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Continuity, expansion of oil and gas activities worthy of note

Pakistan is a net oil importer and meets about 75 percent of needs through imports. Oil imports carry the heaviest weight in total imports of the country. Pakistan has a total refining capacity to process around 400,000 bpd or about 19MTPA of crude oil, against the current demand of 24MTPA. Total global refining capacity is 97 million bpd, and Pakistan, with nominal world share of 0.4 percent, is ranked 48th. Demand for oil products in the country is expected to grow steadily at seven percent on year-on-year basis, according to recent studies, in particular for the furnace oil, motor spirit, diesel and aviation fuel, which accounts for 78 percent of total oil demand. Thus, the demand-supply gap will continue to strain heavily on the imports in future, if oil refining capacity is not added at a large scale.

As most large, accessible reserves of hydrocarbons in Pakistan are already discovered and are, in fact, mostly in decline, the major challenge for the E&P industry is to replenish depleting reserves to secure a sustainable energy future for the country. This imperative is eminently pertinent in Pakistan’s case, where only about 40 percent of available acreage is tapped, of which barely one-fourth is under active exploration. Practically, this means a huge part of the country’s prospective region remains unexplored. The only way to counter this is to venture into less-explored frontier areas, including offshore basins, even if it entails higher business risk and cost. Moreover, the presence of sizable unconventional reserves presents another potential opportunity to improve the reserve base. To this end, we need sharper focus on technical enablement, especially through capacity building, and collaboration between local and foreign partners.

 

The upstream oil and gas sector is led by the state-owned, listed companies, namely, Oil and Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL). These companies have announced their intention to increase exploration and production. Pakistan’s upstream sector has not attracted as much foreign investment as expected, despite attractive policies and high equity returns. Pakistan Petroleum Policy 2012, offers one of the best incentives for E&P companies, according to the industry experts. Government of Pakistan guarantees purchase of whatever is produced by the O&G companies, at the well head. All proceeds to foreign companies are paid in US dollar. Operational difficulties due to sluggish response by government authorities on operational and policy issues are a major reason, according to private sector experts. Security challenges do exist in Pakistan; however, industry sources believe that they are manageable.

Despite increasing local production and imports of oil and LNG, Pakistan does not have a sufficient supply of energy to meets its demand. The shortfall currently runs at about 2 Billion Cubic Feet per day. Pakistan imports 75 percent of its need. Industry sources believe this deficit will remain for the next 5-10 years. Oil and gas, both locally produced and imported, make up 75 percent of Pakistan’s energy mix. Maintaining and expanding this sector is strategically important for Pakistan’s economic growth.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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