Nov 02 - 08, 2009

The country's energy scene is marked by rising fuel demand and growing supply shortfall. There has been a doubling of gap between demand and supply of oil during the past decades. During the last five years, the indigenous production in country's oil sector has remained static at about 55,000 to 65,000 barrels per day.

The nation wide sales of petroleum products have reflected an upward trend for the last three years. The country needs more natural gas to feed new power plants to meet a potential energy shortfall by 2010 when it will need at least an additional, 3000MW of power. This shortfall is expected to increase to 5,000 MW by 2012. Potential investors are unable to proceed with gas-fired power plants due to uncertainty of natural gas availability.

According to the official sources, about 48 percent of thermal power generation is based on furnace oil, out of which about 62 percent was imported at a cost of over $2 billion in 2007-08. The country's demand for energy, according to one estimate, is expected to rise at the rate of 10-12 per cent annually in the foreseeable future, which means that if this rate of increase continues, demand for energy may well double before 2015.

Serious effort is needed on the part of the government to harness the country's petroleum and natural resources to its fullest potential. For example, Balochistan, the country's largest province is rich in energy resources.

Geological surveys have reported reserves of billions of cubic feet of gas in the province. In the prevailing energy scenario of the country, the foreign investors may avail the opportunities in energy sector to exploit the province's tremendous indigenous resources. The province produces more than 40 percent of the primary energy of the country in the form of natural gas, coal and electricity.

Being the least populous province, Balochistan consumes the least power, as compared to other provinces of the country. According to one estimate, the province's total power needs does not go beyond 1500 mega watts, and the coastal areas get electricity from Iran. On the other hand, Karachi city needs 2500 mega watt of power to continue its industrial, commercial and social life in a normal way.


Rich in oil and gas resources, Balochistan offers enormous opportunities for foreign investors. The provincial government has issued security clearance to 15 licences issued to different companies out of 25 licences aimed at stepping up work on exploration and production of oil and gas from natural resources of the province. Provincial Chief Minister Nawab Aslam Raisani has invited investments in oil and gas exploration in the province and assured full protection to national and foreign investors. The government has issued NOCs to five national and international companies for investments in the oil and gas sector.

Around 23 percent of the total national output of natural gas is being exploited from Balochistan, including 18 percent from Sui. The presence of natural gas is of utmost importance for the province, as it is an important source of income for the provincial government through the gas development surcharge. Geological surveys have reported reserves of billions of cubic feet of gas and billions of barrels of oil during offshore exploration in the province. The Pakistan Petroleum Ltd. (PPL) is producing 720-750 million cubic feet of gas per day from its 80 plus wells in Sui field of Balochistan. The federal government should also extend all help to the province in exploration and development of its oil and gas resources.

Pakistan Exploration and Production Companies Association (PPEPCA) has already asked the former federal government to open its Balochistan province for exploration to overcome a potential energy shortage. Petroleum Exploration and Production Policy 2007 had failed to address the problems faced by the PPEPCA and was not able to attract much needed foreign direct investment in this sector.


Balochistan's vast coal reserves can be utilized for energy generation. About one percent local coal is presently utilized by coal-based power stations. Need is to increase the share of Balochistan coal in the country's energy mix, as the government has already decided to increase the share of coal in the country's energy mix from 7.6 percent to 18 percent by the year 2018.

The province possesses huge reserves of coal at Harnai, Degari, Mach, Ziarat, Chamalang and Abegum. The estimated reserves of all coal fields in the province are 217 million tons. The 60km-long Chamalang coal mines contain coal ranging from high volatile C bituminous to high Volatile A bituminous with a total resource of six million tons.

Chamalang coal mine project is likely to provide jobs to 25,000 people. Nearly 200-250 loaded trucks of coal leave daily for different areas of Pakistan from Chamalang mines in Balochistan.

Supply of coal from Chamalang mines in Balochistan started with the first convoy of loaded trucks left for different areas of the country in March 2007. The Chamalang-Mekhtar track had been made operational for heavy traffic enabling coal trucks to go to other areas. The tribal rivalry in the area during the last three decades had obstructed the mining of coal in Chamalang. The Luni and Marri tribes had been at war over the ownership of the mines. The mines were made operational following the tripartite agreement between the Marri and Luni tribes and mine contractors on December 12, 2006. According to a rough estimate, the profit from the supply of coal from Chamalang mines would be worth Rs30 billion per annum.

Coal mining sector in the province needs some tax incentives for its development from the federal government. Federal Board of Revenue should amend income tax rules and allow 100 percent write-off on expenditure incurred on mining operations. Other tax incentives, which may be given to the mining sector, include the permission for duty-free import of mining machinery, equipment, and transportation trucks, withdrawal of GST on coal for at least five years, bank loans at three percent interest rate and the removal of the condition that the depletion allowance should not exceed 50 percent of the total amount invested..


The prevailing security environment in Balochistan cannot attract foreign investment in the oil and gas exploration sector and also call into question the guarantees of security for a proposed multi-billion dollar gas pipeline from Iran that would have to run through the province. India has frequently voiced its concern over the security of the pipeline traversing Balochistan.