QUETTA: A low-level separatist insurgency and fears of the spread of Taliban militancy are likely to keep a lid on foreign investment in the rich gas and mineral resources of Pakistan's poorest province.

For decades, separatists in Balochistan province have been fighting a guerrilla war for control of the province's resources, which they say are unfairly exploited by richer provinces.

They have regularly blown up gas pipelines and attacked utility infrastructure and transport links.

While hard-nosed investors have been managing that risk, new danger lurks.
 
US assertions that Afghan Taliban leaders are based in and around the provincial capital, Quetta, has brought fear the United States could expand attacks by pilotless drone aircraft to the province, which borders Afghanistan and Iran.
 
‘The really worrying headlines about Balochistan concern the potential Talibanisation of the province,’ said Claudine Fry, a London-based analyst for Control Risks Group.

‘Statements about possible drone strikes in Balochistan could make investors more reluctant to operate in the province, or in Pakistan,’ she said.

Pakistan denies the presence of Taliban leaders in Quetta.

But according to US officials, one of the options President Barack Obama is weighing for turning around the war in Afghanistan is more drone strikes, perhaps in Balochistan.

Separatist concerns

Pakistan's unexplored gas reserves are estimated at 62.26 trillion cubic feet with oil reserves at 3.5 billion barrels.

Total recoverable reserves of oil are an estimated 313 million barrels. Recoverable reserves of gas have been estimated at 29.671 trillion cubic feet, much of it in Balochistan.

The province also has billions of tonnes of copper reserves, as well as sizeable deposits of iron, zinc and coal.

The World Bank recently singled out security as the most important factor impeding exploration and production in the province.

‘Security issues are a direct obstacle primarily for the exploration and exploitation activities in natural gas,’ it said.

‘But these problems in selected districts affect the perceptions of potential investors for the entire province and thereby lower investments in other sectors as well.’

An official at Tethyan Copper Co. Pakistan Ltd., a joint venture between Canada's Barrick Gold and Chile's Antofagasta Plc, one of the world's largest copper miners, said security problems were manageable.

‘The security situation is a concern in Pakistan and not just in Balochistan,’ said the official of the company, which has been granted an exploration license for the Reko Diq site with ore reserves estimated at more than four billion tonnes.

‘Despite the concerns, TCC considers security to be manageable enough,’ the official said.

Baloch separatists say they would be happy if foreign investors stayed away.

‘When we are independent we will bring our own investors,’ Sher Muhammad Bugti, spokesman for the Balochistan Republican Party, said by telephone from an undisclosed location.

Sardar Shaukat Popalzai, president of the Balochistan Economic Forum, said no one was strong enough to destabilise the province or break it away from Pakistan.

But foreign investment in resources was vulnerable when those resources were a bone of contention, said Fry.

‘The very natural resources that create so many potentially attractive opportunities for investors are also the source of dispute,’ she said.

‘Because a principal aim of separatists is to undermine the state and protest over the exploitation of resources, projects involving foreign investors are vulnerable to becoming targets.’