Pakistan seeks a two-year extension


Oct 27 - Nov 02, 2003



Pakistan had sought a 2-year extension in the Special Oil Facility amounting to around one billion US dollar from Saudi Arabia. The move was discussed during recent visit of Saudi Crown Prince Abdullah bin Abdul Aziz. There were indications that the move for extension, made by Pakistan officials, has been promised for a favorable decision.

It may be mentioned that existing Saudi Oil Facility for Pakistan will expire in December this year. Since Pakistan working on a new energy policy desires continuation of the facility for yet another two years so that it could achieve its on-going target of switching its oil consumer sectors specially the power generating and transports from oil fired to natural gas system. Under this scheme, Pakistan will get 50,000 barrels of crude oil for two years till December 2005.

Pakistan's oil imports under the Saudi Oil Facility had amounted to Rs39 billion during 2002-03, however, the amount for imports is likely to cut down to Rs31 billion during the current financial year.

In terms of value, Pakistan's total oil imports were amounted to $3.06 billion at the end of last financial year in June, 2003, while in terms of volume both crude and refined come around 20 million tons. Of the total oil imports, Kuwait Petroleum Company (KPC) meets 75 percent of high speed diesel and 25 percent of furnace oil. The remaining requirement is met through imports from Saudi Arabia, more often at special price and deferred payments. Saudi Arabia had facilitated Pakistan with oil worth over $2 billion on deferred payments in 1998 and 1999.

Pakistan's crude oil requirement is estimated at 5.5 million tons at the rate of around 100,000 barrels per day. This includes around 55,000 barrel per day of Arabian light, 25,000 barrels a day of Iranian light and about 10,000 barrels of upper zakum.

The furnace oil mainly used for power generation is required about 8 million tons followed by six million tons of high speed diesel and comparatively small quantities of kerosene and other products.



In order to contain oil expenditures, currently Pakistan is actively involved in switching over its thermal power generation plants both in the public as well as private sector to shift either on natural gas or on coal-fired system to bring down exorbitant electricity prices in Pakistan. Pakistan has sought a two-year extension sought in Saudi Oil Facility at a highly significant nick of time as its economy is said to be on the turning point and if all goes well, Pakistan could cut down its oil import expenses within an affordable limits during next couple of years.

Diversified measures have already been taken in accordance to the plans of reducing oil imports and cut down power generation cost in Pakistan.


The agreement on the installation of a 600mw Thar coal power generation plants at Duddar Lead Zink is most likely to be finalized next month when President Musharraf visits China sometimes in November.

The project will be discussed between the heads of the two countries and there are strong indications for a go ahead. Director General Petroleum Concession would reach China ahead of the President's visit. The Director General was scheduled to leave for China this week.

Chinese company Shanhua has shown its willingness to build coal-fired power generation plants.

In the first phase, the Chinese company will start work in about 50-square km of Thar Coal area and install two coal-fired power generation plants each of 300mw capacity.

The Chinese company Shanhua is also engaged in the feasibility study of Thar Coal to ascertain the gasification of the coal and coal bed methane (CBM). China would also help Pakistan for installation of 3000MW power generation plants after the completion of work on these two power plants.


The policy of shifting from oil to gas has started responding in a positive direction as the fuel oil consumption fell by 16 per cent in two months up to August 31 as producers switched over to coal or natural gas because of rising fuel oil prices.The companies consumed 2.32 million tons of petroleum products in July and August, from 2,77 million tons in the same period a year earlier.

Gas availability has increased to new discoveries in the last fiscal year, thus attracting more power producers to use gas as cheaper mode of fuel. About 78 per cent of Pakistan's fuel oil as used to generate electricity and to run cement factories.

The furnace oil consumption fell 21 percent to 898,000 tons down from 1.14 million tons.



The oil bill fell by 4 per cent to $679 in the three months up to September 30, from $708millin.

Sui Southern Gas Company of Pakistan, second largest natural gas distributor, raised its supply capacity by 33 per cent to 1.2 billion cubic feet of gas per day after completing a pipeline expansion project.

Pakistan's gas demand is expected to grow to 5.5 billion cubic feet a day by 2012 from 2.6 billion cubic feet now. The government seeks to have most power plants funning on gas or coal by end of this year.

Oil bill and consumption will fall further in the current fiscal year as most of the power producers and cement makers will also switch to gas. Pakistan's imports of crude oil and oil products in the year to June 30 rose by 9 per cent to $3.06 billion from $2.86 billion.