LOS ANGELES, May 11: The Wednesday’s killing of 12 French expatriates, just a month after Islamabad’s church killing in diplomatic enclave and reports that the US ambassador has decided to cut short her tenure are all going to slice across Pakistan’s drive to attract foreign investment.

Nowhere the damage is going to be more pronounced than the country’s $3 billion privatization targets, which may also bring an increase of 25 per cent in federal taxes. And nowhere the heat will be felt more than Pakistan’s oil and gas sector.

The biggest hit will, however, be Pakistan’s most potential blue chip PSO, whose former CEO Shaukat Reza Mirza was also lynched on a broad daylight last July, just few furlongs from the company’s glassy headquarters in the posh Clifton area.

To give few examples, the US Import and Export Bank (EXIM), at the behest of the Bush administration, is pledging to help finance the US bids on Pakistani assets. But a recent US trade delegation to Pakistan, which visited PSO headquarters, was depleted by cancellations.

“The oil and gas people that we had hoped to go into Pakistan with us ended up not going,” says Pacific Ventures director Barry Clark, who helped organize the trip. “Their decision was in response to (travel advisory) warnings from the US State Department.”

Though, the US government’s Overseas Private Investment Corporation (OPIC), which provides insurance and sovereign guarantees, has allocated $300 million for business guarantees to the US investors seeking to invest in Pakistan this year, it seems no one is interested to avail it. The OPIC last gave such a guarantee to Pakistan’s controversial Hubco power company in early 1990s.

On Friday, the USA Today wrote quite a critical report on PSO’s gloomy prospects.

It said despite Mirza’s American-trained successor, Tariq Kirmani, who is determined to finish the job begun by his former boss and mentor, the tinderbox of Pakistani politics is sure to put off many investors.

Says Rashna Writer, head of global risk at London-based Merchant International Group: “I would be reluctant to put my own money in Pakistan today, and if we were to advise clients, we would not rush into it.”

While Huw Thomas, managing partner of Ashurst Morris Crisp in Singapore, who led an ill-fated investment in Pakistani power generators in the 1990s, told USA Today: “A lot of people have lost quite a lot of money there. They’ve got a long way (to go) to restore their credibility.”

The PSO last year recorded a narrow 1.3 per cent profit on $2.9 billion in sales at a time when pump prices fell eight times due to a world oil supply surplus. Now, as prices rise again, the company margins are expected to swell to 3.5 per cent. PSO’s market value is $365 million based on the 49 per cent of company shares already traded on the Karachi Stock Exchange.

These days, Kirmani is travelling to Dubai, United Arab Emirates, London and Singapore, in an attempt to convince global money managers that the rewards of owning his profitable gasoline chain, Pakistan’s largest, boasting 3,820 service stations, outweigh the risks.

Kirmani said PSO might be a small company from global standards, yet Pakistan’s energy sector is growing 11 times more than the world’s biggest economy — the United States.

But Kirmani’s impressive sales pitch is sure to meet resistance from boiling religious extremism at home — including sectarian warfare that targets the business class — and the threat of armed clashes on Pakistan’s borders with Afghanistan and India, which have crippled the economy.

Pakistan needs to grow far faster than the 3 per cent expansion projected this year to lift its 144 million people out of misery. The country’s per capita income is $1.08 a day, the report said.

The energy sector is clearly Pakistan’s biggest hope, due to unproven reserves of 27 billion barrels of oil and 280 trillion cubic feet of natural gas. Yet in the half-century of its existence the country has drilled just 12,000 oil wells “which is an average of almost nothing,” said Usman Aminuddin, minister for petroleum and natural resources.

“It has never been easy (to sale), not even today,” Kirmani told USA Today.

He said he had accelerated the PSO’s efficiency drive undertaken by his predecessor. He slashed 750 jobs last year and is closing more than 300 unprofitable service stations. He is also investing heavily to add phone, fax and Internet service to stations in neighbourhoods where most families can’t afford their own.

Now Kirmani is pushing PSO to regain lost market share from new competitors such as Caltex Pakistan, a subsidiary of Dallas-based gasoline retailer Caltex, and Pakistan Shell.

Recently, he engineered PSO’s single-largest contract with Pakistan’s defence ministry. “I said I want to bid a price nobody can match,” he says.

The government, however, after selecting PSO, sought to fall back on its former cozy relationship with the state oil company and negotiate a still-lower price. But Kirmani bristled. “I’m a professional. I’m nobody’s man.”