BHP – The Broken Hill

BHP Billiton is the world’s largest resource company with a focus on creating value through the discovery, development and conversion of natural resources. BHP Billiton Petroleum has been active in Pakistan since 1994. After a successful exploration review in 1993-4, in 1995 a Joint Venture led by BHP Billiton Petroleum was awarded the Dadu Concession (Block 2667-1) located in the Province of Sindh. The Zamzama Gas Field was discovered in 1998. On behalf of its joint venture partners, BHP Billiton Petroleum is the operator of the Zamzama production facility. The Zamzama field represents BHP Billiton’s first commercial production in Pakistan.

Once discovered, the Zamzama field development was pursued on a fast track basis with early production commencing in March 2001 through an Extended Well Test (EWT) as a precursor to full field development. Gas Sales and Purchase Agreements (GSPA) were signed with the Government of Pakistan and its nominated buyers, Sui Southern Gas Company Ltd (SSGCL) and Sui Northern Gas Pipelines Ltd (SNGPL), were allocated a total of up to 320 million standard cubic feet of gas per day (MMcf/d) over the expected field life of 20 years. In March 2002, the Joint Venture approved Phase-1 of the Zamzama field development.

The full field development came on line in mid 2003. The project was completed about four months ahead of schedule, and under the original US$106 million budget, of which BHP Billiton’s contribution was approximately US$40 million. This represents a highly efficient, low cost development of a major gas resource. By 2004, a steady average production of 270 MMcf/d was being delivered from the field to our customers.

The Zamzama field is now moving to Phase-2 development, which will accelerate the commercialization of reserves. The Phase-2 Development was formally announced in November 2005, following the signing of separate agreements between the Zamzama Joint Venture, the Government of Pakistan and SSGCL. The Phase-2 Development project, scheduled for completion in the third quarter of 2007, represents an increase in plant production capacity of 50%, to a total of 450 million standard cubic feet of gas (MMcf/d) per day. This new facility will be located at the existing Zamzama plant site.

The additional gas produced will be sold to SSGCL, under a new Gas Sales and Purchase Agreement. The total amount produced by the Phase-2 Development will have the potential to supply around 13% of Pakistan’s daily gas demand, so reducing the dependence on imported fuel and helping to rejuvenate the local economy. The total cost of Phase-2 is US$120 million, of which BHP Billiton’s share is US$46.2 million.

Production of condensate associated with gas from the Zamzama field will average approximately 3,000 barrels per day. Under an agreement signed with the Government of Pakistan, the Joint Venture will also proceed with the construction of a new, 40 kilometre condensate pipeline linking the Zamzama plant to the Karachi-Multan crude oil pipeline at Bubak. This pipeline will reduce the need for transport by road, thus decreasing the safety and environmental risks associated with this.

We are committed during Phase-2 development to maximize the local economic benefits of our field development activities through using Pakistani content and local labor as far as practicably possible, as was successfully conducted during previous phases of the Zamzama development.

The Zamzama gas field has experienced an excellent health, safety and environmental performance to date, and during Phase-2 BHP Billiton will strive to maintain and improve this performance wherever possible.

In the short period since its inception, our Community Development Program has already begun to make a tangible difference in the areas of health, education, provision of basic infrastructure, and sustainable livelihoods. We will continue to expand these activities during Phase-2.