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Extract less oil strategy may fall short to succeed; Pakistan must overcome real energy issue

Interview with Mr Abdul Sami Khan — Chairman, Pakistan Petroleum Dealers Association and Chairman, CNG Dealers Association

Profile

Mr Abdul Sami Khan (Alig), Sitara-e-Imtiaz, was born in India and belongs to the Kakar tribe. He completed his education from Aligarh Muslim University. His family migrated to Pakistan. His father, Mr Abdul Waheed Khan, started Terry Towel factory business and he also joined him in the business. Then he stepped into the petrol business and since then he has been very active in it. His designations are as follows: – Chairman Pakistan Petroleum Dealers Association – Chairman CNG Dealers Association – Chairman FPCCI Standing Committee on Petroleum Products – Vice Chairman FPCCI Standing Committee on Banking Credit & Finance – President Clifton Block 2, Residents Association – Ex. M.P.A Sindh – Ex. Vice President Chamber of Commerce & Industry, Karachi – Ex. Member Board of Governors Civil Hospital and Lyari Hospital – Ex. Administrator P.E.C.H.S – Ex. Hon. Treasurer Karachi Gymkhana

PAGE: YOUR VIEWS ON RECENT TREND IN RISING OIL PRICES:

ABDUL SAMI KHAN: In my opinion, the oil producing countries have already suffered a loss due to decrease in oil prices and high cost of extraction. Although, efforts are made to extract less oil in order to cut short their expenses but I do not think they will succeed in the long run.

PAGE: WHAT WOULD BE THE IMPACT OF RISING OIL PRICES ON THE ECONOMY OF PAKISTAN?

ABDUL SAMI KHAN: It is not just the oil prices that has risen but:

– The cost of food rises
– The cost of shipping goods of all types
– The cost of material that are made from oil
– The cost of natural gas extraction tends to rise as will since oil is used in natural gas drilling

Two of the major areas where the impact of rising oil prices will deeply be felt are remittances and inflation measured by the Consumer Price Index (CPI). A surge in global oil prices will increase the rate of inflation that has remained subdued since October 2014.The rising oil prices will exhibit the rising potential of US currency, which will badly effect the economy of Pakistan.

PAGE: HOW WOULD YOU COMMENT ON THE INDIGENOUS ENERGY RESOURCES IN PAKISTAN?

ABDUL SAMI KHAN: Energy is considered to be the lifeline of any economy and most vital instrument of socio-economic development of a country. Pakistan’s energy infrastructure is not well developed and poorly managed. Pakistan is currently facing severe energy crisis.

Our sources of energy are:

– Petroleum Products
– Natural Gas
– Coal
– Wind
– Solar
– Agricultural Biomass
– Tidal
– Nuclear

Despite strong economic growth and rising energy demands during the past decade, no serious efforts have been made to install new capacity of generation. Moreover, rapid demand growth, transmission losses due to outdated infrastructure and power theft. Pakistan’s energy consumption is met by a mix of gas, oil, coal and LPG. Each energy source provides different levels of shares which creates a menace. Government can overcome energy crises by making effective policies and their proactive implementation.

PAGE: YOUR VIEWS ON STRATEGY OF OPEC AND OTHER OIL PRODUCING COUNTRIES PARTICULARLY RUSSIA:

ABDUL SAMI KHAN: Saudi Arabia is by far the largest OPEC producer. During the latest meeting of OPEC, it was decided to reduce the oil production. The cuts take effect from January 1, 2017 and will last for six months. During that time, traders will monitor the oil tanker traffic to ascertain whether fewer are leaving the port. They cannot monitor Russia or pledge to cut its production because much of its production moves by pipelines.

Russia in my opinion will be at an advantage as its production cannot be monitored plus oil prices continue to rise so Russia will enjoy good oil prices. OPEC argues that a modest cut now will spur investment in new sources of crude oil that will prevent oil shortage in future. But if non-OPEC producer, Russia does not cut production, it will difficult for OPEC alone to balance the market and bring prices up.

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