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Cover Story

Turkmenistan-Pakistan pipeline project is vital

Dec 06 - 12, 1999

Persistent political disturbance in Afghanistan is a major setback to bring peace and prosperity not only in Afghanistan but for economic growth in Pakistan.

The $2 billion Turkmenistan-Pakistan gas pipeline project which promises economic growth by attracting foreign investment in Pakistan at a massive scale and development of downstream industries is suffering due to political disturbances in neighbouring Afghanistan.

A persistent war-like situation in Afghanistan is the cause of delay in implementation of gas pipeline project. Whereas a consortium of international oil companies have already arranged the finance while an accord on gas price between Turkmenistan and Pakistan governments has also been reached.

According to a report the only reason for the delay in laying the gas pipeline from Turkmenistan to Pakistan via Afghanistan is that the United Nations has not yet accorded recognition to Taliban ruled government in Pakistan.

According to an energy expert, delayed pipeline project is precluding Pakistan from taking advantage of speedy development of its energy sector, reduction in huge import bill on account of oil and also using gas as a substitute for its large scale manufacturing sector such as cement, fertilizer and electricity generation. The pipeline not only will offset the cost push use of oil for power generation but provide a respectable base for export of the natural gas having a much larger market in this part of the world including India.

Meanwhile energy sector in Pakistan has succeeded to increase its production of oil by 10.5 per cent as compared to last year from local resources and is poised to gain a 6,236 barrel per day during current fiscal of 1999-2000.

Official sources told PAGE that gas production during 1999-2000 in Pakistan is planned to be 2,404 million cubic feet per day against the estimated production of 2,024 MMCFD in 1998-99 showing an increase of 18.8 per cent in overall production of natural gas in Pakistan.

A total of 45 wells, both in public and private sectors are planned to be drilled during 1999-2000 comprising 20 exploratory and 25 appraisal and development wells.

In 1998-99, 44 wells comprising 18 exploratory and 26 development well were drilled. Similarly, in Liquid Petroleum Gas (LPG) production which progressively increasing its demand in the country is estimated at 656 tonnes per day while in the outgoing year the production of LPG was 478 tonnes per day which was 82.4 per cent of the production target. The Union Texas Pakistan is also working on development of a LPG project near Hyderabad.

According to official figures, Oil production during 1998-99 was 55,422 barrel per day against the target of 61,904 barrels, showing 89.5 per cent achievement.

Meanwhile arrival of Pak Arab Refinery near Multan sometimes next year will be another milestone in the refining sector of Pakistan.

While on the existing refinery sector side Attock Refinery has already upgraded its refinery capacity which has been increased to 35,000. With the increase capacity of 35,000 BPD the refinery shall process the entire crude oil produced in the northern region while balance requirements being fulfilled by transporting crude from Southern region, which would yield substantial freight savings to the government.

Former government had set a budget target of Rs63.3 billion for the energy sector which was 48.4 per cent higher as compared with Rs43.4 billion of the previous year. It is yet to be seen how the present government led by Gen. Pervez Musharraf deals the oil and gas sector in its economic package expected to be announced in the second half of the current month, sources said. New government however has already started taking interest in the speedy development of oil and gas sector and has accorded new licenses to oil and gas exploration companies recently. The upcoming 6 gas fields which are near to completion, the government target to increase the existing production of 2,024 mmcfd to 2404 mmcfd seems to be an easy target. The Uch gasfield operated by Oil and Gas Development Corporation(OGDC) is already in the trial production of about 250 mmcfd, it is learnt, while other fields which are also near completion may add a substantial amount of the much needed gas to the main supply system.

All these developments in the energy sector of Pakistan though would provide a relief to some extent however they are insufficient to address the huge energy problem faced by the country.

According to informed sources, the gas price accord reached between Pakistan and Turkmenistan is highly desirable due to its nature of cheapest oil pricing mechanism. It is learnt that the imported gas through the proposed pipeline would be cheaper even than the locally produced gas.

Each citizen of Pakistan is heavily taxed in terms of POL prices as over 70 per cent of the oil price goes into tax net under the title of development surcharge. While the oil prices are already on higher side in Pakistan, IMF is again pressurising the government to further increase its prices. Further increase in POL prices neither would be affordable by the common man nor it would help economy to its cost push effects on inputs for industry. It is however expected that Turkmenistan-Pakistan Pipeline project may address this formidable problem, if it is allowed to be completed.