DEVELOPING THE GAS SECTOR
A bold initiative by the present government to revive the oil exploration activity
From SHAMIM AHMED RIZVI, Islamabad
Sep 04 - 10, 2000
An ambitious plan has been drawn by the Ministry of Petroleum and Natural Resources to develop the huge gas reserves discovered by various local and foreign companies in Balochistan and Sindh. Pakistan has decided to focus on the development of these reserves by offering more incentives to the exploring companies rather than going for cheaper imports. The reserves estimated to be more than 30 trillion cubic feet ( enough to meet country's growing requirements for more than 50 years ) out of which about 3 trillion is already explored and in final stages of development .
At the same time, however, Pakistan will extend full cooperation to the proposed pipeline projects from Iran and Turkmenistan for supply of gas, through Pakistan, to India and other gas deficit area in the region on commercial lines. Besides other benefits these projects will provide additional source of income in foreign exchange to Pakistan as royalty for the passage of pipelines. In case of any emergency Pakistan can always receive gas supplies through these pipelines. Besides, during construction phase of the pipelines, jobs will be provided to hundred of thousands workers.
According to the a statement issued by the Petroleum Ministry, a high level meeting presided over by the Chief Executive in Quetta recently approved the long shelved plans to reactivate oil and gas exploration in this province which is known for its highly rich oil, gas and mineral resources. The plan includes a comprehensive package guaranteeing attractive return on investment and firm arrangements for law and order, protection of life and movement to the workers of the Multinationals operating over there.
This is definitely a bold initiative by the present government to revive the oil exploration activity in the province which had remained suspended in the past several years on the withdrawal of foreign explorers from the scene who invoked the clause of "force majeure" in the face serious disturbances which were usually created by the tribal people living in the adjoining areas. It is indeed deplorable fact that the past government miserably failed to tame the situation and consequently the huge reserves of the otherwise backward province remained untapped. The present government strategy to offer not only to incentives, facilities and protection to exploration firms but also to ensure speedy development of the social sector for the people of the areas, it is hoped, would win over cooperation of the people for successfully carrying out the exploration activity.
According to the Federal Petroleum Minister, the existing limitations of the gas transmission system in the country has stalled progress in the development and commercial utilization of the discovered gas reserves. He further pointed out that this was one of the main hurdles underlying the government's cautious moves in the handling of negotiations with the foreign companies in finalizing price agreements. In other words, if the gas purchase agreements were signed with these companies, the government would be honourbound to pay for the contracted gas off take even if actual transmission does not commence. The Minister estimated an investment of about 500 to 600 million dollars for the desired expansion of the gas transmission system in order to induct additional gas supplies into the network.
During his recent visit to Kuwait, the Petroleum Minister, Usman Aminuddine, found a very favourable response when he offered to Kuwaiti investors to invest in the profitable projects of oil and gas transmission pipelines in Pakistan which needed a total investment of about one and half billion dollars At the same time the government has offered to the multinational oil and gas companies already working at various sites in Pakistan to come forward to also invest in the transmission system with attractive returns. The recent increase in the prices was directed to offer more profits for the operating companies. Privatisation of Sui Southern and Sui Southern distribution system at enhanced rate are steps to achieve the same objectives. According to the reports the Ministry had recommended 25 per cent annual increase in the prices of gas for the next four years.
The two gas companies are to be put on sale by the current year. In order to ensure continued rising profitability to attract the investors the government is intending to fix the tariff for gas for the next 3 to 4 years. In this way the government is providing a guaranteed increase in the profitability to the investors besides providing full protection to the firms engaged in exploration. Justifying the proposal for enhancing the gas prices the Ministry said that the important factor which cannot be overlooked is the need to ensure a fair return to gas explorers keeping in view the international prices of fuel oil so that the foreign investment flows into Pakistan's oil and gas sector may be sustained. With the improvement in the rate of return of gas exploration and marketing as a result of recent increase and guaranteed enhanced tariff, it is felt that not only the newly discovered gas reserves would attract capital investment from foreign companies for making these reserves commercially operative but also new foreign investment is expected to show up for laying the pipeline network throughout the country in order to integrate gas flows from the new reserves with the existing gas supply network.