Foreign Investment
The Oil and Gas Conference 2000 was held in Islamabad 2 weeks
back has accelerated investment in oil and gas sector and it is likely to
receive fresh momentum when the Petroleum Ministers of Economic Coordination
Organization (ECO) meet here early next month.
In his inaugural address at the Oil and Gas Conference 2000,
President Mohammad Rafiq Tarar had observed, "Our basins are known to be
hydrocarbon-rich and according to estimates, resource potentials of Pakistan is
200 trillion cubic feet of gas and 6 billion barrels of oil. We have so far been
able to find only a small part of these resources and the remaining potential
should be more than sufficient to challenge the minds of explorers".
To meet the growing demand of energy, substantial levels of
new investment in petroleum exploration and production as well as infrastructure
will be required and this investment must come primarily from the private
sector, the president said.
Inviting the foreign investors to invest in this sector in
Pakistan, the President said, Pakistan is an investor-friendly country, which
offers complete safety to foreign investment. With a transparent, stable and
independent regulatory regime that is being put into place, the President said
"I am sure investors will feel more confident". Our fiscal terms are
quite competitive in relation to the rest of the world and in particular to the
region". Notwithstanding this comment, he said, "I would like the
delegates to identify the areas of concern and to make suggestions for
improvement". He said Pakistan itself is a country of more than 135 million
people and "our energy demand is growing and with the expected economic
growth there will be an increasing demand for energy".
The three-day Pakistan Oil and Gas Conference 2000, which was
held in Islamabad has been successful in more ways than one. It succeeded not
only in holding free and frank discussion on the policies that are currently on
the anvil but also facilitated the conclusion of agreement worth $428 million
for the development of several newly discovered gasfields and transportation of
gas to important consuming centres. The policies that were deliberated upon are
under formulation. They will lay down ground rules for exploration and
development of the two sources of energy. The revamping of rules and regulation
has assumed great importance in view of the unprecedented increase in oil prices
recently and the equally unprecedented rise in the demand for power in Pakistan.
The import of oil constitutes over a quarter of the country's total imports of
about $11 billion. Oil import is expected to reach $3 billion this year.
3 years programme
The government is taking up a three years investment
programme of Rs. 162 billion in the oil and gas sector. Of this proposed
investment Rs. 93 billion (almost $1.5 billion) is expected to come from the
private sector. Oil business sources say that the government plans to inject Rs.
7.95 billion through budgetary allocations and Rs. 59 billion investment would
be taken up outside the budget during the next three years.
This investment programme is a key component of a three-year
Rolling Plan prepared by the Planning Division which stipulates a total public
investment programme of Rs. 700 billion. This plan offers macroeconomic
framework within which the present government will work and hand over the
responsibilities to next government for implementation of the last phase, from
2002 to 2003.
Termed as "modest but realistic", the investment
programme has been given a direction on Thursday when the Cabinet in a meeting
chaired by the Chief Executive, General Pervez Musharraf approved the offshore
petroleum exploration and production policy package and model production sharing
agreement.
Under the proposed package, the previously designated deep
water zone has been redefined and divided into deep and ultra deep water zones
with a new profit oil and profit gas split. The investment programme is being
termed as modest as the assessment is that there is an investment opportunity of
$5 billion in oil and gas sector. The government has already taken a number of
steps in this direction. Besides setting up the gas and oil regulatory
authorities, the government is in process of giving a final shape to a Holding
Company that will control all its shares in oil and gas business.
Talking informally to the newsmen, Minister for Petroleum,
Mr. Usman Aminuddin said that in order to attract foreign investors in this
highly potential sector the government was planning to everhaul rules and
regulations governing oil and gas exploration and production to bring them at
the international standard. Talking about the potential in this sector, he said
Pakistan's sedimentary basins, stretching over 825,000 square kilometers provide
enormous and exciting investment opportunities to entrepreneurs who are prepared
to take up the challenge. He said drilling success ratio of 1.3 was quite
attractive but the current exploratory effort in these areas was limited.
He said 25 companies, including 21 foreign, were exploring
this area under 62 licenses and 96 leases. Productivity of Pakistan fields is
about 57,000 barrels of oil per day and 2.3 billion cubic feet of gas per day
with total proven recoverable reserves of natural gas and oil estimated to be 33
trillion cubic feet and 670 million barrels respectively.
