First Year of OGDC's Self-Financing

By Ahmed, Gulfaraz | Economic Review, June 1991 | Go to article overview
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First Year of OGDC's Self-Financing

Ahmed, Gulfaraz, Economic Review

First Year of OGDC'S Self-Financing

Since the beginning of the oil crisis resulting from the Iraqi invasion of Kuwait, the OGDC has increased its oil production by over 6000 barrels a day. A statistical picture of the oil production during the last two years period is given in Figure-1. It may be seen from this figure that OGDC's average daily production of oil in November 1988 was only 7764 barrels. It increased to 14653 barrels in November 1989. The projection for November 1990 is about 28000 barrels daily. The average production during the month of October 1990 was 27363 barrels/day. The OGDC has become the principal oil producer in the country since June 1990. A table of comparative average daily production by various oil producers is as follows:-

Production statistics for October 1990 are shown in Figure. It may be seen that OGDC is producing 39 per cent of our indigenous oil production.

Although OGDC has greatly improved its immediate cash flow position and made a good start toward self-funding, it has many other challenges to overcome. One of them that merits an elaboration relates to a degree of professionals Autonomy to the OGDC. There are only two stable configurations the OGDC is financed by the government and maintains a government culture and structure in its management. OGDC had stayed in this configuration from its raising in 1961 to 30 June 1989. It could survive in this form for as long as the government wanted and there would be no threat to its existence. In the second stable configuration, the OGDC operates under a commercial objective of self-financing and develops a commercial culture and structure. In this form, OGDC will not only survive but is expected to make the all too important economic take-off leading the country to self-reliance in oil.

There is another permutation of the above configurations that is unstable. In this form, OGDC operates under the commercial objective of self-financing but retains the government culture and structure in management and control. In this state, the OGDC may face a challenge to survive. In reality, during the present phase of transition, OGDC is placed in the third and unstable configuration. It has been rightly made to self finance but does not yet have the autonomy and flexibility to self manage. It is important that in the extreme national interest it is allowed the professional autonomy to develop a commercial culture of cost effectiveness and profitability. A dynamic structure of OGDC on modern lines of industry holds a great promise of boosting the economy of our country. It needs all the focus and the impetus. Giving the OGDC a degree of professional autonomy is one of the most far reaching decisions that can give a new meaning to our search for oil.

Self-reliance in oil is an important but difficult objective. Even though our indigenous production of oil has been increasing at about 20 per cent for the last 2 years, our consumption of oil has been growing as well. Although the consumption has been increasing 8-9 per cent yearly, the gap between our consumption and indigenous production is continuing to grow. In net effect, we have to import more oil in future unless a determined effort is made to close the gap and move toward self-reliance. This will need a dynamic national policy and direction in oil and gas sector. We need to take a number of far reaching strategic decisions and an integrated effort in their implementation. Some of the points requiring strategic decisions are identified as: * Facilitating exploration for oil and gas

in Balochistan. A number of foreign

and native companies holding exploration

licenses for Balochistan blocks

have declared force-majeure and have

not been able to start the work for

almost two years. * Accelerating the processing and finalization

of pending and new applications

for grant of exploration licenses.

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