab, 14 in Sindh, 5 in NWFP and 2 in Balochistan) and more than
107,000 water courses. The aggregate length of the canals is about 56,073 km. In addition, the
watercourses, farm channels and field ditches cover another 1.6 million km. The system utilises
over 41.6 MAF of groundwater, pumped through more than 500,000 tube wells, in addition to the
canal supplies. Outside the Indus Basin, there are smaller river basins. One on the Mekran coast
of Balochistan drains directly into the sea and a closed basin (Kharan). These in total amount to
an inflow of less than 4 MAF annually

21.5.2 Regional Geology

Lower Indus Basin is one of the most studied sedimentary basins of Pakistan. This basin is
bounded to the north by Central Indus basin, to the northwest by the Sulaiman and Kirthar
basins in the south west. The main factors which controlled structures and sedimentology of
Lower Indus basin is rifting of the Indian plate. In the context of petroleum exploration and
success ratio, it is the more successful basin.

The lower Indus platform basin is underlain by infra-Cambrian to recent clastic and carbonates.
In this part, the early Cretaceous rocks are considered as the potential source rocks for
hydrocarbon generation. Similarly, Cretaceous to Eocene carbonates and clastic rocks are
considered as best reservoir rocks. Some of the rocks are also acting as seal rocks including
Cretaceous intra-formational shales. The Indus Basin is accompanied by different structural
events that makes a unique way of trapping mechanism. Such combination of source, reservoir,
seal and trapping mechanism made Lower Indus Basin the more potential basin in the context of
petroleum accumulation.

It was discovered in 1988. The structure is a tilted fault block which culminates at about 5800 ft
sub-sea along its Southwest bounding fault. It originally contains 131 BCF of recoverable gas at a
pressure of about 2900 psia.

The structure of Khorewah field is that of a three-way up thrown fault closure which has been
complicated by a series of smaller subsidiary faults. The major bounding fault, located on the
south-western margin of the field, connects northward with the fault forming the western
boundary of the Turk field. This fault has a throw to the west ranging from 700 to 900 ft. The
eastern closure is also by a major fault; the trend being parallel to the contour of the structure.
Throws on this fault range from 500 to 1000 ft. Dip closes the structure to the north and partially
to the east.

21.5.3 Ecological Environment

The study area for ecological baseline consists of the entire area proposed for Underground Gas
storage Project and its immediate vicinity. The ecological baseline provided in this ESIA includes
terrestrial and aquatic species found in the area. An ecological field survey of the project area
was conducted on 26-03 February to March 2021. The specific tasks covered under this ecological
baseline study include:
209
 • A review of the available literature on the biodiversity of the study area; and,
• Field surveys including;
• Qualitative and quantitative assessment of the fauna and flora.

In addition to the field survey, a review of available literature as well as interviews with members
of the local communities and relevant government departments (wildlife and forest departments)
was also carried out to verify the information collected.

The flora of Study Area is distributed into three main Forest Types;

District Badin has only two irrigated plantations which do not represent ample collection of forest
trees, rather these are manmade small forest areas with mainly firewood and timbre tree
species. One is located at the border of District Sajawal and other in South of Badin City, and
both are located outside the project area. In Forest types perspective Badin District mainly can
be classified into four different Forest types.

Scrub land (not forested land) observed at the Eastern and South site of District, which is
mainly near arid/desert lands

Manmade Irrigated Plantations. observed/recorded at south side of Badin City and in West a
small plantation near River making border with District Sajawal (both denoted as red patches in
District Badin in the following map of Sindh forest area)

Figure 67: Vegetation types of Badin District

As the Study Area i.e. District Badin holds a unique geography, with 2 vegetative zones mainly
dry, starching from delta to desert as described earlier, various habitat type and one manmade
irrigated plantation providing suitable conditions for a variety of floral species distributed from
delta to desert and mangroves to the warm Subtropical drylands. In bare lands near agricultural

210
 fields, scrub land area is represented by the xerophytic species. The main species of study area
are Kikar (Acacia), Jand (Prosopis), Frash, Mesquite, Dhaman, Khabbal etc.

Besides of huge anthropogenic activities and interference, the Study Area has still a much-
diversified range of Wild Mammals but the populations of some species are declining due to
destruction of their natural habitat by different anthropogenic/human activities. Some of these
are added in IUCN Red List as “Endangered” species eg: Striped hyena and Urial.

The study area is much diversified in respect to Avifauna. It is enriched with many bird species
some of them are very important as well as have importance on our National level such as the
Chukar partridge, which is the National Bird of Pakistan, in some places it is denoted as a symbol
of strong love also. An excellent population of Ducks, geese, and waterfowl is also observed
during study, and due to these types of birds presence their predator birds such as falcons and
kites are also observed in the Study Area. Due to River Jehlum and canal system in Study Area a
vast variety of birds of all types are found in it. As the Study Area is comprising of unique
geography, vegetative zones, habitat types and protected areas so a remarkable amount of
summer and winter Visitors and Passage migrant’s choice this locality for interim stay or
breeding.

PROTECTED AREAS

No natural forests and protected areas are located within 30 km of the proposed project facilities.
Forts, tombs and historical buildings are located in these districts.

FLORA AND FAUNA

Due to intense agricultural activity through irrigation canals, the natural vegetation is scarce.
Good breed of buffaloes and cows are found in these districts. Sheep, goats, camels, horses,
asses, and mules are also the main lives-stock of these districts. The livestock population 3 of
Badin district is given below

Table 72: Livestock population in Badin district

Livestock Number

Cattle 315,369

Buffalo 498,253

Sheep 223,072

Goat 578,299

Camel 8,672

Horse 1,714

Ass 18,947

Mule 184

Domestic poultry 611,560

3
Pakistan livestock census, Pakistan Bureau of statistics, 2006
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 ASSESSMENT OF SOCIO-ECONOMIC IMPACTS

Socio-economic and cultural environment of the proposed project area has been described in
terms of following key socio-economic indicators:

• Literacy;
• Employment and Income Sources
• Income and Expenditures
• Health and Healthcare Facilities
• Agriculture
• Cultural Features
• Archaeological and Religious Places
• Basic Amenities

The overall literacy rate is about 19%, which is lower than overall literacy rate in district Badin
(36% in year 2014)4. The literacy rate among female is low (about 29%) when literacy rate
among males (71%). While ratio of higher education is higher in males (88%) than females
(12%).

About 28% of the population in the project area is presently employed, including both males and
females. The unemployment ratio is substantially higher in females (99% of the total female
population) than in males (55% of the total male population).

In the project area the average household income is in the range of about 15 to 20 thousand
rupees per month per household. But there exists of differences among the individual income
status of various employment categories. Agriculture also has an ample indirect share in income
of the people in project area. Agriculture often compensates daily food needs of the local people.
It also helps to meet the fodder need for livestock, which would have to be purchased otherwise.

Health facilities in the project area are not sufficient. The BHU facility is provided to the
surrounding of project area and they are lacking basic health facilities. People must go to nearby
facilities in case of minor medical lot problems. In case of major medical issues, Golarchi and
Badin are the nearest places.

The nearby areas of project area have few agricultural lands where wheat, Barley, rice,
Tomatoes, Sunflower and Mustard are the main crops in the area. These crops are grown for
domestic and commercial use.

Electricity is not available in entire project area. Water is used for drinking purpose and for
household which villagers collect through hand pumps or from nearby canals. No treatment plant
was found in the area. The solid waste is disposed in open places. Sewage waste is not connected
septic tanks. Fuel woods are mainly used for cooking and heating purposes. Under certain
circumstances, LPG cylinders are also used mainly for cooking purposes. Most of the tracks in the
locality are kacha. The vehicle type used is mainly Qingqi and Bikes. Cell phone network is
available in the area.

4
Pakistan Emergency Situation Analysis by US AID, 2014
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 PUBLIC CONSULTATION

Section 12(3) of the PEPA and Section 17(3) of Sindh Environmental Protection Act requires
stakeholder’s participation and consultation during the environmental assessment process.
Stakeholder’s consultation leads to better and more acceptable decision-making. Stakeholder’s
consultation is an ongoing process, which is required at various stages of developmental projects
such as during: initial project planning; pre-construction; and construction. Consultation with
relevant stakeholders may be required even during the post developmental stages of a project.
This helps to communicate and share significant information to general public and other
stakeholders at all stages and lays the basis for on-going positive relationships between various
stakeholders and project developers.

Moreover, it is important to consult with the affected communities in order to make the proposals
for a project more sustainable by addressing the concerns and apprehensions of directly affected

as well as indirectly affected communities.

In this way, stakeholder’s consultation improves the transparency of the development processes
and increases the likelihood of participation of stakeholders.

21.7.1 Objectives of Consultation

The main objectives of public consultation are:

• Exchange of information related to the Project and its possible utilization in the Project
planning and execution.
• Dissemination of information through discussions.
• Eliciting the comments and feedback on the proposed project.
• Documentation of information narrated by the stakeholders.
• Documentation of mitigation measures proposed by the stakeholders.
• Stakeholder concerns regarding various aspects, existing environment, and impacts of
the proposed project were incorporated into the ESIA report.

21.7.2 Views of Institutional Stakeholders

The concerns and suggestions of government departments visited during the ESIA stakeholder
consultation are summarized in the table below

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 Table 73: Views of Institutional Stakeholders

Name of

department Response Suggestions/ Concerns

Health care facilities in the project area are satisfactory. Medical

facilities available in the area are Basic Health unit (BHU)
bypass Khorewah and Diagnostic Centers at Khorewah chock.

Few numbers of Private Hospitals, Clinics and Dispensaries are

also available for public health issues.
Health Department No suggestion for that

There are number of common diseases like R.T.I, TB, Diarrhea,

Typhoid, Malaria. And also have a specific health issues overall
in Badin about water purification.

Specific diseases related to air and water pollution in the

It will be better to install such proposed

There is not resettlement and land acquisition have been
underground gas in the storage system
practiced in the Khorewah in the last 10 years. Normally the
in Jurisdiction of Khorewah and there is
land rates in Khorewah 20 to 30 lac per kanal for residential
not any kind of concern regarding the
land and 40 lac for commercial land and 30 to 60 lacs for
installation of such above mentioned
Revenue agriculture land. There is also annual increase in land rates is
system.
Department 10%.

There are total 2931 Government schools of primary level and

total 196 Government schools of Middle, Secondary and Higher
Secondary level in Badin, Golarchi, Matli, Talhar, Tando Bago.
Education which is in vicinity of project area.
Department N/A.
There is no private school in the project site.

Existing educational trend is growing upward in villages around

site area of both males and females.

From agricultural point of view,

proposed project will provide easy
access to farmer’s community in term
Total Agriculture land available in Khorewah is three lac acres
of construction of roads. There exists a
approximately (Surrounding areas).
risk to agriculture due to climate
Agriculture Major crops of the area are in Khareef growing season Rice change. Therefore, measures should
Department Paddy and in Rabi growing season Wheat, Tomatoes , be taken to improve the agriculture
Cucumber, Vegetables, Toria and sun flower also exist in which would ultimately contribute in
proposed Area. terms of the betterment of the
community.

There is not any forest source and no medicinal plants in

Khorewah and overall district Badin. And endangered species is It is suggested that measured may
Salvadora oleoides scattered in Badin District. It rarely formed kindly be taken for plantation of trees
Forest Department
in bushy form. Roadsides, canal side plantations and urban side around site of operation.
forestry blocks plantations may be carried in future.

214
 As far a PHED Schemes are not
affected, Yes, if it is possible to
energize the water supply scheme
Public Health There is an existing Gravity Flow Scheme of water supply of
through gas or any alternate or give
Engineering PHED Khorewah canal. Its installed capacity is 924000 gallon
Khorewah people any portable drinking
Department and number of water supply connections 150.
water facility.

LHDP works for the capacity building and empowerment of the

Laar Humanitarian community. The organization would support in its capacity for
and Development any project which would bring positive change in terms of N/A
Programme (LHDP) employment opportunities, living standards and outlook of the
village.

ACF-USA works in 45 countries in the area of nutrition, health, food

Action Against Hunger/ security livelihoods, water, sanitation, hygiene and mental health support. At least 2% profit of the project must be used
Int. NGO Proposed project is likely to bring the betterment in socioeconomic in the community support programs in Badin.
condition of nearby population living far below the poverty line.

21.7.3 Community Concerns and Suggestions

General public of the area were made aware of the proposed project through Focused Group
Discussion and door to door questionnaires survey.

It is common perception of people that proposed Project would not bring any positive impacts
and adversely affect the livelihoods of the people living in the vicinity of the project. It is mainly
because in terms of job acquisition and compensations and

A brief summary of the views of local people is provided below:

• Some people wished that they should be appropriately compensated for their land and
assets.
• The general public of the area expected new and better facilities of health, education
and livelihood due to the construction of the proposed Project in their area.
• Local shopkeepers were quite happy with the construction of proposed Project as they
were expecting better and increased business opportunities and activities in the area.
• Local community emphasized that they should be preferably considered for the skilled
and unskilled jobs during the construction as well as operation of the proposed Project.
Particularly, the labour groups emphasized on provision of labour jobs during the
construction and operation of the proposed Project. It was noted that existing
industries and power plants did not consider the local people for jobs at any stage.
• People of the area were quite concerned about the existing air and water quality in the
area which, according to them, has been deteriorated by existing power plants and
industries in the area. They were expecting that the project developer would take care
of the environment as well as the culture of the area.
• People were also concerned about the health issues which according to them are related

215
 with air emissions and polluted water released by the existing industry in the area.
• People were expecting to get some facilities from the construction of the proposed
project e.g. supply of gas, construction of roads and public transport.
• People were also concerned about the health issues which according to them are related
with air emissions and polluted water released by the existing industry in the area.

ENVIRONMENTAL & SOCIAL IMPACTS AND MITIGATION MEASURES

Project activities of Underground Gas Storage Project generally encompass a broad range of
issues including air pollution, water pollution, land degradation and soil contamination, effects on
terrestrial flora and fauna, impacts on employment, impacts on community structure and many

other environmental and social issues.

Environmental and social impact screening has been carried out for the following phases of the
proposed project.

• Impacts associated with preconstruction and construction activities;

• Impacts associated with operation and maintenance phase;
• Impacts associated with decommissioning phase.

Following is the list of potential impacts and significance identified during the course of ESIA.

Impact Significance
S. No Environmental and Social impacts
Low Medium High

A: Impacts associated with Preconstruction and construction phase activities

1 Land use change ▄

Land Degradation and Erosion

2 Impact on Surface Water Quality ▄

3 Soil Erosion and Degradation ▄

4 Soil Contamination ▄

5 Air Quality Deterioration ▄

6 Loss of Natural Vegetation/Threat to Wildlife ▄

7 Aquatic flora and fauna ▄

8 Damage to agricultural land and crops ▄

9 Traffic and transport ▄

10 Public health ▄

11 Human Interference ▄

12 Blocked Access ▄

13 Noise and Vibration ▄

14 Safety Hazard ▄

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 15 Gender and Social Issues ▄

Impacts on Archaeological, Cultural, Historical or Religious

16 ▄
Significance

B: Impacts Related to Operation and Maintenance Activities

1 Waste generation ▄

2 Air Quality Deterioration ▄

3 Solid waste and Wastewater generation ▄

C: Impacts Related to Decommissioning/Site Reclamation

1 Soil erosion and degradation ▄

2 Air emissions ▄

3 Waste generation ▄

As evident from the above environmental and social impact matrixes, most of the impacts of
proposed development have low significance which can easily be managed by adopting the
mitigation measures proposed in the ESIA report.

ENVIRONMENTAL MANAGEMENT AND MONITORING PLAN

Environmental management and monitoring plan (EMMP) have also been proposed in this report
to manage the environmental impacts identified in the ESIA and to enhance the overall
environmental and social performance of the project. The purpose of the EMMP is to provide a
framework for the implementation of the mitigation and monitoring measures which were
identified in the ESIA. EMMP is a tool for the management of potential adverse impacts and it
aims to enhance project benefits and to introduce standards of good practice to be adopted for all
project works.

For each of project components/facilities, the EMMP specify the requirements to ensure effective
mitigation of potential biophysical and socio-cultural impacts identified in the ESIA. For each
impact, or operation following information is presented in EMMP:

A description of the mitigation measures (actions) that Client or its Contractors will implement.

• Designation of responsibility for ensuring full implementation of the required action.

• Parameters that will be monitored to track effectiveness of mitigation actions taken;
• Time for implementation of the action to ensure that the objectives of mitigation are
fully met.

The Client should be committed to the adoption of all of these measures and should carry out
ongoing inspections and audits to ensure their implementation and effectiveness

HSE MANAGEMENT PLAN

• Health Safety and Environment (HSE) induction/orientation will be provided to all
workforce at the project site.
• Assembly point will be established for the gathering of workforce regarding daily HSE
Tool box.
217
 • HSE Tool box meeting will be held by HSE Manager on a weekly basis.
• Special education sessions will be held be conducted properly at the site including COVID-
19 Management Response.
• The daily walkthrough will be conducted at the project site.
• All the mandatory PPE’s (Safety helmets, Safety jackets, Safety shoes, coverall, full body
harness, safety goggles, earplugs, Earmuff, Dust mask/Special, safety gloves masks etc.)
• Proper and safe scaffolding will be provided at the site for safe work at height.
• All heavy machinery will be inspected properly at the site.
• All cranes and lifting gears will be inspected properly at the site.
• Safety signage will be provided at the project site.
• Fire posts will be established at the project site at easy approach location.
• Waste will be maintained properly.
• HSE signboard will be installed at the project site for an emergency response.
• Rest area and smoking zones will be established at the site.
• Regular first aid centres, along with all required medicines 24/7, will be available at the
project site.
• Paramedics (dispensers) will be deployed at the first aid post for day and night shift
• Fully equipped Ambulance will be made available at the site 24/7
• In house training will be conducted on the project site.

The contractor will develop his HSE policy, rules and responsibilities of HSE Manager and staff. It
also provides information about HSE objectives, Personal Protective Equipment’s (PPE’s) to be used
at the site, first aid training and communication and documentation regarding HSE.

• First Aid Boxes: First aid boxes will be provided at all active construction sites to cope up
the emergency situation. Usually, a typical first aid box mainly contains antibiotics, basic
medicines, cotton, bandages, saniplast, haling balms, pyodine, spirit, painkiller etc.
• Dispensaries: Medical facilities will be established by the contractor. A dedicated room
will be established as a dispensary and first aid services at the campsite.
• PPE’s: Site engineer and HSE Manager will be responsible for providing PPE’s to all
workers.
• Safety Signs: Relevant safety sign boards will be displayed on the worksites and labour
camps to make aware/train workers about safety rules. Mainly safety sign includes signs
of speed limit, electric sparks etc.
• TBTs: Tool Box Talks (TBTs) will be delivered on a regular basis and when a new team of
workers start a new activity like shuttering, steel fixing, steel cutting, steel bending,
scaffolding, concrete pouring, mechanical works, electrical works, etc. at sites to promote
safety cultures.
• Water Sprinkling: Dust pollution will be controlled with water sprinkling and minimize the
risks of adverse impacts of dust on workers and surrounding areas. Water sprinkling will
be carried out regularly to minimize dust pollution and avoid creating slush.
• Barricading: The contractor will put barricade tape at all the active worksites. Hard
barricading (scaffolding pipes) will be used to cover exposed areas where excavation is
more than 10 feet.
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 • Training: Safety training will be delivered by the HSE Manager to achieve its objectives.
Training will be conducted for the capacity building of employees/workers/labour/sub-
contractor to make them well effective to respond to any kind of emergency situation.

The breakup cost for the safety of the workers is described in the table below

Table 74: Estimates Cost for the Implementation of Health Safety Engineering Plan for under gas storage
Project

Sr. no Item Quantity Unit Cost (Rs.) Total Cost (Rs.)

Personal Protective Equipment (A)

1 Dust Masks 20,800 10 208,000

2 Safety shoes 400 2,000 8,00,000

3 Gloves 1,000 1,200 120,000

4 First Aid Box 2 3,000 6,000

5 Ear Plugs 2,400 50 120,000

6 Safety Helmets 400 1,000 400,000

7 Safety Jackets (Hi-Vis) 400 500 200,000

8 Hand Sanitizers 100 1000 100,000

Others (B)

8 Provision of Dust Bins 20 1,000 20,000

9 Warning Tape 20 500 10,000

10 Safety Cones 10 1,000 10,000

11 Safety Sign Boards 20 1,000 20,000

12 Raincoat 100 1,000 50,000

Total (A+B) 2,064,000

*Rough estimates of cost

Note: Following estimates are made to calculate the above-mentioned cost.
• Time requires for construction period 48months
• Number of labour required for the construction 100
• Personal Protective Equipment PPEs
• Dust Masks: 7 Dust Mask to be used in a week by each labourer.
• Safety Shoes: 1 safety shoes for twelve months for each labourer.
• Gloves: A pair of gloves for each labourer for a month.
• First Aid Box: 1 First Aid Box for every 50 labourers.
• Ear Plug: 1 set of the earplug to be used for 12 months.
• Safety jackets: 1 Safety jacket (Hi-Vis) for each labourer for 12 months
• Dust Bin: Rough estimate
• Water Sprinkling the whole construction period.
• Rain Cost: 1 Raincoat for each labourer.

(The calculations are made by considering the peak number of workers working at a time)

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22. LEGAL AND REGULATORY FRAMEWORK

EXISTING FRAMEWORK RELATED TO NATURAL GAS

To ensure availability and security of sustainable supply of oil and gas for economic development
and strategic requirements of Pakistan and to coordinate development of natural resources of
energy and minerals, the Petroleum & Natural Resources Division was created in April 1977. Prior
to that Petroleum and Natural Resources was part of the Ministry of Fuel, Power and Natural
Resources. The Ministry was converted into Petroleum Division in August 2017 and the division
was merged into Ministry of Energy

The Ministry is entrusted with responsibility for policy formulation, provision of policy guidelines
to the provinces and coordination of development of mineral sector of Pakistan in order to attract
and sustain private sector investment. The relevant institution structure can be obtained from
below.

Figure 68: Relevant Institutional Structure of Gas Sector

The upstream activities in the gas sector are administrated and regulated through the Directorate
General of Petroleum Concessions (DGPC) of the Policy Wing. In general, the upstream segment
is balanced between state owned companies such as OGDC and PPL, local private companies and
other IOCs. The jurisdiction for LNG import projects is exercised through the General of Liquefied
Natural Gas. The Directorate General of Gas is mainly responsible for formulating government
policies and assessment and allocation of natural gas matters. At present, all-natural gas
transportation pipelines and associated infrastructure is owned and controlled by two State-
owned corporations, namely, Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas
Pipeline Limited (SNGPL). The utilities are publicly listed companies, in which the GOP owns the
majority shares. Apart from the Policy Wing, there is a Mineral Wing attached to the Ministry of

220
 Energy Petroleum Division which is entrusted with responsibility for policy formulation, provision
of policy guidelines to the provinces and coordination of development of mineral sector of
Pakistan. As a primary regulator for the midstream and downstream oil & gas industry, Oil & Gas
Regulatory Authority (OGRA) was established in 2002. The regulatory process is an important
mechanism to ensure functionality of the natural gas sector. It is the aim of OGRA to increase
competition and investment within the oil and gas sector, while safeguarding public interest.

In order to facilitate the institutional framework, a legal framework to accelerate the exploration
and development of oil and gas is in place. The basic law that regulates the upstream sector is
the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948.
The most relevant current legal framework for the upstream sector of oil and gas and LNG is
following:

Figure 69: Relevant Legal Framework (Oil & Gas) in place

221
 CURRENT STATE OF GAS SECTOR

The main Act under which the exploration and production of the gas sector governed by The
Regulation of Mines and Oilfields and Mineral Development (Government Control) Act 1948 (The
Act). The Act also empowers the government to develop detailed Rules.
Historically Mining leases for the production were granted in accordance with the Act and The
Pakistan Petroleum (Production) Rules, 1949. The 1949 Rules were repealed through enactment
of The Petroleum Exploration and Production Rules, 1986, keeping the rights of the earlier lease
holders intact and remained applicable under the previous Rules. Same methodology is applied in
the application of subsequent Rules. However, the petroleum exploration and production
operations in Pakistan thereafter have been regulated under these rules by issuing related
licences and/or grant of related Development and Production Leases 5.

The rights of the lease owner, irrespective of it is Mining or Production Lease, are protected under
the respective Rules applicable at the time of issuance of the lease. These rules allow the holder
an independence of the field operations without government interference while observing the
good field practices. In this regard, a competitive environment in the petroleum sector exits to an
extent as the exploration licences are issued through bidding process.

The leases are awarded for a fixed term which may be extended on application under the
applicable rules, which extension application should not be withheld unnecessarily, (specifically
for a producing field).

The marketing of petroleum (oil and gas) is a regulated sector. The Government has the first
right to purchase petroleum and prices of these are determined as per the mechanism given in
the policy when the lease agreement is executed. The provisions of a third-party sale are
provided in the applicable policies but no third-party sale to date has materialised. In this
respect, all gas production is purchased by the government and delivered to the nominated
buyer/buyers (SSGCL, SNGPL, IPP, Fertilizer plants, etc.) at the price determined and notified by
the regulator (OGRA) under the respective Gas Sale Purchase Agreement (GSPA) with the
government.

There is currently no gas storage is in operation, there is no legal framework nor an institutional
structure in place. Government of Pakistan must develop rules, regulation and fiscal terms
therein for the gas storage sector. The country like Pakistan with a regulated gas sector with
some private stakeholders must define, develop and implement its own regime.

As there is currently no gas storage is in operation, there is no legal framework nor an

institutional structure in place. Government of Pakistan has to develop rules, regulation and fiscal

5
One difference between the Mining Lease and Petroleum Production and Development lease under the Rules is that the data
submitted by the mining lease operators is protected and remains confidential till life of the lease period. However, certain data
submitted by the operator to the regulator, herein Directorate General of Petroleum Concessions may be disseminated after a certain
period of time to the Public domain. This is where due to absence of a Confidentiality Agreement between the Consultant and
ISGS/DGPC, the consultant has faced difficulty in data acquisition during this study.
222
 terms therein for the gas storage sector. Consultant will provide input regarding the current
applicable systems in other countries. However, it may be noted that gas storage mostly
developed and operated under either “free market” mechanism (Europe, USA, Japan etc.) or in
complete state-owned regulated regimes like China and Russia).
The country like Pakistan with a regulated gas sector with some private stakeholders must
define, develop and implement its own regime.

SUGGESTIONS TO DEVELOP GAS STORAGE FRAMEWORK

The rules and regulations go hand in hand with the policy which sets the direction for future of
the sector. The government of Pakistan may develop a policy in consultation with the
stakeholders, which in this case are the exploration and gas companies (both national and
international). These companies have operated the fields over its lifetime and are operating now
at the last leg of the depletion. Having the historic, geological and operational knowledge of the
field the suitability of its use a gas storage under the given rules with a defined economic/fiscal
regime be better accessed by them. Thus, a detailed framework may be developed in
consultation of DGPC, OGRA, E&P companies.

Currently, it may be noted, DGPC acts as a regulator for the E&P sector companies with a limited
rule of price notification under the agreed GSPA is assigned to OGRA. All upstream operational
matters of the petroleum sector are being regulated by DGPC. The government must decide that
the future gas storage sector, operational being same as exploration and production activity,
remains to be entrusted with DGPC.

Regarding ownership of the fields, only field which stands abandoned is Rehmat (DGPC to
confirm). Rest leases of all depleted or near depleted fields are in place with remaining applicable
periods. These rights of ownership can only ceased under the current agreement. Immediate use
of these field through a bidding process will create legal issues or the government has to wait for
the expiry of the lease of a selected prospective gas storage. LNG on surface gas storage also
have the same deficiency of policy and fiscal regime as identified above for underground gas
storage except the issue of rights of the current depleted field lease holders.

It would therefore as prerequisite of bidding process to have a gas storage policy that these legal
deficiencies are adequately addressed.

Consultant have provided input regarding the current applicable systems in other countries.
However, it may be noted that gas storage mostly developed and operated under either “free
market” mechanism (Europe, USA, Japan etc.) or in complete state-owned regulated regimes
(like China and Russia).

There are already some good examples on requirements and regulations in place which could
serve as a guideline for Pakistan. In example the underground gas storage market in USA is
highly regulated on a federal level and regulated under the directives of “Pipeline and Hazardous

223
 Materials Safety Administration (PHMSA)”. PHMSA either issues a certification namely “UNGS
Interstate 60105 Certification” or there is an agreement namely “UNGS 60106 Agreement”
between the state and PHMSA and the state ensures the implementation of the regulations6.
Examples of this regulations are publicly available and can be partially used, modified for drafting
the regulations applicable in Pakistan, towards the developing the Recommended Practices for
the storage operators with an oversight by the regulator.

Europe also provided good examples on functional requirements set out by the European
standard. EN1918-5 in example covers the functional recommendations for the design,
construction, testing, commissioning, operation, maintenance, and abandonment of underground
gas storage facilities in oil and gas fields up to and including the wellhead. It specifies practices
which are safe and environmentally acceptable.

The regulations, however, should provide a balance between the strategic, sustainable, security
of supply to the consumers balancing the economic benefits of the storage operator in the
current regulated gas sector environment.

Consultant considers that the most applicable regulations, however, in this regard may be of UK
and European countries

6 Details of these may be found at PHSMA website: https://www.phmsa.dot.gov/technical-resources/pipeline/pipeline-technical-

resources-overview

https://www.phmsa.dot.gov/sites/phmsa.dot.gov/files/docs/about-phmsa/working-phmsa/state-programs/70696/2020-ungs-state-
guidelines-appendixes-final.pdf
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23. RISK CONSIDERATIONS AND MITIGATIONS

To identify and analyse risk related aspects and to develop a mitigation strategy, Consultant has
identified relevant risks related to the Underground Gas Storage Project. Mitigations of these
risks to a level acceptable and to be tolerated by the project shall be investigated in the next
design phase. The Risk identification is prepared as a qualitative risk. The risk sheet will be
updated throughout the feasibility study.

Below we have laid out a list which can be seen exemplary

Construction Risks: Aspects related to the construction of the project, both surface and
subsurface components towards EPC

Operation risks: Related to the operation and maintenance of the facility. This is mainly in
relation to the surface facility part which requires labour for operation

Geological risks: Events such as inadequate soil stability at the project location, difficult
geological conditions for the gas pipelines (swamp area, rocky area) or the underground gas
storage facility (cushion gas volume, trapped gas.), seismic risk etc. These risks can be mitigated
in later planning phases.

Technical Risk: related to the technical concept, adequacy of technical solutions, major design
data, plant efficiency, site conditions and other operating and performance risks, considering the
specific constraints pre-vailing in the project region.

Environmental risks: Environmental requirements which are more stringent than defined in the
present environmental legislation. Includes also risks related to the permitting procedure:

Cost and Schedule Risk: Schedule associated with the time schedule and principal project
milestones. Cost Estimate is in respect to capital expenditure and operating costs

Commercial Risk: Risks related to the commercial aspect of the project to the e.g. revenues,
tariff will be looked at.

Legal Risk: Risks related to the legal aspects of the ownership, determination of liabilities and
responsibilities under applicable legal framework, benefits provided to the investor without an
approved fiscal policy

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 ID Category Risk Description Recommendation / Mitigations

Perform FEED/Detailed Design Phase prior EPC

Risk Register/Risk Matrix in place
Prepare Contingency Funds
Ensure good Accuracy in scheduling
Delays in Construction of Subsurface and Ensure buffers for the critical path
1.1 Construction Risk
Surface Facilities identify Risks associated with delay that can be allocated or transferred to relevant parties
Develop contract provisions and insurance regimes covering delays in construction
Fixed Amount for EPC Contract
Have appropriate Liquidated Damage Clause
Select an experiences and well qualified EPC contractor
Perform FEED/Detailed Design Phase prior EPC
Fixed Amount for EPC Contract
Set up cost ceiling mechanism in EPC contract
Prepare Contingency Funds
1.2 Construction Risk Cost Overruns
Ensure good Accuracy in cost estimate
Have Risk Register and develop Risk Matrix
Have appropriate Liquidated Damage Clause
Select an experiences and well qualified EPC contractor

Fixed Amount for EPC Contract

Have appropriate Liquidated Damage Clause
Define Warranties
1.3 Construction Risk Performance below guaranteed parameters
Have Risk Register and develop Risk Matrix
Select an experiences and well qualified EPC contractor
Consider splitting EPC contract in 2 lots (subsurface and surface)

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 Fixed Amount for EPC Contract
Have Risk Register and develop Risk Matrix
1.4 Construction Risk Materials and Labour Cost and Availability Ensure that Long Lead Items are ordered in an early phase
Select an experiences and well qualified EPC contractor
Consider splitting EPC contract in 2 lots (subsurface and surface)
Considering local weather conditions in time schedule
1.5 Construction Risk Severe weather conditions/sea state
Use of reliable weather forecast

Solid and earthquake proved construction

1.6 Construction Risk Earthquakes
Use of international standards for planning

Proper Written Procedures and Training

Experienced Supervisor/Foreman from Similar Projects to supervise commissioning/Start-up and
2.1 Operation Risk Operator Performance
first year of operation
Supplier/vendor support during commissioning and start-up and ramp-up phases

Proper selection and monitoring of Operator

2.2 Operation Risk Operator Insolvency
Establishment of early-warning-system

Equipment Sparing Philosophy

Adherence to Generally Accepted Codes and Standards
2.3 Operation Risk Equipment Failure
Supplier/Vendor Guarantee and Warranties
Check References for Suppliers

Lock in important feedstock, fuels, supplies costs via contract

2.4 Operation Risk Increased operational cost
Fix rates of supply for fuel gas (if gas driven) per long term supply contract

Decent Employment conditions and contracts

Labour Availability (Strikes,
2.6 Operation Risk Training of personnel
insufficient quality of workforce, health ...)
HSE management system in place

2.7 Operation Risk Underground Gas Storage Utilization Risk Conduct Sensitivity/Utilization Risk Study

Considering earthquake risk in design phase

2.8 Operation Risk Earthquakes
Application of adequate standards

Develop Security Plan (throughout project phase)

Country Risk (War, Terrorism, Hostage,
2.9 Operation Risk Force Majeure Provisions in Contracts / Agreements
Revolution, Government Change ...)
Maintain Approval register / record

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 The actual in-situ reservoir properties such as
Profound reservoir characterization, consideration of additional exploration measures like new seismic or
3.1 Geological Risk structure and tightness/integrity differ from
similar.
expectations.

The actual in-situ reservoir properties such as Profound reservoir characterization, detailed key parameter analysis (permeabilities, porosities, pressure
3.2 Geological Risk capacity, deliverability, performance differ from ranges), additional exploration measures, adjusted well planning (number of wells, location, and type
expectations. (deviated, horizontal, stimulated, ...).

Changes in produced gas quality due to Predict gas composition in reservoir simulation and plan measures to adjust gas quality to grid
3.3 Geological Risk
interactions with residual reservoir fluids. requirements.

Induced seismicity due to accelerated pressure

3.4 Geological Risk Assess similar events (if occurred at all) during production history; also, from adjacent fields.
changes.

Verification of max. possible storage pressure by corresponding exploration measures (cap rock
4.1 Technical Risk Loss of storage integrity
analysis).

4.2 Technical Risk Loss of WGV by inaccurate storage operations Derivation of appropriate and suitable operational scenarios by numerical reservoir simulations.

Loss of stored gas by inaccurate storage

4.3 Technical Risk operation (exceeding the maximum storage Consideration of sufficient number of observation wells at relevant spill points.
volume)
Planning of underground gas storage well away from the community to avoid any casualties in case of
5.1 Environmental Risk Natural Disaster
natural disasters i.e. earthquakes.
5.2 Environmental Risk Habitat disturbances Preparing comprehensive tree plantation plan and its implementation on approved sites.
Compliance with all the relevant rules and regulations in construction, operation and maintenance phase
5.3 Environmental Risk Permitting Risk
of the project.

5.4 Environmental Risk Contamination of soil and water Development of site-specific water and soil preservation strategies during preparation of EMMP.

Cost-Overruns (exceeding range agreed with Careful/ Accurate Cost estimation

6.1 Cost and Schedule Risk
authorities) Implement cost control mechanism

Revisit Design / Design Optimisation during FEED

6.2 Cost and Schedule Risk High CAPEX
Ensure that subsequent design phases are thorough and complete

Negotiate operational contracts in an early phase if applicable

6.3 Cost and Schedule Risk High OPEX Implement proper preventive maintenance standards and hire proper expertise for commissioning,
start-up, and ongoing operations)

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 Understand requirements and follows procedures while submitting procedures
6.4 Cost and Schedule Risk Permitting and Authorization Project Schedule to consider the permitting requirements
Adhere to Government of Pakistan (GOP) policies

Project Implementation to be based on good planning and well thought strategy

6.5 Cost and Schedule Risk Overall Project Delay
Project Implementation Authority Matrix must be available

Gas Demand/Supply Situation of the country to be carefully looked at during each project phase
7.1 Commercial Risk Competing Fuels
Competing Fuel study to be looked at before Final Investment Decision

Downstream Buyer Credit Off-taker to provide parent company guarantees

7.2 Commercial Risk
Risk Capacity Buyers approach to be considered to minimize risk

Gas Demand/Supply Situation of the country to be carefully looked at during each project
7.3 Commercial Risk Natural Gas Pricing
Natural Gas Pricing study to be looked at before Final Investment Decision

7.4 Commercial Risk Regulatory/Legal Regime Adhere to Government of Pakistan (GOP) policy

Invoice and cash-flow Establishment and adherence to proper bookkeeping procedures

7.5 Commercial Risk
mismatches Making available of enough working capital

7.6 Commercial Risk Commissioning and ramp-up periods lump-sum EPC contract with liquidated damages sizes to match net revenue losses

Force Majeure to carry no-obligation clause, termination rights for prolonged Force Majeure
7.7 Commercial Risk Acts of God/Force Majeure Insurance coverage for facilities and equipment
Business interruption insurance

Prepare well rationalized economic model

Reduction in OPEX
7.8 Commercial Risk Tariff not accepted by authorities (OGRA)
Optimization of CAPEX
Tariff petition for review and approval by OGRA to be well explained and rational

Detailed Reservoir Simulation

Cushion Gas cannot fully recovered after end of
7.9 Commercial Risk Prepare well rationalized economic model
operation
Appropriate and suitable operational scenarios by numerical reservoir simulations.

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 Revisit Concept (Withdrawal Rate, Working Case …)
Reduction in OPEX
7.10 Commercial Risk Non-competitive Tariff Optimization of CAPEX
Risk Evaluation of LNG Import as Working Gas
Evaluation of solutions like weighted average method (WACOG)

Revisit Concept (Withdrawal Rate, Working Case …)

Project Economics show low IRR and long
7.11 Commercial Risk Reduction in OPEX
payback period
Optimization of CAPEX
Wait for lease expiry
8.1 Legal Risk Lease of selected field is intact
Offer first right to current operator

Fiscal terms not approved by the competent

8.2 Legal Risk Get these approved before initiating the bidding process
authority-possible litigations
Regulatory Authority not assigned, and Rules
are not developed
8.3 Legal Risk – No or low response on bidding process Legislations and rules be in place before initiating the bidding process
- Lack of credit worthy investors

Compensation calculation for the loss of production for production until lease expiry (e.g., decline curve
analysis)
8.4 Legal Risk Acquisition of Target (Khorewah)
Potential condensate production in first storage cycles part of compensation strategy
Alternative reservoir as backup if Acquisition is not possible

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24. CONTRACTING STRATEGY AND IMPLEMENTATION

The work schedule from the previous Feasibility Study considers a construction phase of 6 years
for Khorewah and 5 years for Bukhari. The difference in construction comes from reservoir filling
and first load where Bukhari UGS considers two years and Khorewah three years. The projects
are developed consecutively with operation of 20 years respective 18 years.

It must also be noted that the schedules only consider activities from start of construction work
and that activities leading the construction phase are not looked at. The schedule may be
therefore slightly misleading, as especially the work to achieve construction work may impose
some challenges. Especially the time to mature the project from feasibility study to signature of
EPC may be 2 or more years. This is especially relevant as this UGS will be the first of its kind in
Pakistan and there is a lack in regulatory environment for that project. Ramboll has therefore
elaborated a potential high-level time schedule starting from the finalisation of Feasibility Study
(this study) to start of operation. All project specific aspects are considered; only issues not
directly linked to the project like regulatory framework, establishment of project structure, etc.
need to be considered outside of this advisory service.

CONTRACTING PHILOSOPHY

For a project with such complexity, to award EPC Contract(s) and Long-Lead Item (LLI)
procurement packages based on the update of a techno-economic feasibility study may face
some challenges, both technical and commercial nature. The technical dossier from the Feasibility
Study, while significantly improving the level of technical definition for the Project, still contains
items to be resolved and still includes a certain level of uncertainty regarding potential
modifications and variations throughout project execution. Therefore, it is strongly recommended
to carry out a FEED Phase for the project, which will have as its main objectives:
• Further defining the level of technical detail for the Long Lead Items (such as:
Compressor-Driver units, Line Pipe), so that procurement can be initiated, thus reducing
timeframe for critical path activities
• Further defining the technical level of detail as a basis for competitive EPC procurement,
allowing reduced EPC risk margin, and minimising costly claims and time delay during the
Execution Phase
• Further defining the level of technical detail to allow update of Cost Estimate as basis for
Final Investment Decision
• Initiating time-critical activities, such as ground investigations/terrestrial survey,
reservoir analysis, environmental scoping studies/field investigations, support to ISGS for
start of permitting and land acquisition activities
• Defining the pipeline route corridor (+/- 200m)

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 To support project development though to final completion a three-phased engineering
contracting strategy may be considered which will enable a timely completion of the project.

The design will be further matured as the basis for bidding the Execution Phase Contracts and is
used as the design basis. A good engineering design will reflect ALL clients’ project specific
requirements and avoid significant changes during the execution phase. During this phase there
is close communication between Project Owners and Operators and the Engineering Contractor to
work up the project specific requirements. The amount of time invested in this engineering phase
shall be sufficient to reflect all project specifications to be well detailed and not leave place for
interpretation. The Cost estimate shall be accurate enough to allow to take the Final Investment
Decision and to finalise its budget for the execution of the project.

Phase I –FEED Phase: Selected Consultant will mature the Feasibility Design to minimum a
Pre-FEED design, including technical design, philosophies, PFDs and PIDs, functional
specifications, and requirements in place which will help to determine a common understanding
for the Contractor(s) during EPC bidding phase. For the pipeline, constraints mapping and onsite
investigations will be carried out in order to narrow the pipe corridor. This design phase will be
approximately 9 months. Also, as the project is packaged most likely into separate Lots, which
could potentially be awarded to different Contractors, a greater level of initial project definition is
required than for an unpackaged Pre-FEED/FEED. This is to ensure that the battery limits
between all Contractors are defined and the project philosophies and specifications sufficiently
developed to ensure a consistent design across all Lots. Depending on market status / lead
times, procurement of critical packages (LLIs) may be initiated during FEED, which will eventually
be novated to selected EPC Contractor(s).
During FEED Phase, Client shall undertake following activities (supported by FEED Consultant):
• Contact with Authorities / Environmental Permitting entities
• Identification of Landowners, preliminary access/acquisition agreements
• Contact to third-party stakeholders, establishment of contracts where required, e.g., Pipeline
Owners (for gas grid interconnection), Power Supply Authority (electric grid connection),
third-party operators that might be affected by pipeline crossings (road, railways,
river/waterways, etc.)

Phase II – EPC Proposal and Selection Phase: EPC Contractors will develop proposals for
each project package based on the design basis included within the tender documents. Tenderers
are to provide detailed phase proposals, including schedules, technical detail and deliverables and
budget cost estimates. Phase II will be approximately 8 months after approval of FEED and Final
Investment Decision. Based on the proposals received during Phase II, contractors for each of
the project packages will be selected. Depending upon the conclusions of the bid evaluation
completed during Phase II, a single overall contractor or separate contractors for each of the
packages may be selected.

Phase III – EPC Phase: Once awarded, the Contractor shall design, procure, transport to site,
construct, hook-up, test and handover the Lots. Selected Consultant will support ISGS as

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 Owner’s Engineer as defined by FIDIC, including vetting of EPC Contractor’s Detailed Design,
expediting, inspections and witness testing, site supervision.

The project shall be in tendered in line with the Public Procurement Rules 2004.

RECOMMENDED WORKS PRIOR/DURING FEED DESIGN

A project with such complexity and high CAPEX requirements shall be planned carefully.
Regarding a next step for the conversion of the depleted field into a gas storage, the pre-work
and the corresponding deliverables should be considered.

24.2.1 Exploration Wells

The wells Khorewah 1 – 5, Mulaki 1 – 3, Khorewah Deep 1 – 3 have been drilled in the area of
the Khorewah field and could be used to characterize the structure. The well logs need to be re-
interpreted, if necessary, to serve as input to the static geological modelling
In this context, drilling of new/additional exploration wells should be taken into
consideration. Updating the database with new data representing the current state would allow to
significantly improve the results to be achieved in the further steps (geological modelling,
reservoir simulation). Determination of corresponding well locations should be performed in close
cooperation with the Seismic Data Analysis.

24.2.2 Seismic Data Campaign

In respect of a conversion into a gas storage, special focus needs to be taken on the
determination of the delineation of the reservoir (like faults, spill points, stratigraphic pinch-out).
In this context, the interpretation should incorporate, if applicable, both 2D and 3D seismic data.
In case the existing seismic data does not allow to image/determine the spatial extent with the
required accuracy, a new 3D seismic campaign (data acquisition, processing,
interpretation) should be considered. A state-of-the-art data processing up to prestack depth
migration and a seismic attribute or at least AVO analysis is recommended.

CONTRACT PACKAGES

Based on the above considerations, the following Contracting Strategy is proposed:

• Procurement of time-critical LLI’s shall be initiated in the FEED phase for subsequent free-
issue (novation) to EPC Contractors. It shall be considered whether strategic procurement
packages (SPPs) shall also be procured by ISGS
• Proposed EPC Contracts are as follows:
o Pipelines (CPL-1, CLP-2), including pigging stations, BVS’s and CMS
o Indus Crossing (specialist HDD-Contractor)
o Sub-surface Facilities (including wellhead facilities)
o UGS Aboveground Facilities, including field flow lines

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 o Power Supply (cross-country HV overhead lines, including HV switchgear at grid
interconnection)
It should be noted that an ‘Early Works’ package, such as access roads, site grading, is
currently not required according to Implementation Schedule, but could be investigated
as part of overall schedule optimisation.
• EPC Pipeline Contractor shall receive overall route drawings 1:25,000 showing route corridor
+/- 200m, and shall prepare all further documents suitable for construction, i.e. Alignment
Sheets, crossing construction drawings, etc. and obtain all necessary additional permits,
right-of-way, etc.
• EPC Contractor for UGS Aboveground Facilities shall carry out detailed engineering and
procurement activities to develop the FEED documents into construction documents, and
shall be overall responsible for system performance, as well as incorporate LLI and SPP-
vendor data, integrate and coordinate the interfaces to EPC Pipeline Contractor, EPC Sub-
Surface Facilities Contractor, and other critical sub-contractors (e.g., SCADA / Telecom)

24.3.1 Pipeline
The Pipeline Contract includes the two pipelines (CPL-1 93km, CPL-2 16km), as well as
associated pigging and block valve stations. Pipeline Contractor may subdivide the work into
spreads as required to meet the time schedule. The Custody Metering Station (CMS) is also
included in the scope. Conduit for subsequent blowing-in of fibre-optic cable is included in the
scope, as well as all necessary facilities for pipeline cathodic protection.

As mentioned above, the Pipeline Contractor will receive FEED documents, including:
• Route Maps 1:25000
• Typical Drawings (e.g., crossings)
• Terrestrial survey data and satellite imagery (carried out during FEED)
• Results of Ground Investigations, CP-survey
• Land Access pre-agreements, preliminary right-of-way (where obtained by ISGS)

The Pipeline Contractor will develop the Alignment Sheets (1:5,000), which include required
temporary and permanent right-of-way, which ISGS shall use for land acquisition purposes. ISGS
will be responsible to obtain environmental permits for the project. Pipeline Contractor shall be
responsible for Construction Permit, local access / land lease requirements during construction,
and any additional permits required, such as disposal of hydrotest water. Pipeline Contractor shall
carry out detailed design of crossings, including input / approval of third parties where required.
Pipeline Contractor will prepare all other necessary construction drawings, such as profile
drawings, construction details, special areas/crossings.

The Indus Crossing is foreseen as a separate Contract, however, it may be combined with the
Pipeline Contract, depending on Contractor experience / competency.

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24.3.2 Sub-surface Facilities
Sub-surface Facilities relate to all works associated with interconnecting / expanding the
wells/reservoirs, including drilling, casing, completion. Well-head skids (‘Xmas-tree’, inhibition,
etc.) are included.

24.3.3 Aboveground Facilities

Aboveground Facilities relate to all construction activities within the new UGS fence, including
field lines to the well head distribution skids. This includes all discipline works, integration of
novated LLI’s and SPP’s, liaison and coordination of interfaces with other EPC-Contractors. AG-
Facilities Contractor is overall responsible of mechanical completion, pre-commissioning,
commissioning, performance and reliability testing, training, documentation, start-up and test
operation, handover to ISGS, support during initial operation phase / reservoir filling.

24.3.4 Long Lead Items (LLIs)

Based on the preliminary implementation schedule, as well as lead times advised by Suppliers
and known as per Ramboll database, some packages are identified as LLIs according to project
critical path. These are:
• Turbine/Compressor Units (including unit control system, auxiliaries)
• 36” Line Pipe and Induction bends
• Dehydration Package
Procurement of LLI’s shall be initiated during the FEED phase, based on functional specifications
and datasheets. During LLI bidding period (ca. 12 weeks), design details will be developed and
issued to preferred Bidders prior to Tender Negotiations, in order to firm-up contractual details,
performance requirements, etc.

In addition to LLIs, ISGS may consider initiating procurement of strategic ‘high-value’ packages,
which will again be novated to the selected EPC Contractors. This could allow to reduce cost
(eliminate EPC Contractor’s margin) and give ISGS tighter control over Vendor selection.
Strategic Procurement Packages (SPPs) could include:
• Large-bore Valves (>24”)
• Pressure Vessels
• Air coolers
• HV/MV Transformers and Switchgear
• Station Control System / SCADA / Telecom
• Metering systems

24.3.5 Early Works

Early works packages may be considered in order to save time prior to EPC Contractor
mobilisation. Typical packages include:
• Installation / upgrade of access roads
• Site clearance/grading, installation of site drainage systems
• Sub-surface preliminary works (see section 9.2)
This package is currently not required according to Implementation Schedule.

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24.3.6 Power Supply
Final power supply requirements for the new UGS/subsurface facilities are not yet finalised,
however, it appears likely that a new cross-country overhead power line connection will be
required (15-35 km). Such installations are often carried out by the local grid operator (e.g.,
HESCO), however, if permitted, ISGS may tender this work to qualified Contractors. Potentially
supply/installation of required HV/MV transformers and switchgear could be part of this Contract.

24.3.7 Mechanical Completion, Pre-Commissioning, Commissioning

EPC Contractor(s) are responsible for mechanical completion and pre-commissioning of their
individual scopes. Cold commissioning (without gas) is followed by Line Fill and ‘hot’
commissioning. AG-Facilities Contractor shall be responsible for coordinating the Line Fill and
commissioning with other EPC-Contractors and LLI-Vendor and SPP-Vendor commissioning
teams. After commissioning, Test Operation takes place followed by Handover, which represents
end of EPC Contracts.

As mentioned above, the reservoirs must be filled with cushion gas before commercial operation
as UGS. This may take up to 300 days. EPC-Contractor and Vendor support should be
contractually assured during initial reservoir filling phase.

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