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PETROLEUM SECTOR
$10b investment opportunities
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An aggressive oil and gas policy is required to
put highest priority to foreign investment in oil and gas sector
By AMANULLAH BASHAR
Nov 27 - Dec 03, 2000
Pakistan, having hydrocarbon rich basins with
resource potential worth 200 trillion cubic feet of natural gas and
six billion barrels of oil offers attractive prospects for investors.
Since we have so far been able to find only a small
part of these resources and remaining potential should be more than
sufficient to challenge the minds of explorers, it is estimated that
opportunities worth $10 billion exist in the energy sector of
Pakistan.
The situation has placed the energy sector as the
only area where the government is eyeing on import substitution
because it feels that country is one of the most prospective regions
for oil and gas reserves. In this background, the massive dependence
on imported oil is somewhat paradoxical. The policy makers are
required to remove this paradox by pursuing an aggressive oil and gas
exploration policy putting highest priority to foreign investment in
oil and gas sector.
Pakistan is a net importer of POL products. Oil
accounts for about 44 per cent of the total primary energy supplies.
In order to meet the oil need, Pakistan spent an amount of about $1.4
billion for import of crude and petroleum products in 1998-99. The
cost of oil import jumped to as much as $2.76 billion in 1999-2000.
With the international crude prices touching its peaks, the petroleum
import bill of the country might be touching around $5 billion. There
is definitely a tremendous flight of foreign exchange when buying
petroleum products from the international market as compared to
refining within the country.
The gap in supply and demand indicates that
expansion in refining sector is a pre-requisite to relieve the
pressure on the strained economy and promote economic and industrial
activity in Pakistan.
The use of oil has increased by an average of about
8 per cent a year since 1991. The domestic refining capacity has
however remained constant at 6.7 million tonnes per annum over the
same period. After commissioning of PARCO the capacity would increase
to 11.2 million tonnes as against the demand of 18-20 million tonnes
per year.
It is estimated that the demand for petroleum
products will be touching 25 million tonnes per annum by next 8 years
against the refining capacity of 11.2 million tonnes per annum. If the
economic managers of this country desire to get rid of the costly
imported oil, the country would have to get more refinery projects at
least with a capacity of 14 million tonnes to meet the home
requirement. This is again an area highly attractive for investors as
well as for the economy to get rid of the imported oil.
According to reports, the developed world is
shifting their interests from refining sector. Established refineries
having capacities worth 136,000 barrel per day have already shut down.
Singapore has already decided to go for no more refineries and
petrochemical plants and it is the case with Japan. On the other our
competitor India is also getting saturated and offers no more avenues
for investment in refining sector. Under this situation, energy sector
in Pakistan offers attractive investment opportunities, is a natural
choice for the international investors. To make the refinery projects
more attractive, integration of refineries and petrochemicals should
be explored. Presently the requirement of the petrochemicals is being
met by imports with annual growth of 10-15 per cent. With high demand
of petrochemicals and excess naphtha available, projects such as
naphtha cracker would be extremely viable and encourage more
investment in several downstream projects options. To avoid the burden
on the economy and cater for shortfalls in the supply of finished
products; it is imperative that adequate expansion is made in refining
capacity. By 2008-09, if the existing capacity were not enhanced, the
demand would be more than double the refining capacity, which may be a
condition that should neither, be acceptable nor be affordable to our
economy.
According to Raziuddin, Chief Executive Officer of
ARL, Pakistan must not only use its strategic location as the gateway
to South Asia but also keep in mind its defence requirements. The
vagaries of international politics and economic upheavals must be
countered by self-reliance in finished petroleum products if not in
the production of crude. This is only possible by rapid expansion of
the existing refineries and putting up of new projects. One of the
most viable future project is said to be the Iran-Pak Refinery Limited
(IPRL) pending for years. Though the governments of Pakistan and Iran
were in agreement for setting up the refinery project. Joint venture
agreement was signed, Iran's ministry of petroleum had expressed
willingness to ensure guaranteed supply of crude for refining, land
for the project was also allotted at Gaddani Beach and the financing
was also available, it is however beyond comprehension of a lay man
that why this project has failed to come up.
Existing Refining Capacities
Attock Refinery Limited 1.57 million tonnes per annum
Pakistan Refinery Limited 2.2 million tonnes per annum
National Refinery Limited 2.8 million tonnes per annum
Dhodak 0.13 million tonnes per annum
PARCO 4.5 million tonnes per annum
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