IS IRAN CONCERNED OVER DRILLING OF OIL WELLS IN BALOCHISTAN?

SYED FAZL-E-HAIDER
Mar 31 - Apr 06, 2008

Strategically located Balochistan is surrounded by the countries like Afghanistan, Iran, and Arabian Gulf states, which are rich in oil and gas reserves. While on one hand it is located in midst of oil and gas reserves, on the other the most important international sea routes pass by the Balochistan coast. By virtue of its geographical location, it is considered a strategic part of trans-national pipeline corridors, which are currently in the planning stage.

The province has the country's extensive oil and gas reserves. According to an estimate, out of the Pakistan's estimated 25.1 trillion cubic feet (Tcf) of proven gas reserves, 19 trillion are located in Balochistan. According to another estimate, out of the country's proven oil reserves of 300 million barrels largely are located in the province. Other sources place its oil reserves at an estimated six trillion barrels of oil reserves both on-shore and off-shore.

If Balochistan has proven reserves of oil and gas, then why the exploration, production and drilling activities have so far been too slower in the province? Why does the country still lack a comprehensive program for on-shore and off-shore oil exploration in Balochistan? What have been the snags, hurdles or constraints for tapping the energy resource potential of the province? Undeniably, shy investment in oil and gas sector and the security concerns in the province have been the key reasons for slower growth of the sector, but there is presumably another issue related to Iran's reservation and concern over drilling of oil wells in Balochistan.

Balochistan borders Iran, which is rich in oil and gas resources. Some observers believe that discovery and drilling of oil wells in Balochistan may cause the Iran's oil to flow towards the province, which is physically located below the level of surface in Iran. Some independent analysts have even claimed that Pakistan is bound for not drilling oil wells in southern Balochistan under a deal with Iran, as the neighbouring country would loose most of its oil for its flow toward lower landscape.

The geographical view and the landscape in Iran further reinforce the idea of oil flowing from upper surface in Iran to lower surface in Balochistan. With an area of 1,648,000 square kilometres, Iran is located in south-western Asia. It shares its northern border with the Russia. Its western borders are with Turkey in the north and Iraq in the south. Its southern border is formed by the Persian Gulf and Gulf of Oman littorals. Its eastern borders are with Afghanistan on the north and Pakistan on the south. Iran's high interior basin is surrounded by a series of mountain ranges. Most of the country is above 1,500 feet, one-sixth of it over 6,500 high, depicting a sharp contrast to its coastal regions, which are outside the mountain ring.

In geographical perspective, if one sees from Iranian side, Balochistan is located on south of its eastern borders. In the north, the 400-mile strip along the Caspian Sea falls sharply from the 10,000-foot height to 90 feet below sea level. In the south, the land drops away from a 2,000 foot plateau, to meet the Persian Gulf and the Gulf of Oman.

Is there any reality in Pakistan's deal with Iran for not drilling oil wells in Balochistan? Excluding Sui gas field, no local or foreign firm has so far been successful in completing a significant oil exploration work in Balochistan. The company had to quit the project for one or another reason. Security has been the main reason or pretext. According to an estimate over a dozen oil and gas exploration blocks had been awarded to over 20 local (both public and private) and international firms in Balochistan over the past 12 years but they could not start operations due to law and order problems in the province. A Chinese company BGP had stopped oil exploration work in Bugti tribal area in June 2001 for security reasons. Similarly an American company also suspended offshore drilling work in Mekran for the same reason. The offshore drill was carried out between Gwadar and Pasni. Two wells were drilled involving a huge expenditure of nearly 26 million dollars.

Pakistan Petroleum Limited (PPL) has been planning to undertake "offshore" drilling of gas in the Arabian Sea, but it could not fully implement its project in Mekran. If offshore drilling gets successful, it will give a tremendous boost to Gwadar development as it would meet entire energy requirements not only of Gwadar port city but also of Pasni, Turbat and adjoining areas. PPL plans to make an investment of about $15 million in the project.

The PPL operates the Sui gas field in Balochistan. The gas reserves discovered in Sui were to the tune of 9.625 trillion cubic feet. The PPL is producing 720-750 million cubic feet of gas per day from its 80 plus wells in Sui field. If it continued with the same speed, these reserves could hardly last for 10 to 12 years. As the consumption of Sui gas has increased, the pressure depleted to a level of 45 bars. Experts are of the view that if gas supply to the industries continues with the current rate, Pakistan's reserves would be spent in 10-15 years time. This will necessitate having another source of gas for protecting the reserves from over exploitation. The PPL is also carrying out surveys and completing other technicalities for the gas exploration in Dhadar, Noshki and Khuzdar areas for gas exploration.

In December 2004, the federal government had granted four licences to Oil and Gas Development Company Limited (OGDCL) and Mari Gas Company Limited for petroleum exploration in four blocks of Punjab and Balochistan. In Balochistan, the two licences over block nos. 2968-3 (Kohlu) and 2969-7 (Kalchas), both in Zone-II, were granted to OGDC and Mari Gas. While licences for block nos. 2763-2 (Shahana) in Zone-1 were granted to OGDCL only. The Kohlu and Kalchas areas are located in Kohlu and Dera Bugti Agencies, districts Bar Khan and D.G. Khan of Punjab/ Balochistan province, whereas Shahana area falls in Kharan and Panjgur districts. A minimum firm investment of over $29.32 million and a contingent investment of over $16.50 million were to be made in the said four blocks. During the initial term of these licences, the OGDCL was to carry out geological studies, gravity survey, seismic acquisition, its data processing and interpretation thereof. The OGDCL had planned for drilling of three exploration wells in second licence year in Kohlu and Kakhas blocks. Ironically, since December 2004, the security situation in the province has not been enough satisfactory for an oil company to start its operations.

In view of the fact that the experts have emphasized the need to open Balochistan for exploration to overcome a potential energy shortage, the province's huge potential for oil and gas exploration should be tapped by granting maximum exploration licenses to foreign and Pakistani oil and gas exploration companies. If there is any deal with Iran with regard to oil exploration in south western areas of the country, then facts should be unfolded by the government.