LIVING WITH THE RISING OIL PRICES AND CHALLENGES AHEAD

SHAMS GHANI <shams_ghani@hotmail.com>
Mar 31 - Apr 06, 2008

The $100 mark is now history. The oil prices are rearing to find a new foothold - perhaps $115 level or even more. As against $50 a barrel in 2004, the ides of March 2008 have recorded the highest ever level of $111.80. A brief cool-down phase has brought the prices back to $100 level. It is any body's guess that this downturn is short lived. The world oil prices are not simply dependent on market forces. A number of geo-political factors and some imponderable forces combine together to move the prices in the desired direction. In economic terms, the deteriorating supply position and globally rising level of consumption are the two main causes of the unprecedented oil price hike. The global economic slowdown during the last 10 years has been a prohibiting influence on the investment in oil exploration. The existing world oil refining capacity is also unable to meet the rising demand for oil especially in countries like China and India. Any plans to increase the output by oil producing countries are not in sight. The time required to get any such plans implemented can further exacerbate the situation landing developing economies like Pakistan in a hopeless mess. The global increase in the prices of food items and essentials has already wiped off the positive achievements our economy had made during the last four or five years. The rising oil prices have added cost-push inflation to the already battered economy thereby making the life of common man miserable, if not impossible. We are definitely on the road to crisis.

We produce about 20 per cent of our oil requirement. In the back drop of failing efforts to find new reserves and a lavish style of consumption, this percentage is likely to fall during the coming years resulting in quantitative pressures. The rising prices of oil will subject us to monetary pressures. This vicious combine will put our economy in complete disarray. Domestic inflation together with the imported inflation will derail the post 9/11 recovery process. It is time about we take cognizance of the perilous situation. We can survive only for a shorter period by consuming more than what we actually produce.

Natural gas reserves, the mainstay of our economics of energy, also remain untapped due mainly to the lack of investment on exploration side. The swiftly changing geo political scenario especially the law and order situation in the war struck regions has made the import of gas a doubtful proposition. We can hardly sit back praying for the OPEC to dramatically ease the supply position so as to bring the oil prices back to $50 level. These are times not to dream but to act.

THE MESS CREATED BY THE CARETAKERS

As if the soaring inflation resulting from the external as well as internal factors was not enough, the caretakers have added fuel to the fire by twice increasing oil prices to break the back of the common man. The preemptive move precluded the new government from looking for some alternatives to resolve the long outstanding issue. The spiral effect of this dastardly move has started taking shape. The already high prices of essentials have gone up further and there seems no end to it. The option not to increase the oil prices by applying cut on oil marketing and refining companies' margins was always there which the caretakers have so conveniently ignored in the usual feudal style. After all, India has been postponing the increase in oil prices for the last many years by making the big oil companies of the country to run losses to avoid wrath of the common man who is so important in their democratic society. The new government should not look for excuses; instead it should immediately reverse the two price hikes to identify itself with the masses rather than stepping in the shoes of the predecessors. There is much room for adjustment in the anomalous price structure and deemed duties enjoyed by the oil and refining companies since long. With the power of the people on their back, the new set up should not dither from opening the "Pandora's Box" of anomalous margins and duties and settle the long outstanding issue on an equitable basis.

FUTURE COURSE OF ACTION

The cost-push inflation caused by the oil price hike ensues from our reliance on oil as major source of energy. We produce 64% of our energy from oil, gas and coal based operations. Besides increasing domestic oil output, we will have to gradually do away with the use of oil for power generation. Use of oil by the transport sector should also be minimized by adapting to CNG based transport system. Modern mass transit projects also need to be designed and completed on an emergency basis. This will not only minimize the use of private transport but will also improve the fast deteriorating traffic situation through out the country.

New investment in the field of oil and gas exploration will have to be attracted by offering incentives to the local and foreign investors. These incentives should be well thought out and based on a win-win theory. We have sufficient gas reserves which, if properly exploited, can give our economy a real break.

Another option is to switch from oil-based to coal-based energy. Coal is globally considered as one of the most important source of energy. Pakistan is said to have about 185 billion tons of coal deposits located in Sindh, mainly at Thar. It is unfortunate that a viable national coal policy yet remains to be evolved.

Coal based energy projects require mining facilities and supporting infrastructure. Currently four such projects with a cumulative capacity of 1550 MW are being processed by PPIB (Private Power & Infrastructure Board). Three of these projects with a cumulative capacity of 550 MW are located at Ghotki, Jherruk Sonda and Lakhra. The fourth project with a capacity of 1000 MW is located at Thar. In addition to that, two projects based on imported coal with a capacity of 1000 MW each will be located near Karachi. In the absence of a feasibility report and a consensus on tariff, the Thar project is being unduly delayed. An early use of domestic coal reserves also seems a distant possibility as the requirement of cement sector is being met through import from Indonesia.

Hydro power is a cheap and clean alternate source of energy. Pakistan produces 34% of its energy from water. The falling water level at dams during certain periods results in negative fluctuations of power generation. The water levels at Tarbela and Mangla dams have fallen to an alarming level posing an immediate threat to an already low power generating capacity. During the last 30 years, we have succeeded only in politicizing the dams' construction issue. We have neither been able to start Kala Bagh Dam nor have developed consensus on construction of smaller dams. The country's available water resources can generate approximately 43,000 MW - more than double the country's requirement. Following the example of China, we need to develop a network of smaller dams on war footing basis. This will not only solve our water and power problems but will also minimize the security concerns inherent in the construction and management of a single large dam.

To sum up, the antidote to the sky rocketing oil prices is a concerted effort to achieve major break through in the areas of gas exploration, enhanced hydro power generation and coal-based energy production.

BROADBAND PAKISTAN

PTCL TO OFFER HIGH SPEED INTERNET SERVICES

AMANULLAH BASHAR

PTCL to become the fastest net service providers following its multi-year agreement signed with Alcatel-Lucent.

According to Alcatel-Lucent (Euronext Paris and NYSE: ALU), a multi-year agreement was signed with Pakistan Telecommunication Company Limited (PTCL) to deliver its broadband access solution, enabling PTCL to provide high-speed services throughout Pakistan.

Supporting PTCL's nation-wide program branded "Broadband Pakistan"; Alcatel-Lucent will deploy 100,000 IP DSLAM lines throughout the country, including rural regions and outlying districts of urban centers.

Alcatel-Lucent's turnkey solution will be supported by network element management tools that include provisioning, fault management and disaster recovery. Alcatel-Lucent will also provide network integration services including project management, application/software integration, installation, deployment, and testing.

"Broadband Pakistan is a major initiative for PTCL and our country-wide deployment plans are very aggressive. As the leader in IP DSLAM solutions, Alcatel-Lucent is a strategic partner for us to support our ambitious business objectives and deliver best quality services to our customers," said Walid Irshaid, President and CEO, PTCL.

"This agreement with PTCL demonstrates our strong commitment to support them in delivering innovative multimedia and Internet services as broadband further develops in this country," said Frederic Rose, President of Alcatel-Lucentís activities in Europe, Africa and Asia.

Alcatel-Lucent will provide its 7302 solution which is part of the market-leading ISAM (Intelligent Services Access Manager) product family and its 5523 ADSL Workstation (AWS) for network element management.

Alcatel-Lucentís ISAM product portfolio leads the DSLAM market with a cumulative market share of 41%, more than double its nearest competitor. With more than 180 customers deploying the ISAM product portfolio - including 80% of the top 20 DSLAM operators in the world - Alcatel-Lucent continues to be the undisputed leader in the DSLAM market.

With over 5.7 million customers, PTCL (a subsidiary of Etisalat Telecommunication Corporation), is the largest telecommunications provider in Pakistan. The company maintains a leading position in Pakistan as an infrastructure provider to other telecom operators and corporate customers of the country. PTCL has laid an Optical Fibre Access Network in the major metropolitan centers of the Pakistan and local loop services have started to be modernized and upgraded from copper to an optical network.