President Musharraf's visit likely to enhance economic cooperation


Jan 27 - Feb 02, 2003




The Moscow visit by President Pervez Musharraf next month is likely to produce some significant results especially in enhancing the economic cooperation between the two countries.

So far the energy sector in Pakistan, having ample scope of growth, has attracted foreign investment from the US, China and the Western countries. According to reports, the economic managers in Pakistan are considering to invite Russian investment in the energy sector through privatization of the major state-owned oil and gas organizations in the country. This is certainly a right approach and would result in a balanced combination of foreign investment from different countries.

According to reports, during his visit to Moscow, President General Pervez Musharraf is likely to discuss the privatization of government controlled entities in the oil and gas sector, including OGDC, PPL, SNGPL and SSGCL with Russian authorities during his upcoming visit to Moscow.

It is learnt that the Ministry of Petroleum and Natural Resources in its brief prior to the visit has written to the President's Secretariat to discuss the privatization of the government controlled entities with the Russian authorities in the President's upcoming visit to Russia from February 4 at the invitation of President Vladimir Putin.

The discussions with the Russian leaders over privatization of the oil and gas organization are likely to prove result-oriented because of Russian cooperation in this field in the past which would certainly helpful for enhancing economic cooperation between the two countries.



It may be recalled that cooperation between Pakistan and former Soviet Union in hydrocarbon, dates back to 1960, when in 1961, the premier exploration and production company OGDCL was established in collaboration of the two countries.

The Government of Pakistan established Oil and Gas Development Corporation in 1961 as a statutory corporation to undertake exploration and development of oil and gas resources.

Now the government has started the privatization process for sale of 51 percent shares in OGDCL from July 22, 2002 and Russia will be the best option for the process as its founder and have the knowledge about the company far better than any other foreign country.

Besides OGDCL, the privatization of PPL, SNGPL and SSGCL will also find place in the discussion with Russian authorities.

It is believed that Russian help can be obtained in joint venture in the exploration of oil and gas as the Russian geo-scientists in the academic and research organization have thorough knowledge of Pakistan's geology, hydrocarbon potential and exploration.

Their expertise can be utilized in joint venture with Pakistan E&P companies in the development of undeveloped oil and gas fields, where endeavor is necessary to increase the production and shallow oil and gas fields where deeper potential has not been explored.

There is a lot of scope to establish joint venture in manufacturing for special alloy steel pipes, drilling stings, drill collars and high pressure pumps for use in the oil and gas related activities.

The Russian Company OAO Gazprom has already signed a memorandum of understanding for conducting the pre-feasibility study for shallow water for the Iran-Pakistan-India Pipeline project and cooperation in other areas of oil and gas sector.

It certainly gives a sense of satisfaction that despite a sluggish global economic environment and the risk perception regarding Pakistan's economy, foreign direct investment in the country increased noticeably.

During the financial year 2002 inflows totaled $484.7 million. During the current financial year the foreign investment inflows are expected to grow as regional risk perception ease and following the substantial improvement in Pakistan's external sector.

In the last financial year, the major beneficiary area was the oil and gas sector, followed by power. This pattern is likely to sustain even during the current year.



The country-wise position of foreign investment reveals that USA takes the lead, contributing about 67.3 per cent of the total foreign investment during last financial year. The major three areas for US investors in Pakistan were oil and gas exploration, trade and power.

In view of ever increasing consumption of the gas in various segment of the economy especially the power generation and the transport, the natural gas becomes an attractive area of investment for the investors.

An overview of the gas consumption pattern in Pakistan reveals that during the year 1991 the total gas consumption in Pakistan was 465,338 million cft. Since 90s consumption continued to grow as it jumped to 712,351 million cft in 2000, 762,151 million cft in 2001 and 803,507 during the financial year 2002.

The energy policy in the country assigns a much greater role to the natural gas sector in Pakistan's economy thus making a focal point from the investors' point of view. With this back ground, the economic managers are rightly considering that the foreign investment in the petroleum and natural gas sector through privatization of the state-owned entities would find greater attention of the foreign investment purely due to attractive economic returns of their investment.