Page 52 - Pakistan Oilfields Limited - Annual Report 2021
P. 52
RISKS AND OPPORTUNITIES
The Company is in a continuous companies by way of farm-in The vulnerability can give rise
process to implement, and farm-out agreements. to the following risks
monitor and improve its risk
management policies. Risks Drilling risk: • Commercial risks
are identified, prioritized Oil and gas drilling by its very • Operational risk– not having
and incorporated into a risk nature is a high risk activity. materials
management response to The Company is exposed to
effectively address risks. a number of hazards during • Contractual risk– exposure
drilling of wells including well to liquidated damages
Following are some material blow out, fishing, fire hazards The company is mitigating
risks being faced by the and personal injury. In addition, these risks by preparing of
Company along with mitigation the risk of not discovering detailed well prognosis before
measures:
oil and/or gas as expected, the spud date and timely
would have an adverse effect placement of procurement
Oil price volatility: on earnings. The Company orders for long lead items.
The pricing for the Company’s is mitigating these risks
oil and gas production is by selecting efficient and Reservoir engineering and
benchmarked with international professional teams and also process:
prices of crude oil and related by having strict criterion for The over estimation of reserves
products. Any unfavorable selecting rig and other allied and production can lead to
variance in the international services/equipment. Further, investment of significant capital
prices adversely affect the the Company also obtains in the form of plant design by
Company’s profitability.
control of well insurance cover the engineering function. As
for all drilling wells. far as practical, the Company
Exploration risk: obtains third party reserve
Exploration activity is prone Under performance of major oil certification to mitigate this
to the risk of not finding and gas fields: risk.
commercial quantities of The Company’s future earnings
hydrocarbons due to a number and profitability is dependent Laws & Environmental
of factors such as incorrect upon the production and regulations:
selection of exploration reserves of its oil and gas The oil and gas industry is
acreage, poor quality of seismic fields. The actual production regulated by a number of
data, error in processing or from fields may differ materially government regulations
interpretation of seismic data, from estimates due to possible which are required to be
incorrect selection of drilling under performance of the oil strictly followed. Default in
site. The Company is mitigating and gas reservoirs or other this regard can have serious
exploration risks by using production related factors. consequences. E&P Companies
latest technologies and hiring must take extra precaution to
experienced professionals. Procurement planning related ensure they are complying with
The Company is in continuous risk: all mandatory regulations when
process to explore new Vulnerability to the proceeding on a project. The
opportunities and increasing procurement process is risks of non compliance can
the chances of success by a possible threat to the range from cost overruns, fines,
joining hands with other E & P
Company’s profitability. prosecution, work stoppage
50 PAKISTAN OILFIELDS LIMITED
