OIL AND GAS POTENTIALS IN PAKISTAN
SHABBIR H. KAZMI
Jan 10 - 16, 2011
According to a research report published by Topline Securities, reportedly gas production in the country fell to 3.8 billion cubic feet per day (bcfd) during November 2010, down 5 per cent from the same month last year. Similarly, oil production also fell to a seven-month low at an average of 63,000 barrels per day (bpd). Oil production figure shows a drop of six and four per cent compared with November 2009 and October 2010, respectively. Gas production, on the other hand, is down 12 per cent from the peak level of 4.3bcfd witnessed in March.
Despite government efforts, local oil and gas production has remained range-bound over the last many years. Average production during the first five months of current fiscal year to 64,000bpd for oil and 3.9bcfd for gas is quite similar to the situation faced five years ago when average oil production was recorded at 65,000bpd and gas production at 3.8bcfd.
The reduction in oil and gas production can be attributed to depleting reserves but more importantly to failure in boosting drilling activity, which has actually gone down. The report points out that only 14 wells (exploratory and development) were drilled during July and November 2010 period as compared to 23 wells during the same period in 2009. During FY11 exploration and production companies plan to drill a total of 80 wells against 68 wells drilled during FY10.
The dismal exploration and production activities can be attributed to rising inter corporate debt. However, the real concern is heightened security concerns, a drag on drilling activities. The two largest state owned entities, OGDC and PPL, face the worst situation. This can be gauged by the fact that 60-70 per cent of the circular debt is borne by both the companies while the rest by refineries and other companies.
In January 2010, Sui Southern and Northern Gas Pipelines had suspended supply to thousands of industrial units, as the increase in demand led to the shortfall to 940mmcfd. The demand for gas is around 4050mmcfd; however, the supply is around 3110mmcfd. This year the country also faces similar situation, resulting in extensive load shedding of gas.
OIL & GAS RESERVES
Pakistan's unexplored gas reserves are estimated at 62.26 trillion cubic feet (TCF) and oil reserves at 3.5 billion barrels. Total proven oil reserves are an estimated 313 million barrels, and proven gas reserves are estimated at 29.67 trillion cubic feet, much of it in Balochistan. The southwestern province produces about half of Pakistan's natural gas. Irony of the fate is that production from new gas fields that have been discovered cannot be started due to security concerns. Many of the analysts are of the view that two of the mega gas fields, one each in Balochistan and KP provinces, are capable of producing up to 2000mmcfd against a prevailing shortfall of less than 1000mmcfd
Resistance against privatisation of Qadirpur gas field rejuvenated the debate regarding ownership of natural resources, specially oil and gas. The question of ownership of oil and gas resources has been at the centre of province-federation relationship discourse in Sindh and Balochistan. Civil society and political parties in both provinces have been complaining of unfair treatment on account of oil and gas production. It became a trigger point during recent years in Balochistan where the issue has erupted into a civil war like situation and the sentiments in Sindh are equally severe and deserve serious attention.
The production and consumption data reveals that Sindh and Balochistan consume only a small portion of their production and much of the gas produced in the two provinces is consumed in Punjab. According to statistics, Sindh consumed only less than 50 per cent of its production whereas Balochistan consumes one fourth of the gas it produces. Higher consumption of energy is considered one of the major indicators of higher development. However, this may be true because Punjab has the largest population and the first priority of the government has always been domestic consumers.
One of the contentious issues is employment opportunities for the local population. Oil and gas fields are mostly located in remote and underdeveloped areas like desert belt in the east and hilly tracks in the west of Sindh. Oil and gas companies have their head offices in big cities like Islamabad and Karachi where Sindhi or Balochi speaking staff hardly make a small fraction of their human resource. Field staff, which is mostly low paid labor, is somewhat considered as it is not feasible to bring them from other provinces or urban areas. The oil and gas companies often extend an excuse that they do not find qualified and experienced people from rural Sindh and Balochistan.
Environment violations are also the concern. The communities living around the oil and gas producing fields often complain that the companies' operations pollute their natural resources and cause severe damage to the environment. Some of the companies are operating in environmentally sensitive areas where environmental examinations and impact assessment are a legal requirement. However, poor regulatory systems on the part of government and non- professional consultants leave enough space for companies to temper with environmental obligations. Local communities have to pay the price of poor governance in the country.
The present energy crisis in the country calls for better governance of oil and gas sector and judicious sharing of profits accruing from the oil and gas resources of the provinces. Unless all benefits are shared judiciously, the conflict on the right over natural resources may become a serious issue in the coming years.