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Jherruck
The Jherruck block covers a gross area of 734 km
2
and is located in Hyderabad. The Group’s working interest in the
licence for the Jherruck Block is 40%, held through a PSC entered into with the Islamic Republic of Pakistan in 2008.
The Group’s JV partner is NHEPL, which holds a working interest of 30% and is the operator of the PSC, and Pakistan
Petroleum Limited (“
PPL
”), which holds a working interest of 30%. Phase 1 of the exploration period of the PSC was
extended to run to December 2014.
Gas was discovered by the Jherruck-1 well in 2011 on the “Prospect B” structure, however the production rate obtained
from the well did not reach commercial levels and so the well was plugged and suspended. The Group’s operations at
Jherruck are now focused on further exploration and appraisal, having been granted an extension of its exploration phase.
Fiscal regimes
The Group’s operations in Pakistan are governed by PSCs. The Group holds interests in PSCs relating to Kunri and
Jherruck Blocks, which are both in the exploration phase. The PSCs have been negotiated with the Islamic Republic of
Pakistan. The Group must perform certain minimum work obligations within the exploration sub-period applicable to
each block. This includes a minimum work commitment of $8.95 million for Phase I of the exploration licence over the
Jherruck Block and $16 million for the Kunri Block. The first of these wells was drilled in 2011. Should the Group fail
to meet the minimum work obligations and expenditure requirements, it must pay the remaining minimum expenditure
requirement to the government. The remaining commitments of the JV partners are two wells in Kunri and one well in
Jherruck.
Under the PSCs, when there is a commercial discovery in an exploration area, the relevant parts of that exploration area
are converted to a development area or areas. The development period is typically 25 years from the discovery date.
The fiscal regime under the PSCs operates on a tax and royalty basis. The JV partners are required to pay to the Pakistani
government a royalty of 12.5% based on the monthly average oil production level in each PSC area. A 40% income tax
is applied to the JV partners’ profits from each PSC. Under the PSCs, the JV partners incur exploration, development
and operating costs in proportion to the cost interest percentage, and can apply to recover a proportion of their approved
costs.
The JV partners are required under each PSC to spend a minimum of $10,000 per year on training and to commit
specified amounts to social welfare programmes based on average production at the asset. For production under 2,000
boe per day, the JV partners are required to contribute $20,000 per annum to social welfare programmes. The JV partners
are also obliged to pay certain bonuses to the president upon reaching various production milestones, with the amount of
such bonuses under each PSC ranging from $500,000 to $5.0 million. Payment of these bonuses to the president is split
amongst the JV partners on the basis of their cost interest percentages.
HSSE
The Group implements and monitors its HSSE policy in all of its operated assets, and also monitors the HSSE practices
in assets where the Group is not the operator. It is the Group’s policy to comply with all applicable HSSE regulations in
those jurisdictions where it has operations, and to implement Group requirements and guidelines across all its assets. The
Group is continuously developing and improving its business management system to promote uniform work
methodologies throughout the business and compliance with HSSE regulations. The Group is committed to
strengthening HSSE capacities and competence in all operations. The Group’s Kuwait office is compliant with ISO 9001
standards and Kuwait Energy Egypt is compliant with OHSAS 18001 standards.
Below are the guiding principles of the Group’s HSSE policy in each of the areas of health, safety, sustainability and
environment.
Health
The Group is subject to various health regulations in the jurisdictions where it has operations. It is the Group’s intent to
safeguard the health of its employees and the public. As a result, the Group is committed to:
promoting health objectives and responsibilities as an integral part of the duties of management, and involving
employees in the implementation of the Group’s health management systems;
