By Ahmed, Gulfaraz
Economic Review , Vol. 22, No. 2
OGDC's Self-Financing Year
History of oil exploration in the sub-continent is as old as the oil industry itself. The first oil well was drilled at Kundal (Mianwali district) just seven years after Colonel drilled the very first well ever in Pennsylvania, USA in 1859.
Soon after Pakistan's independence in 1947, oil exploration got a boost when a giant gas field was discovered at Sui, Balochistan in 1952. This attracted a number of exploration companies into Pakistan and the fifties saw an increased interest and activity in search of hydrocarbon resources. But there was no significant discovery after Sui, and the foreign oil companies left Pakistan en masse at the end of the decade considering it non-prospective. There was virtually no exploration activity in the country in 1960. A need was felt to create an indegenous exploration capability and the Oil and Gas Development Corporation (OGDC) was raised in 1961. It was created through an active cooperation of the Soviet Union and for the first few years, used Soviet technology and experts to start the search for oil.
Making its first discovery of gas in 1965 at Sari and oil in 1968 at Toot, OGDC maintained a level of exploration activity till mid seventies. The emerging geological information base and discoveries of oil and gas fields brought Pakistan back to the category of oil prospective countries. A number of petroleum concessions were granted to foreign companies in seventies. As a national corporation, OGDC had thus succeeded in re-attracting the interest of foreign exploration companies in Pakistan.
Discovery of oil by Union Texas of Pakistan (UTP) in 1981 at Khaskeli (District Badin) in Lower Indus Basin opened a new geological province for liquid hydrocarbons. Another important discovery of oil in the previously known prospective window of Potwar Basin at Dhurnal in 1984 by Occidental of Pakistan (Oxy) gave the search for oil a major boost. The eighties saw an increasing exploration activity leading to a number of oil and gas discoveries and a substantial increase in indigenous production of crude oil. A number of new exploration agreements were concluded, and at the start of the decade of the nineties, the outlook on search for oil and gas seems quite optimistic.
OGDC is wholly a Public Sector entity. It has throughout been dependent on Government budget for all its funding needs. Although the revenues generated by OGDC covered only a fraction of its budget, a far reaching decision was taken to make it self-financing with effect from 01 July 1989. This was a landmark development in the life of OGDC. It posed a challenge. OGDC could make an economic take-off if successful or otherwise go bankrupt and vanish. The first fiscal year of OGDC's self-financing ended on 30th June 1990. It would be interesting to analyse its first year's performance and make some projections.
For the fiscal year 189-90, OGDC had a debt repayment liability of over Rs. 750 million. Coming off the national budget, and with very meagre revenues, OGDC faced the following three options;
[Right Arrow] seek a write-off by the Goverment for