KARACHI, March 1: Oil and gas, or say energy sector, is fuelling the fire of country's economic growth as well as investors' interest, both direct and portfolio.

For three months, from December 2004 to February 2005, the market capitalization of oil and gas exploration companies at the Karachi Stock Exchange shot up by 60 per cent and the average daily turnover of shares rose to 147 shares during February.

On Tuesday (March 1), the oil and gas exploration sector again witnessed the largest amount of shares traded, which stood at 197 million. Across the globe wars are being fought and everyone everywhere seems to be eyeing oil and gas, the engine of growth.

In order to support Pakistan's growing economy, both supply and demand for oil and gas have been on the rise. During FY'04, country's primary energy supplies increased by eight per cent to 50.8 million toe (tons of oil equivalent) from 47.1 million toe the year before.

"However, oil (as part of the energy sector) saw third consecutive year of decline during the last fiscal year where its supply decreased by 15.6 per cent to 15.2 toe," stated Abdul Rasheed, energy sector analyst at Jahangir Siddiqui Capital Markets (JSCM).

Demand for furnace oil decreased by 47 per cent during FY'04 owing to increase in hydel power generation, larger gas availability to power plants and substitution of coal as fuel by cement plants.

The share of oil in domestic energy supply dropped to 29.9 per cent in the year under review, from 43.4 per cent in FY'01. But the country still fell short of oil and had to import 8.1 million tons worth $3 billion to meet the local demand.

Faisal Jiwani, analyst at Invest Cap, observed that government's efforts to shift energy production from costly furnace oil to gas and hydel power succeeded and power generation during FY'04 was purely backed by power generated by gas-fired and hydel power plants.

"Hydel power generation during FY'04 was 26,944GWh, which represents an increase of 20.5 per cent over the earlier year," said Mr Jiwani, identifying reasons to increased water availability in FY'04 and the commencement of Ghazi Barotha, which increased the share of hydel power in total power generation to 33.3 per cent from 29.5 per cent in FY'03.

Thermal power generation increased by 1.03 per cent during FY'04 to 52,122GWh with generation by oil up 47.8 per cent to 12,711GWh and generation through gas increasing by 45.2 per cent to 39,213GWh.

And Abdul Rasheed at JSCM figured out that the declining oil consumption trend had actually revered during FY'05 as demand for various oil products had been rising at a double digit rate. During the first half of FY'05, domestic oil demand had increased by 18 per cent to 8.1 million tons.

But unlike oil, supply of domestic gas had been on the rise during the last fiscal year in line with the previous many years. Gas supply shot up by a whopping 22.6 per cent during FY'04 to 25.3 million toe due to additional supply from a number of new discoveries - Sawan, Bhit and Zamzama. "Due to this gas share in domestic energy, supply increased to 49.7 per cent in FY'04, from 41.4 per cent in FY'01," calculated Mr Rasheed.

Contribution of indigenous natural resources (domestic oil, gas and coal) stood at 36.8 million toe in the primary energy supplies that totalled 50.8 million toe, which meant ratio of indigenous resource utilization of 72 per cent. The ratio has been climbing for the last few years; that being 61 per cent in FY'01.

In respect of the energy sector, Mr Rasheed noted that another interesting observation was the increase of coal consumption during FY'04. The increase was caused mainly due to conversion of cement plants to coal as fuel. Coal supplies during the year under review rose by 32 per cent to 3.3 million toe, from 2.5 million toe the previous year.

However, in the absence of large scale mining industry, rising demand was largely met through imported coal. During FY'04, coal imports increased by 83 per cent to 1.8 million toe, from one million toe in the year before.