March 4, 2002	Monday	Zilhaj 19, 1422

PAKISTAN’S hydrocarbon-rich basins have resource potential of 200 trillion cubic feet of gas and 40 billion barrels of oil. But the country has only been able to explore a small part of these resources.

At present, 25 companies, including 21 foreign companies, are exploring in Pakistan under 62 licenses and 90 leases. Productivity of Pakistani fields is about 57000 barrels of oil a day and 2.4 billion cubic feet of gas a day with total proven recoverable reserves of natural gas and oil.

The hydrocarbon potential needs to be fully exploited to meet the growing demand of energy. It will also ease pressure on the trade balance by reducing Pakistan’s dependence on imported oil. Pakistan needs substantial levels of new investment in petroleum exploration and production along with infrastructure. This investment must come primarily from the private sector.

Pakistan has introduced policies for offshore and onshore areas, which are equal in size to the North Sea in the United Kingdom. The potential of these offshore areas remains untapped and needs to be vigorously explored.

With a transparent, stable and independent regulatory regime being put in place, the government hopes that the investment climate in Pakistan would become competitive with other parts of the world.

Pakistan’s huge sedimentary basins, stretching over 825,000 sq km, are also enormous attraction for investors. The oil and gas sector has attracted $1 billion investment. A large number of companies are coming in from oil and gas to coal extraction and conversion into final products. A huge saving of transportation cost would be obtained, as the pipelines between big cities would be operational. Private sector firms would be carrying out these pipelines in Pakistan. Furthermore, Sui Northern Gas is working to invest Rs15 billion in expansion of its fields from Multan to Bhong.

On the exploration, the drilling for oil and gas exploration is also going at very good speed, however, there is a great need to further this job to exploit the country’s natural resources at its fullest.

The government is acting on a carefully drawn policy of promoting activities in oil and gas sector with the main objective to tap all possible indigenous oil and gas resources through active participation of foreign as well as local E&P companies.

In this connection, the government has already brought out a petroleum exploration and production policy, 2001 in May last year that provides an attractive package of incentives for onshore as well as offshore exploration.

At the same time, the government has also provided autonomy to public sector companies so that they could operate on commercial lines bringing efficiency and competition in oil and gas sector. Simultaneously, the government is also pursuing a privatization programme that includes a number of oil and gas sector companies.

It will not only generate substantive privatization proceeds but would also make the sector more vibrant. To separate various government functions, an independent regulatory authority for oil and gas sector is being formed which would enhance the level of confidence of the investors and consumers on regulatory regime. A major irritant that had marred activities in upstream sector in the past, was the force majeure in highly prospective areas of Balochistan.

The government started a dialogue process with tribal leaders and successfully settled the matters with Nawab Bugti. Similar efforts have been initiated for settlement of tribal issues with other sardars.

At present four companies,the Ocean Energy of the USA, BG of UK, Shell of UK and Total-FinaElf of France, are active in offshore areas and have undertaken seismic surveys.The Ocean has drilled two exploration wells in Mekran offshore after 22 years, which though have gone dry, but the company has committed to drill another well during next fair-weather window starting October 2002.

BG has also commitment to drill a well in Indus offshore during the next year. Shell and TotalFinaElf are currently finalising future plans. The current level of activity in offshore areas is quite substantive which is expected to receive a major boost on the heel of any discovery by the current operators.

The major task is to attract investment in oil and gas sector. Risk capital for exploration is only available with E&P companies, invested in those areas where investors find secured returns on their investment. The current policy provides an attractive return to the investor’s funds and with situation becoming more stable in near future, foreign companies are expected to come in a major way to make investment in this country.

Another issue that bothers the investors has been restricted access to the gas market and lack of developed gas infrastructure to carry gas to the market. The government has allowed sale of gas to third parties without government intervention. In addition, the producers are allowed to develop infrastructure for which separate tariff would be payable.