"Pakistan is an investor-friendly country"

From Shamim Ahmed Rizvi,
Oct 30 - Nov 05, 2000

Foreign Investment

The Oil and Gas Conference 2000 was held in Islamabad 2 weeks back has accelerated investment in oil and gas sector and it is likely to receive fresh momentum when the Petroleum Ministers of Economic Coordination Organization (ECO) meet here early next month.

In his inaugural address at the Oil and Gas Conference 2000, President Mohammad Rafiq Tarar had observed, "Our basins are known to be hydrocarbon-rich and according to estimates, resource potentials of Pakistan is 200 trillion cubic feet of gas and 6 billion barrels of oil. We have so far been able to find only a small part of these resources and the remaining potential should be more than sufficient to challenge the minds of explorers".

To meet the growing demand of energy, substantial levels of new investment in petroleum exploration and production as well as infrastructure will be required and this investment must come primarily from the private sector, the president said.

Inviting the foreign investors to invest in this sector in Pakistan, the President said, Pakistan is an investor-friendly country, which offers complete safety to foreign investment. With a transparent, stable and independent regulatory regime that is being put into place, the President said "I am sure investors will feel more confident". Our fiscal terms are quite competitive in relation to the rest of the world and in particular to the region". Notwithstanding this comment, he said, "I would like the delegates to identify the areas of concern and to make suggestions for improvement". He said Pakistan itself is a country of more than 135 million people and "our energy demand is growing and with the expected economic growth there will be an increasing demand for energy".

The three-day Pakistan Oil and Gas Conference 2000, which was held in Islamabad has been successful in more ways than one. It succeeded not only in holding free and frank discussion on the policies that are currently on the anvil but also facilitated the conclusion of agreement worth $428 million for the development of several newly discovered gasfields and transportation of gas to important consuming centres. The policies that were deliberated upon are under formulation. They will lay down ground rules for exploration and development of the two sources of energy. The revamping of rules and regulation has assumed great importance in view of the unprecedented increase in oil prices recently and the equally unprecedented rise in the demand for power in Pakistan. The import of oil constitutes over a quarter of the country's total imports of about $11 billion. Oil import is expected to reach $3 billion this year.

3 years programme

The government is taking up a three years investment programme of Rs. 162 billion in the oil and gas sector. Of this proposed investment Rs. 93 billion (almost $1.5 billion) is expected to come from the private sector. Oil business sources say that the government plans to inject Rs. 7.95 billion through budgetary allocations and Rs. 59 billion investment would be taken up outside the budget during the next three years.

This investment programme is a key component of a three-year Rolling Plan prepared by the Planning Division which stipulates a total public investment programme of Rs. 700 billion. This plan offers macroeconomic framework within which the present government will work and hand over the responsibilities to next government for implementation of the last phase, from 2002 to 2003.

Termed as "modest but realistic", the investment programme has been given a direction on Thursday when the Cabinet in a meeting chaired by the Chief Executive, General Pervez Musharraf approved the offshore petroleum exploration and production policy package and model production sharing agreement.

Under the proposed package, the previously designated deep water zone has been redefined and divided into deep and ultra deep water zones with a new profit oil and profit gas split. The investment programme is being termed as modest as the assessment is that there is an investment opportunity of $5 billion in oil and gas sector. The government has already taken a number of steps in this direction. Besides setting up the gas and oil regulatory authorities, the government is in process of giving a final shape to a Holding Company that will control all its shares in oil and gas business.

Talking informally to the newsmen, Minister for Petroleum, Mr. Usman Aminuddin said that in order to attract foreign investors in this highly potential sector the government was planning to everhaul rules and regulations governing oil and gas exploration and production to bring them at the international standard. Talking about the potential in this sector, he said Pakistan's sedimentary basins, stretching over 825,000 square kilometers provide enormous and exciting investment opportunities to entrepreneurs who are prepared to take up the challenge. He said drilling success ratio of 1.3 was quite attractive but the current exploratory effort in these areas was limited.

He said 25 companies, including 21 foreign, were exploring this area under 62 licenses and 96 leases. Productivity of Pakistan fields is about 57,000 barrels of oil per day and 2.3 billion cubic feet of gas per day with total proven recoverable reserves of natural gas and oil estimated to be 33 trillion cubic feet and 670 million barrels respectively.