Pakistan Petroleum Limited

Mission Statement Our mission is to optimize hydrocarbon production and pursue an aggressive exploration programme in the most efficient manner on the local as well as international horizons through a team of professionals utilizing the latest developments in the exploration and production technology and maintaining the highest standards of health, safety and environment

Pakistan Petroleum Limited (PPL) Introduction Pakistan Petroleum Limited (PPL) is one of the pioneer exploration and production (E&P) companies in Pakistan oil and gas sector. On behalf of the Government of Pakistan (GoP), the Privatisation Commission (PC) is proceeding with a strategic sale of 51% shareholding in PPL along with transfer of management control. Merrill Lynch International and KASB Securities (Pvt.) Ltd. (KASB) have been appointed as the Financial Advisor (FA) for the strategic sale. In July 2004, the GoP successfully concluded an offer for sale and initial public offering of 15% shares of PPL on the domestic stock exchanges. The PC invited Expressions of Interests (“EOIs”) from interested parties on February 17, 2005. The Parties submitting EOIs were requested to submit and Statements of Qualifications (“SoQs”) by April 30, 2005 whereby eleven parties submitted SoQs to the Privatisation Commission. Six parties were pre-qualified to continue to the next stage of the privatisation process. As of August 2006 three pre-qualified parties were ready to proceed for the bidding. However, the privatisation process is being reviewed in the light of the Supreme Court's judgment in the Pakistan Steel Mills case.

Company Overview PPL was incorporated in June 1950 with the Burmah Oil Company (renamed Burmah Castrol) and GoP as its principal shareholders. After more than 50 years of successful operations PPL continues to be a prominent E&P player in Pakistan with:

Sui, Pakistan’s oldest and largest gas field♣ discovered and operated by PPL, contributing 25% of Pakistan’s gas production; Remaining proven plus probable (2P) reserves of 6.9 tcf gas♣ and 39.6 mmstb oil/NGL) as of June 30 2005; Average FY2005♣ production of 948 MMcfd of natural gas and 1,759 bbld of crude oil/NGL; FY2005 revenues of PKR 23,294 million (US$ 388 million) and♣ profit after tax of PKR 8,623 million (US$ 144 million); ♣ Significant portfolio of non-operated assets, including Qadirpur, Sawan and Miano, Block-22 and Tal; Strong exploration track record and♣ prospective exploration portfolio, and Replacement of PPL’s 1982 Gas♣ Price Agreement (GPA) with the 2002 GPA allowing gas price increases under a phased 5-year program starting July 2002.

Company History PPL was incorporated on June 5, 1950 whereby the company inherited the assets and liabilities of the Burmah Oil Company Limited and commenced operations on July 1, 1952. At the time of incorporation, the Burmah Oil Company held the majority stake of 70% with GoP accounting for 30% stake and the balance held by private Pakistani shareholders. Burmah Oil divested 6% of its shares to the International Finance Corporation (IFC) in 1982, whereas in 1997 it sold the remaining shareholding to the GoP. In July 2004, the Government successfully concluded a 15% offer for sale and IPO of the company on the domestic stock exchanges at PKR 55 per share. The basic issue was for 10% shares with a green-shoe option of another 5% and the entire issue was 3.7 times oversubscribed. The current shareholders of PPL are the Government of Pakistan (78.35%), International Finance Corporation (6.09%) and institutional and individual investors (15.56%).

Organization

The Company’s holds operatorship of major oil and gas fields including Sui, Kandhkot, Adhi and Mazarani, while its non-operated portfolio includes interests in the Qadirpur, Miano, Sawan and Tal fields. The Company’s exploration portfolio includes operated and non-operated joint ventures in 10 onshore blocks and 2 offshore blocks. PPL holds joint ownership with the Government of Balochistan in Bolan Mining Enterprises (BME), which is involved in the business of mining exploratory well-drilling grade barite powder. BME is the operator of the Gunga barytes mine in Baluchistan. Share of profit in BME at year end June 30, 2005 was PKR 29.263 million. PPL’s head office is located in Karachi. The company’s total staff strength is about 2,536 employees including 640 management staff and 1,896 non-management staff. Reserves and Production

The proven plus probable remaining recoverable reserves (2P) of PPL operated and nonoperated interests as of June 30, 2005 were 6.9 trillion cubic feet of gas and 39.6 million standard barrels of oil/NGL. For the FY 2005, PPL’s average production was 948 mmcf/d gas and 1,759 bbl/d oil. The company’s share in average production from its operated and non-operated joint venture fields are as follows: PPL Production Oil/NGL (barrels per day) Natural Gas (million cubic feet per day)

Financial Data

FY 2003 1,353 910

FY 2004 1,697 942

FY 2005 1,759 948

PPL has an authorized share capital of Rs. 10 billion. The issued, subscribed and paid-up capital is Rs. 6,860 million (686 million shares issued at a par value of PKR 10). The key financial highlights of PPL are given below. PPL Financial Data (PKR mln) Sales less Government levies Operating Costs Profit before taxation Profit after taxation Total Assets Shareholder's Equity Total Liabilities

FY 2003

FY 2004

FY 2005

12,181.32

17,667.51

23,294.17

7,638.57

8,216.24

9,624.92

4,839.36

9,063.47

13,474.99

4,190.45

6,617.40

8,623.152

20,451.03

25,340.07

31,791.80

10,805.73

14,336.89

21,245.44

9,645.30

11,003.18

10,546.36

Source: PPL Audited accounts for FY 2005

Key Contacts

Mr. Consultant Ministry 5-A, Islamabad, Phone: Fax: E-mail:

Shahid

S. Munsif Raza Akbar Mr. Chief Executive / Managing Director Petroleum Limited of Privatisation Pakistan Constitution Avenue PIDC House, Dr. Ziauddin Ahmed Road, Karachi, Pakistan Pakistan (92-21) 5681391-5 (92-51) 9203881 Phone: (92-21) 5680005 (92-51) 9203076 Fax: [email protected]

Mr. Scott Lewis Director, Investment Banking Merrill Lynch International Merrill Lynch Financial Centre 2 King Edward Stree EC1A 1HQ London Phone: +44 2079 953 838 Fax: +44 2079 950 942 E-mail: [email protected]

Mr. Farid Head, Investment KASB Bank Business & Finance First Floor, I.I. Chundrigar Karachi Phone: (92-21) Fax: (92-21) E-mail: [email protected]

SUCCESS STORY

PPL CORPORATION OPTIMIZES OPERATIONS AND REDUCES COST Dramatic Savings and Efficiencies Delivered By Improving the Procurement and Sourcing Processes

Masood Banking Ltd. Centre Road Pakistan 2631770 2211853

The Opportunity:

Deregulation has created new markets for energy companies while intensifying competition. To succeed in this environment, PPL Corporation needed to cut overhead costs and improve efficiency with their warehousing operations. Key to achieving this objective was implementing a mobile computing solution that integrated with Ventyx Asset Suite so the picking and cycle counting processes could be performed electronically. In addition, dramatic savings and efficiencies were envisioned by improving the procurement and sourcing processes. PPL wanted to implement a strategic sourcing program that would automate timeconsuming and costly processes and leverage the advantages of an emarketplace. As part of this program, it would re-source both direct and indirect goods, totaling about $600 million in its US operations, and then expand the program to the rest of its global operations.

The Business Need: For success in this new world of competition, PPL Corporation focused on reducing costs, improving resource allocation and optimizing efficiency throughout its warehouse facilities. These facilities service PPL Corporation’s gas distribution businesses, electric transmission and distribution operations, nuclear generating station in Pennsylvania and two generating stations in Montana. For this strategy to succeed, PPL Corporation implemented Asset Suite (formerly known as PassPort), a comprehensive suite of asset management applications from Ventyx, to manage the maintenance, repair and operations as well as inventory activities at its warehouses. The warehouses and outside yards, some of which total more than 100,000 square feet, store more than 80,000 catalog identification numbers (CIDs), with inventory ranging from generating station replacement parts to wiring, monitoring instruments and transformers. ABOUT PPL CORPORATION Headquartered in Allentown, PA, PPL controls more than 11,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity to about 4 million customers in Pennsylvania and the United Kingdom. PPL has adopted an integrated corporate strategy to generate and sell competitively priced energy in key U.S. markets and operate high-quality energy delivery businesses in selected regions around the world. INDUSTRY Nuclear & Conventional Generation DEPLOYMENT COUNTRY United States VENTYX SOLUTION USED o Asset Suite

VENTYX SUCCESS STORY www.ventyx.com | 1-800-868-0497 2

The Challenges: PPL’s goal was to drive supply chain excellence across fossil fuel, nuclear,

hydro and natural gas facilities in the Americas and Europe. PPL determined that to continue to be successful, they needed to focus not just on cost reduction opportunities, but also on improved resource allocation and operating efficiencies within their warehouse operations. Simultaneously, PPL wanted to use their membership in the Enporion e-Marketplace as a vehicle to further reduce administrative, sourcing and procurement demands. It was also PPL’s goal to minimize the number of products with custom integration activities that would need long-term support, off-setting many of the potential gains. PPL relied upon Asset Suite as the single point of contact for both of these opportunities.

The Key Insight & Projected Benefits: The utility industry has become increasingly focused on improved cost management while at the same time seeking new opportunities for cost reduction. Reducing the administrative costs associated with sourcing and procurement operations has become a key focus at PPL. Maverick spending was proven to be a significant drain on the organization and negotiated costs saving contracts were not being utilized, further contributing to the problem. PPL decided to focus on two areas within their supply chain as they sought new cost management opportunities, turning to Ventyx for assistance from the Asset Suite solution and the Professional Services group. At the same time, it was believed that there were improvements that could be made in the existing warehouse and yard operations. With over 100,000 square feet and over 80,000 catalog ID numbers, PPL realized that a mobile computing solution, integrated with the existing Asset Suite system, would enable the picking and cycle counting activities to be performed in a completely electronic manner.

The Solution & Recognized Benefits: PPL Corporation launched a three-year plan to implement Asset Suite at its warehouses in Pennsylvania and Montana. Asset Suite enables workers to pick items and perform cycle counting at the same time, thereby improving productivity and saving time. It also updates inventory levels in real-time and provides workers with total visibility of inventory at all its warehouses. The implementation was completed ahead of schedule due to its ease of use and tight integration. Benefits gained include: • Decreased time to pick items by works by up to one-third • Improved on-time picks to 98.89 percent from 64 percent prior to the implementation of Asset Suite • Overhead costs decreased by 20 percent • Improved inventory turns to new levels of efficiency VENTYX SUCCESS STORY www.ventyx.com | 1-800-868-0497 3 With the size and complexity of this warehouse infrastructure, PPL Corporation realized mobile computing was essential to further improving productivity and operational efficiency. In 1999, PPL Corporation implemented the Ventyx mobile computing solution, and has achieved further benefits from Asset Suite. “It was a burning platform here,” said John DeFluri, Manager of Warehouse Operations. “We had to quickly improve our usage of resources to compete successfully in this new deregulated environment. We installed Ventyx mobile solutions to enhance our Asset Suite system in order to survive and thrive in this new deregulated environment.”

PERFORMANCE PROVEN

Ventyx is a leading business solutions provider, delivering asset management, mobile workforce management, customer care, energy trading and risk management, energy operations, and energy analytics solutions to more than 900 energy, utility and communications customers, as well as to asset-intensive customers in selected commercial markets. With approximately 1,200 employees in more than 20 locations worldwide, Ventyx delivers best-of-breed business

solutions that maximize operational and financial performance, backed by the industry’s deepest available industry-specific domain expertise.

Pakistan Petroleum Limited Energy Oil & Gas SWOT Report Type Marktstudie Year: 6/2008 Publisher: Global Markets Direct Language: english Availability: available

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Porter “Strive for competitive advantage and the forces that affect it.” Strategic Management Dr. Cassell By: Ashleigh Bender Table of Contents: I .) Executive Summary pg. II.) Porters Five Forces Defined pg. • Supplier Power pg. • Buyer Power pg. • Threats of New Entrants pg. • Substitutes Products pg. • Degree of Rivalry pg. III.) Advantage and Disadvantage of Porter’s Five Forces Model pg. IV.) Application of Porter’s Five Forces pg. V .) Porter’s Generic Strategies pg. • Cost Leadership pg. • Differentiation pg. • Focus Strategy pg. VI .) Advantage and Disadvantage of Porter’s Generic Strategies pg. VII .) Application of Porter’s Five Forces pg. VIII.) Bibliography pg. Executive Summary: Michael Porter created two concepts used by industries to either achieve greater competitive advantage or can be used......

Achievements

Year

Event

1952

Discovery of Pakistan's Largest Gas Reserves at Sui.

1955

Commencement of pipeline quality Natural Gas supply to Karachi for industrial and domestic use within record time of three years of discovery at Sui.

1959

Discovery at Kandhkot Gas Field. Discovery of Gas at Mazarani Field.

1976

Commercial Production of Barytes by Bolan Mining Enterprises.

1978

Crude Oil discovery at Adhi field.

1980

Commercial Production of Crude Oil from Adhi field.

1982

Execution of Sui Gas Well Head Price Agreement (1982 GPA) stipulating cost-plus fixed return Gas Pricing Formula.

1986

Commissioning of Sui Field Gas Compression Project (Phase 1) in Sui Main Limestone (SML) formation.

1987

Start of Commercial Production From Kandhkot Gas Field.

1990

Installation of Liquefied Petroleum Gas (LPG) and Natural Gas Liquid (NGL) Plan and Commencement of LPG, NGL and gas production from Adhi.

1995

Commencement of gas production from Qadirpur Gas Field (operated by a Joint Venture Partner).

1997

Completion of Phase II Extension of Sui Field Gas Compression Project at SML and three Turbo Compressor Trains in Sui Upper Limestone Reservoir.

2000

Commencement of Extended Well Test (EWT) Production from Block-22, Shikarpur.

2001

Supply of gas from Miano Gas Field (Operated by a Joint Venture Partner).

2002

- Dismantling of 1982 GPA and execution of new market based Sui and Kandhkot Gas Price Agreement linking the Sui and Kandhkot gas price with international oil prices.Acquisition of Sui gas Purification Plant jointly owned by SSGCL and SNGPL

2003

- Commencement of gas supply from Mazarani Gas Field. - Commissioning of Gas Processing Facilities (Phase 1) and supply of gas from Sawan Gas Field. (Operated by a Joint Venture Partner). - Discovery of Pipeline Quality Gas Reserves in Tal Exploration block, NWFP (operated by a Joint Venture Partner)

2004

- Country's first ever supply of 100,000 tonnes of indigenous iron ore from Dilband, District Mastung, Balochistan, to Pakistan Steel, Karachi.

2005

Discovery of significant quantities of oil and gas/ condensate from the second exploratory well Makori-1 drilled within Tal Block.

2006

- Completion of Extended Well Testing of Manzalai-1, first discovery well in Tal Block. - Commencement of production from Early Production Facility at Makori-1 well site in Tal Block.

2007

- Three discoveries; one oil and gas discovery at Mela-1 well (Nashpa Block) and two gas discoveries Latif-1 (Latif Block) and Tajjal-1 (Gambat Block) were made. - Completion of the first exploratory well Mela-1 at Nashpa Block as oil and gas producer and commencement of Extended Well Test production.

2008

-For the first time in the Company’s history, two horizontal development wells were drilled and successfully completed as producers at Kandhkot field. -Exploration well Memikhel-1 at Tal Block was successfully competed as gas/ condensate discovery. -Appraisal well Mela-2 at Nashpa Block was successfully completed as producer and tied in with EWT facilities

Company Overview

Pakistan Petroleum Limited is the oldest and largest Exploration and Production Company in the country was incorporated on 5th June 1950 subsequent to the promulgation of the Pakistan Petroleum Production Rules, 1949 with the main objective of conducting exploration, development and production of Pakistan's oil and natural gas resources. PPL inherited all the assets and liabilities of the Burmah Oil Company (Pakistan Concessions) Limited and commenced business on 1st July 1952. PPL and its ex-parent Burmah Oil Company have been active in the subcontinent since the early part of the 20th century. A total of 239 wells including 65 exploratory and 174 appraisal / development wells have so far been drilled which resulted in the discovery of about 19.90 Tcf gas (both operated and nonoperated leases). A gas condensate/oil field at Adhi with original recoverable reserves of 1,253 MT liquefied Petroleum Gas and 39.4 MMbbl of oil/condensate was also discovered by PPL. The Company also operates a Baryte mine in Balochistan province. It produces oil well drilling grade Baryte powder from the mine, which has proven reserves of 1.25 million tones. For the year 2004-05, PPL's share of average production from its operated and non-operated fields was 953 MMcfd of gas, 1,372 bpd of oil/NGL and 26 tones per day of LPG. Production of gas from these fields meets about 25.1% of the country's indigenous production. The gas, LPG and NGL production from PPL operated and non-operated fields for the year 2004-05 in terms of oil equivalent, was about 171,205 barrels of crude oil per day. The Company has a staff of about 2520 as at 31 May, 2006 employees with about 431 qualified technical staff in the fields of engineering, computer and earth sciences. PPL has well established IT department and all staff in the Head Office has access to computers and are interconnected through Local Area Network (LAN). The Wide Area Network (WAN) has also been established connecting PPL's three major producing fields and Regional Office in Islamabad with the Head Office at Karachi. The Company has implemented SAP in 2004 integrating core business processes using Costing, Finance, Human Resources, Materials Management, Plant maintenance and Project Systems modules. The Government of Pakistan (GoP) in September 1997 purchased the entire equity interest of Burmah Castrol PLC, formerly Burmah Oil Company, in the Company (comprising 21 million ordinary shares of Rs.10 each) representing 63.91 percent of the Share Capital thereby increasing its holding in the Company to 93.35 percent. Subsequent to June 2004, the GoP has disinvested a portion of its equity in the Company equivalent to 15% of the paid up share capital of (i.e. 102.873 million shares of Rs.10 each) through an Initial Public Offering (IPO). The GoP has made a policy decision to privatize PPL and IPO is a significant step towards this direction. A consortium led by Merrill Lynch International and KASB securities (Pvt) Limited have been appointed by the Privatization Commission (PC) as the Financial Advisor (FA) for the strategic sale of GoP's 51 % interest in the company. Five (5) parties were prequalified as potential bidders for the transaction. The Government of Pakistan continues to pursue the privatization process through sale of its majority interest in the Company to a strategic investor and remains committed to proceed with the transaction with a view to concluding the process at an early date. LEADING THE WAY Pakistan Petroleum Limited (PPL), the pioneer of the natural gas industry in the country, has been a frontline player on the exploration and production sector for well over five decades. The company follows an aggressive strategy to not only maximize production but also replenish existing reserves and venture into untapped areas. Today, PPL contributes around 26 percent of the country's total natural gas production besides producing crude oil/ Natural Gas Liquids (NGL) and Liquefied Petroleum Gas (LPG). Starting out concurrently with the first major gas discovery at Sui in 1952, PPL now operates four producing fields at Sui, Kandhkot, Adhi and Mazarani and holds working interest in seven partneroperated producing fields. PPL’s exploration portfolio comprises 24 exploration blocks, including four that are offshore. On June 30, 2008, the company’s hydrocarbon reserves stood at approximately 3.71 trillion cubic feet of natural gas, 23.3 million barrels of oil/NGL and 321,000 tonnes of LPG. RECENT INITIATIVES In pursuance of its corporate vision, PPL has stepped up efforts to increase hydrocarbon production to keep pace with Pakistan’s growing energy needs. To this end, it has devised a dynamic exploration and development strategy, focusing on enhancing its reserve-replenishment ratio, drilling-to-discovery ratio