PAKISTAN has proven oil reserves of 354 million barrels, ranking 52nd in the world on this count. Every year, it produces on an average 83,000 barrels per day of oil, which represents 8.5 per cent of its total proven oil reserves, and 19pc of total yearly consump-tion of oil in the country. In other words, indigenous oil reserves will be exhausted totally within 10-12 years given the present rate of production in case new discoveries of crude oil reserves are not made.

According to various studies in the past, Pakistan has extensive oil and gas reserves, and, therefore, significant potential to increase production of crude oil exists to meet its energy needs in the future.

It is estimated that Pakistan has 27 billion barrels of oil reserves, offshore and onshore, largely located in Balochistan, Sindh and Khyber Pakhtunkhwa (KP). A study of the United States Agency for International Development (USAID) concluded that 14 billion barrels of crude oil was technically recoverable in the Indus basin alone.

Currently, oil is produced in upper Punjab and lower Sindh, but, intriguingly, oil production has constantly been declining. During the year 2021-22, oil production was 73,000 barrels per day, compared to 98,000 barrels per day in 2017.

Regrettably, exploration and production activities have constantly declined in recent years and average wells drilled in potential areas for oil and gas deposits have been significantly low. Exploration for new discoveries for oil and gas are not being carried out in the prospective areas in Sindh and Balochistan, bordering India and Iran, respectively, whereas these neighbouring countries produce tens of thousands of barrels daily in these bordering areas.

Seemingly, either it is to serve the vested interests of the oil importing mafia, or there are some political reasons for not exploring potential areas for new discoveries of oil in Pakistani areas bordering the neighbours. Regardless of the reason, the hydrocarbons continue to flow to the neighbouring countries. Balochistan has recoverable potential for six billion barrels of oil, and KP has around one-third that much. All this bounty needs to be effectively and timely utilised.

Pakistan had a record trade deficit of $48.259 billion for the year that ended on June 30. Imports surged to $80.019 billion, whereas exports remained almost static at $31.760 billion. The alarming trade deficit is propelled, primarily, by record increase in oil prices in the international market, and, generally, because of imports growing significantly higher than exports.

Import of petroleum products, mineral fuels, including oil, valuing about $21 billion, which constitute 26pc of the total import bill, is the main contributor to the massive trade deficit. Pakistan imports crude oil as well as refined oil since the domestic oil refining industry has limitations in terms of capacity and capability.

Last year, the consumption of petroleum products was 437,000 barrels per day, which was met by domestic oil refineries to the level of 174,000 barrels per day, and the balance 263,000 barrels per day was imported refined oil. Ironically, on the list of oil-consuming countries, Pakistan is ranked 33rd.

The trend of import of oil, crude as well as refined, is likely to continue. Oil demand in Pakistan is increasing by at least 8pc a year. For the last few weeks, global oil prices have been declining, having gone below $100 per barrel, but there is upward trend again. According to a JP Morgan forecast, global oil prices could reach as high as $380 per barrel if Russia cuts its crude oil output in the wake of the Western sanctions due to the ongoing war with Ukraine.

These challenging times provide an excellent opportunity for the government to accelerate oil exploration and production in the country, which will result in the reduction in oil imports. Inviting new investments in the oil and gas sector is the need of the hour.

Hussain Ahmad Siddiqui
Islamabad

Published in Dawn, September 28th, 2022