ATTRACTING INVESTMENTS IN BALOCHISTAN'S OIL AND GAS SECTOR

SYED FAZL-E-HAIDER
Mar 9 - 15, 2009

Balochistan government has reportedly issued security clearance to exploration and production (E&P) companies, which have started carrying out work on 15 oil and gas fields in the province. The Economic Coordination Committee (ECC) to attract investment has also approved Petroleum Exploration and Production Policy 2009, which has been forwarded to another committee of Corporate Social Responsibility for resolving all the undecided and contentious issues.

The decision has been taken during consultation on Petroleum Exploration and Production Policy 2009 at a recent meeting of Ministry of Petroleum and Natural Resources and Planning Commission. E&P firms would encourage local employment through imparting training to the local youth and a handsome amount from the profits would be spent for social welfare of the local population.

Pakistan's energy scene is marked by rising fuel demand and growing supply shortfall. There has been a doubling of gap between demand and supply of oil during the past decades. During the last five years, the indigenous production in country's oil sector has remained static at about 55,000 to 65,000 barrels per day. The nation wide sales of petroleum products have reflected an upward trend for the last three years. The country needs more natural gas to feed new power plants to meet a potential energy shortfall of 5,000 MW by 2012.

Potential investors are unable to proceed with gas-fired power plants due to uncertainty of natural gas availability. Presently, the Sui Southern Gas Company and Sui Northern Gas Pvt. Limited are supplying gas to the numerous industries and if they continue it with the current rate, the country's reserves would be spent in 10-15 years time. This will necessitate having another source of gas for protecting the reserves from over exploitation.

Rich in oil and gas resources, Balochistan offers enormous opportunities for foreign investors. The provincial government has issued security clearance to 15 licences issued to different companies out of 25 licences aimed at stepping up work on exploration and production of oil and gas from natural resources of the province. Provincial Chief Minister Aslam Raisani has invited investments in oil and gas exploration in the province and assured full protection to national and foreign investors. The government has issued NOCs to five national and international companies for investments in the oil and gas sector.

Around 23 percent of the total national output of natural gas is exploited from Balochistan, including 18 percent from Sui. The presence of natural gas is of utmost importance for the province, as it is an important source of income for the provincial government through the gas development surcharge. Geological surveys have reported reserves of billions of cubic feet of gas and billions of barrels of oil during offshore exploration in the province. The Pakistan Petroleum Ltd. (PPL) is producing 720-750 million cubic feet of gas per day from its 80 plus wells in Sui field of Balochistan. The federal government should also extend all help to the province in exploration and development of its oil and gas resources.

Pakistan Exploration and Production Companies Association (PPEPCA) had asked the former federal government to open its Balochistan province for exploration to overcome a potential energy shortage. Petroleum Exploration and Production Policy 2007 has failed to address the problems faced by the PPEPCA and was not able to attract much needed foreign direct investment in this sector.

The Chinese embassy in Pakistan has barred its country's services companies from oil and gas exploration and production work in Balochistan for security reasons after the land mine incident of April 2, 2006 in which six security personnel were killed.

A Chinese petroleum firm BGP was awarded $1 million contract in 2001 by the Government of Pakistan to carry out seismic survey over an area of 178km in Dera Bugti. The company had suspended the survey in Sui due to security reasons. Over a dozen oil and gas exploration blocks had been awarded to over 20 local (both public and private) and international firms in Balochistan over the past 12 years but they could not start operations due to law and order problems in the tribal areas of the province.

The prevailing security environment in Balochistan cannot attract foreign investment in the oil and gas exploration sector and also call into question the guarantees of security for a proposed multi-billion dollar gas pipeline from Iran to India that would have to run through the province. India has frequently voiced its concern over the security of the pipeline traversing Balochistan.

The security situation in Balochistan will only improve when the real stakeholders feel a sense of ownership and they would be held directly responsible for the security of the development projects. The nationalist parties feel and resent over the Islamabad's firm control over the way the province's economy is managed. On the other hand, the perception of a rapid economic progress poses a threat to centuries-old feudal system which has been enjoying aristocratic status and exploiting the people. It is also a proven fact that the use of military might has been ineffective in bringing about a political or social change in a society.

According to the official estimates, out of 90,000 people, who had left Dera Bugti during military action, 65,000 had returned to their houses and a massive relief operation is being carried out for their rehabilitation. The provincial government had to incur substantial amounts to maintain law and order in the province particularly in Sui, Loti and Pirkoh areas of Dera Bugti district. Many transmission lines came under rocket attacks during past three years.

Balochistan has turned out to be a Mega thin-skinned province due to the discriminatory attitude meted out with it for the last five decades. What is actually needed is to harmonize the views of the local people and their chiefs with those of the government on development goals and approaches, as otherwise the development process will not go on sustainable and durable basis.