10-15 per cent increase expected in oil prices
By AMANULLAH BASHAR
Sep 18 - 24, 2000
In the face of formidable rise in international oil
prices, the government of Pakistan may find it difficult to avoid a
mandatory 10 to 15 per cent average increases in local retail oil
Daunted by the possible increase in oil prices, the
consumers in general, industrial sector in particular, have expressed
their concerns that the chain effects of increase in POL products is
feared to take the economy to a situation where the candle burns from
both ends. They said that electricity and transportation charges have
already gone to a saturation point. Cost of production is rendering our
products incompetitive in the export market while beyond reach of the
common man in the local market. They feel that there should be an
immediate solution to this problem to save people as well as economy.
The official quarters, defending the proposed
increase in the oil prices contended that oil prices in Pakistan are
still cheaper as compared to other regional countries. They said that
diesel prices which are Rs 13 per litre are still cheaper than
Bangladesh and Sri Lanka where Diesel is being sold at Rs40 per litre
while it is Rs17 in neighbouring India. They added that the last
increase in oil prices was allowed when the international prices were
around $28 per barrel which have gone up to $33 per barrel.
All said and done the international hike in oil
prices already has general price rise trend in Pakistan. Besides a
quantum jump in Pakistan's import bill, which is likely to be around $ 3
billion at the end of the current fiscal, it has adversely proved a
cost-pushing factor in some of the key industrial areas in Pakistan. The
cost of thermal based power generation has severally hit the power
consumers due to constant increase in power charges, while its chain
effects are visibly reflected in the ever increasing concerns of the
people in Pakistan.
The rise in oil prices is expected when the
government makes a quarterly review of petroleum prices sometime this
month. Pakistan imports 85 per cent of the 385,000 barrels per day it
Spelling out the programme for switching over from
oil to gas fired system, official sources said that government was
making all out efforts to switch the oil-based fuel to gas by July 2002.
They expressed the hope that alternative fuel would help reducing the
heavy oil import bill of Pakistan.
In this respect, they said oil and gas conference is
to be held on October 8-10 in Islamabad.
To accelerate the pace of oil and gas exploration
activities in Balochistan, where the exploratory work has been suspended
since 1989-90, the government has decided to provide full protection to
the companies having the concession blocks in these areas, it is learnt.
It may be recalled that most of the areas where exploration concession
blocks are situated were under force majuere making it difficult for the
companies to carry out their exploratory work. Now it has been decided
that army, which is expected to encourage more investors to come forward
in this sector, would provide protection to the oil exploring companies.
The Economic Coordination Committee of the Cabinet
has also approved the exploration programme in Mekran blocks of granting
an extension in the initial term of exploration licenses for Pasni and
Gwadar blocks up to December 2001.
To attract more investments in the oil and gas
sector, the government is working out two incentive packages for the
local and foreign investors, which will be announced this year.
The forthcoming incentive package would cover every
aspect of upstream and down stream exploration and infrastructure
development activities in Pakistan.
The incentive package is expected not only to bring
foreign investment in oil and gas sector but will also restore investors
According to reports, a 4-member group of Occidental
higher management called on the Federal Minister to have latest on
Pakistan's efforts for creating investment atmosphere, especially in the
oil and gas sector.
The proposed investment package is also expected to
help cementing the cooperation between the investors in oil/ gas sector
and the government of Pakistan.
The government's resolve for boosting economic
activity is also reflected in the fact that Pakistan has welcomed the
Iran-India gas pipeline project and has extended every possible support
and guarantee to the pipeline project.
He said the government has determined the viability
of the project with a view that it will gear up development activities
in the oil and gas sector and to help built strong regional ties.
Recent discoveries of huge oil reservoirs in
Kazakhistan, initially estimated around 50 billion barrels, have sent
waves of interest to have an access to them not only in Pakistan but all
world players in the oil sector.
Pakistan is also looking for pros and cons whether it
could play any role in the newly emerged situation that has already
ignited the interest of USA, China and Russia.
The foreign office in Pakistan has however advised
its Almaty embassy to keep abreast itself of the developments taking
place in Kazakistan. Pakistan has already signed MOUs with other Central
Asian countries for laying oil and gas pipelines. Iran and Russia were
also trying to have access over the production and transportation of the