OPENING BALOCHISTAN FOR EXPLORATION

SYED FAZL-E-HAIDER
(feedback@pgeconomist.com)
Sep 27 - Oct 3, 20
10

Pakistan is currently facing acute gas shortage leading to the closure of many industrial units. Officials project a gas shortfall of 10.34 billion cubic feet per day by financial year 2015. The indigenous gas supply has been projected at 2.16 billion cubic feet per day against the current gas supply of 4.3 bcfd. The demand for gas would stand at 12.5 bcfd by 2015.

According to the official sources, about 48 per cent of thermal power generation is based on furnace oil, out of which about 62 per cent 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.

Balochistan offers great opportunities in oil and gas exploration for foreign investors. The exploration projects can open up the province converting it into a land of opportunities for foreign investors. The country needs modern technology for drilling. According to one estimate, as many as 25 blocks of oil and gas were closed and 16 blocks had been opened with the cooperation of Balochistan government during past two years. The government needs to explore indigenous oil and gas reserves. Talks should be held with the Baloch leaders to expedite exploration activities in the province.

The presence of natural gas is of utmost importance for Balochistan, as it is an important source of income for the provincial government through the gas development surcharge.

Last year, the Economic Coordination Committee (ECC) to attract investment approved Petroleum Exploration and Production Policy 2009, which was forwarded to another committee of Corporate Social Responsibility for resolving all the undecided and contentious issues. Under the Petroleum Exploration and Production Policy 2009, the E&P firms would encourage local employment through imparting training to the local youth and a handsome amount from the profits would be spent for social welfare of the benefit of the local population.

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

Tremendous gas potential of Balochistan may be tapped by granting maximum exploration licenses to foreign oil and gas exploration companies. Last year, the provincial government gave security clearance to 15 licences issued to different exploration and production (E&P) 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 no objection certificates to five national and international companies for investments in the oil and gas sector.

Pakistan Petroleum Ltd (PPL) is the country's largest exploration and production company, which has been dominating the arena of oil and gas exploration for many decades in the province. It is the operator of the country's oldest Sui gas field in Bugti tribal area. Presently, the PPL is producing 700 million cubic feet of gas per day from its 80 wells in Sui field. Sui is still the single largest gas field in Pakistan.

In January 2005, the law and order problem at Sui in Dera Bugti district had led to the countrywide gas load shedding for many days, as the damaged gas plants at Sui were to be repaired. Millions of households faced gas shortages in the country after the main gas plant was hit during clashes between security forces and Bugti tribesmen. The southern region, along with the northern, was facing a 110 MCF gas shortage daily.

Balochistan has been demanding of the federal government to transfer entire ownership of the PPL to the province on the ground that the provincial energy resource had kept on feeding the country's energy requirements since independence. The ownership of PPL could become a source of revenue to the cash-strapped province.

LAW & ORDER ISSUE

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 multibillion dollar gas pipeline from Iran that would have to run through the province.

The Chinese embassy in Pakistan barred its country's services companies from oil and gas exploration and production work in Balochistan for security reasons after the landmine incident of April 2, 2006 in which six security personnel were killed. 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 tribal areas of the province.

The security situation will only improve when the real stakeholders feel a sense of ownership and they would be held directly responsible for the security of the development projects.

Baloch nationalist parties resent over the Islamabad's firm control over the way the province's economy is managed. On the other hand, the perception of a rapid economic progress poses a threat to centuries-old feudal status of tribal chiefs under which they have been enjoying power and exploiting the people.

The government can materialise no plan, pledge or proposal under Balochistan package until peace and order is restored in the province. The incidents of target killings and attacks on police and personnel of other security agencies and bomb blasts have become a routine in the province. The government has proposed allocation of Rs31 billion for launching 36 projects in the province under the package. Present government however could not appease the insurgents in past two years. No clear-cut strategy about continuing or calling a halt to military operation has come from the government. The government seems in dilemma over the issue. Today, security is the key issue related to implementing any development agenda for Balochistan. The law and order is continuously worsening.