Economists warn about the consequences for the
global economy of oil prices rising. The price is over $60 and gloomy
industry analysts are speculating on it hitting $100. The driving
forces behind current rising prices, however, are not those that
prompted the increase of 1999-2000.
The main factor pushing prices up today is soaring
demand, not producer constraints on oil output. Without a determined
global conservation effort, the threats of an economic crash and
growing friction - both between consumer states and between consumers
and producers - are bound to be fundamental elements of international
relations over the coming years.
Expanding oil production to meet demand is not a
solution, and would only ease the shortfall temporarily: reserves are
being depleted three times faster than new oil sources are being
discovered, and most older, more easily exploited fields have passed
their peak output. The problem was bound to arise sooner or later: oil
is finite, and so is human prudence when it comes to taking care of
the future. It arises now in an acute form because of sharply rising
energy consumption in developing countries, particularly China and
India. China alone accounted for a third of extra global demand in
2004. According to the International Energy Agency, China's oil
consumption is expected to grow to over 10 million barrels a day over
the next 15 years, and India's by 30 percent in coming years.
It is squarely believed that energy is an imminent
fuel for the economy. The consumption of energy is one of the critical
indicators of the level of development of any country. Developed
countries use more energy per unit of economic output and far more
energy per capita than developing countries.
Energy use per unit of output does seem to decline
over time in the more advanced stages of industrialization, reflecting
the adoption of increasingly more efficient technologies for energy
production and utilization as well as changes in the composition of
economic activity. At present, over a billion people in the
industrialized countries use some 60 percent of the world's commercial
energy supply, while 5 billion people living in the developing
countries consume the remaining - a large number of them are poor. It
is estimated that about two billion people around the world have
access to modern energy services and as a result, struggle to meet
their basic daily needs.
PAKISTAN'S ENERGY SCENARIO
Energy sector in Pakistan comprises power, gas,
petroleum and coal. The total primary energy supplies measured in
terms of tones of oil equivalent (toe) stood at 50.8 million tonnes
equivalent of energy (toe) in 2003-04. The primary energy supplies
have been rising steadily over the last several years. It was 45.2
million toe in 2001-02, increased by 4.4 percent in 2002-03 and
further grew by 8 percent in 2003-04 to stand at 50.8 million toe.
Oil, natural gas, electricity, coal and LPG 29.9 percent, 49.7
percent, 13.5 percent, 6.5 percent and 0.4 percent, respectively, to
primary energy supplies in 2003-04 (see Fig-1 for detail). Oil and gas
drilling activity remained slow in 2003-04 as compared to 2002-03 and
accordingly, 29 exploratory wells and 24 development wells were
drilled in 2003-04 as against 32 and 45 drilled in 2002-03. In 2003-04
11 new discoveries including 4 oil and 7 gas/condensates were made.
Average oil production dropped from 64,268 barrels per day in 2002-03
to 61,817 barrels per day in 2003-04, while natural gas production
increased to an annual average of 3,295 million cubic feet per day
from 2,719 million cubic feet per day in 2002-03, showing an increase
of 21.2 percent.
The government is putting efforts to attract local
and foreign investors and as a result of these financial and
structural reforms, the energy sector has already emerged as one of
the most attractive sectors in the country. Recently, Pakistan has
signed six agreements for US$ 42 million with various international
companies to carry out exploration activities in the oil and gas
STRATEGY TO COPE UP DEMAND
Economic growth is the key to changing this
situation, and for economic growth we need energy. Pakistan's economy
is witnessing a visible and crucial structural shift since 1999- 2000.
The real GDP growth is accelerating over the last three years - rising
from 5.1 percent in 2002-03 to 6.4 percent in 2003- 04 and further to
8.35 percent in 2004-05. Over the next five years, 7-8 percent growth
per annum is targeted to be sustained which will demand a commensurate
rise in the energy use. In order to sustain growth momentum, rise in
levels of income, and increased availability of goods and services
have to be assured. Pakistan needs an integrated National Energy Plan
not only to increase the supply but also to conserve energy with
efficient technologies. The per capita energy consumption in Pakistan
is currently low at 14 MBtu as compared to 92 MBtu for Malaysia and 34
MBtu for China. Efforts are on to ensure the development of energy
resources to contribute to the nation's development.
The government's own statistics reflect declining
exploration activities at home, which has already been historically
low compared to standard rate of hydrocarbon exploration in the world.
During July-March 2004-05 a total of 34 wells have been drilled
including 13 wells in public sector as against 35 in the same period
last year. This speaks volume of the negligible hydrocarbon
exploration activities as a desirable rate of exploration stands 100
exploratory wells as per 10,000 square kilometers concession.
In the past five years, the country has increased
its dependency on gas instead of oil. This growing dependency is going
to place Pakistan along with India and China, the two largest
energy-starved countries in near future.
A contrast in the energy basket of India and
Pakistan is visible. And this very contrast provides the basis of
tapping energy sources from across the borders.
In Indian energy basket gas accounts for mere seven
percent whereas it draws 45 percent energy from its huge coal
reservoirs. Story is different here. Pakistani energy consumption
trend shows that it energises industries, commercial and domestic
needs through gas whose share is 50 percent. Coal consumption is
negligible, though a huge but still unexplored reserves lying under
the Thar deserts.
The coalfield in Sindh province has reserves of 175
billion tonnes. Due to import of high cost energy resources,
government has decided to enhance the share of coal in the overall
energy mix from present five percent to 18 percent up to 2018. Almost
80 percent of cement industry has now switched over to indigenous coal
from furnace oil that has saved considerably foreign exchange which
was being spent on the import of furnace oil. But, power generation
accounts for 70 percent of India's total coal consumption, despite the
fact that Indian coal is of poorer quality with low in caloric content
and high in ash and located far from major consumption centers. China
as well producing 50 percent of its electricity through coal-fired
thermal power stations. It certainly nauseates a sincere citizen as to
why the authorities are not able to bring this precious stone out of
quarries to be burnt into power station on large blast furnaces. The
situation typically offers the 17th century situation when England
first found coal deposit but had no technology to develop the mines
and lagged behind from France in industrial advancement.
TRANS-BORDER GAS PIPELINES
Both Pakistan and India attach high hopes with
sourcing of energy from Iran, and Turkmenistan or Qatar. India plans
to enhance gas consumption in its energy mix to 20 percent from
present five percent in coming 20 years. Once a pipeline project is
commissioned, India would be importing 200-mmcfd gas, despite the Bay
of Bengal may emerge as the second North Sea, in terms of oil and gas
reserves. On the other side Pakistan's gas production, which cater for
the 50 percent of the present energy needs, is going to be peaked in
coming years. Thus the production of gas would start receding fast
prompting demand running faster than supplies. In 2010, it would
become imminent for Pakistan to import gas in view of exhausting gas
deposits at home which size 30.13 trillion cubic feet now. By the year
2010, Pakistan's gas import needs would be 300 mmcfd whereas Indian
needs would stand around 200 mmcfd. The cumulative import needs of 500
mmcfd would make the two countries the largest buyer of natural gases
in the world- a phenomenal fact, no exporting country can take it for
This would be the biggest strength as well as the
weakness at the same time of the two countries.
This has been encouraging to see diplomatic and
political efforts going on among the three countries i.e. Iran,
Pakistan, and India, despite overt resentment by the US.
John Gee, a writer for Energy Bulletin, states:
These moves create difficulties for Washington's present policies in
the Middle East. The Bush administration sees the warming of its
relations with India as a very positive development, while, despite a
temporary rapprochement following 9/11, treating China as a threat to
be contained. It is rather difficult for the White House to signal
criticism of China's involvement in Sudan (bodies such as the Heritage
Foundation are more direct) and ignore the parallel Indian role. The
administration's displeasure at China's opposition to any threat of
the use of force against Iran over its nuclear program has been made
plain. China's attitude has been ascribed to its need for Iranian oil
and gas, but Beijing's attitude differs little from that of
Washington's allies in Europe, with which the White House does not
want to damage relations following the bruising falling out over Iraq.
The big losers from the energy shortage are likely
to be the world's poor nations. Between them, the U.S., Western Europe
and Japan - the old industrial centers - and the rising economies of
Asia are driving up prices to levels that most of sub-Saharan Africa
and countries such as Yemen and Bangladesh will not be able to afford.
It becomes obvious that energy would be a driving
force to lead international instability or conflicts in the coming
years. This has been a gigantic challenge for Islamabad, whose current
focus is on strengthening its role in war against terror. (email@example.com)