. .

Soaring oil prices

10-15 per cent increase expected in oil prices

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 prices.

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 consumes.

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 confidence.

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 new discovery.