Tuesday July 16, 2024

Oil, gas exploration sector announces $5 billion investment in Pakistan

PM Shehbaz Sharif assures local, international E&P firms operating in Pakistan of total cooperation of govt

By Business Desk
July 06, 2024
A general view of oil drilling equipment on federal land near Fellows, California, U.S., April 15, 2023. — Reuters
A general view of oil drilling equipment on federal land near Fellows, California, U.S., April 15, 2023. — Reuters

ISLAMABAD: Reposing full trust in Prime Minister Shehbaz Sharif-led government's pro-investor policies, a group of Oil and gas exploration and production (E&P) giants aims to spend $5 billion to tap new energy in energy-strapped Pakistan, state-run APP reported on Saturday.

An announcement to this effect came to light in a meeting held between a delegation of the local and international E&P firms with Prime Minister Shehbaz Sharif on Saturday as the pressure continues to mount on Islamabad to shore up the country's wobbly energy infrastructure.

If it materialises, it will not only help provide more reliable energy supplies to the country's growing population but also cut reliance on expensive oil imports.

“Exploring the oil and gas reserves at the local level in Pakistan is our top priority,” PM Shehbaz said during the meeting with the delegation at Prime Minister House, inviting the oil and gas explorers to also tap Pakistan’s offshore reserves.

Pakistan spends billions of dollars every year on importing oil and gas, the PM lamented. “Production from local reserves will save Pakistan’s valuable foreign exchange, and fuel and gas will become affordable for the common man.”

Facing a severe balance of payments crisis, record inflation, and sharp currency devaluation, Pakistan lacks sufficient resources to operate its oil and gas plants, leading to the import of most of its energy needs.

Consequently, planned power cuts, known as loadshedding, occur every summer due to fuel shortages and high demand. The duration of these power cuts varies across different areas of the country, which has a population of 241 million.

The delegates informed the Prime Minister that over the next three years, around 240 exploratory wells would be drilled for $5 billion to explore petroleum and gas in Pakistan.

The meeting was informed that currently, Pakistan’s domestic production stood at 70,998 barrels of oil and 3,131 MMSCFD of gas per day, which needs to be drastically increased to achieve as much self-sufficiency as possible.

Constituting a committee that would coordinate with the explorers, the PM directed the authorities concerned to provide solutions to all the problems of the sector on a priority basis. The new body, comprising experts, secretaries, and the relevant authorities, would be chaired by Deputy Prime Minister Ishaq Dar.

The committee, after consultation with the stakeholders, would formulate proposals to create an attractive policy for the exploration and development of petroleum and gas reserves in Pakistan.

State Bank of Pakistan (SB) Governor Jamil Ahmed told the meeting that, on the prime minister’s special instructions, all the remittances (profit of the business) had been sent to the respective countries of the oil and gas production companies.

The delegation thanked the prime minister for making the petroleum and gas exploration and production sector part of the consultation process, listening to their problems, and finding serious solutions to them.

The meeting was attended by Deputy PM Ishaq Dar, federal ministers Ahad Khan Cheema, Muhammad Aurangzeb, Syed Mohsin Raza Naqvi, Engineer Amir Muqam, Ahsan Iqbal, Sardar Awais Khan Leghari, Deputy Chairman Planning Commission Jehanzeb Khan, Coordinator to PM Rana Ehsaan Afzal, Chairman Federal Board of Revenue Amjad Zubair Tiwana, representatives of domestic and international companies, and relevant high officials.

According to the Pakistan Economic Survey 2023-24, Pakistan’s petroleum import bill decreased in the first nine months (July-March) of the fiscal year 2023-24 not because of higher local production but due to lower consumption.

The Economic Survey states that the drop in consumption was caused by reduced economic activity and higher product prices. Total petroleum product imports fell to 11,047 thousand metric tons, valued at $8.36 billion.

The main imported products are motor spirit (MS), high-speed diesel (HSD), and crude oil. Compared to the same period last fiscal year (2022-23), the import bill for MS dropped from $3.704 billion to $3.156 billion, for HSD from $1.646 billion to $1.050 billion, and for crude oil from $4.287 billion to $4.051 billion.

Oil and gas exploration companies showed mixed results during this period. Gas exploration declined by 2%, while crude oil production increased by 1.5%.

Gas production decreased from 1,190 million cubic feet in the first nine months of the previous fiscal year to 1,166 million cubic feet in the same period this year.

However, crude oil production rose by 1.5%, from 25.5 million barrels to 25.7 million barrels.