Pakistan's New Petroleum Policy 1994 - an Immense Promise

By Ghouri, Salman Saif | Economic Review, July 1995 | Go to article overview

Pakistan's New Petroleum Policy 1994 - an Immense Promise

Ghouri, Salman Saif, Economic Review


The importance of the hydrocarbon sector of Pakistan's economy continues to be highlighted by the growing demand for petroleum products and declining domestic crude oil production. Import of crude oil and its products continues to show an upswing. During 1992-93 it constituted about 25 per cent of country's invaluable export earnings.

Although the history of oil exploration in Pakistan dates back to 1866 when first well was drilled t Kundal (District Mianwali, Punjab), it took about fifty years before first oil discover (Khaur) was recorded in 1916. Since 1947 only 315 exploratory wells were drilled resulting in 94 oil and gas discoveries. Apart from Sui a giant gas field discovered in 1952 all other discoveries being small in size.

Historically, oil production was the result of the first oil window discovered in Pothowar at the beginning of this century. Until 1980, the country's oil production remained below 10,000 barrels per day (b/d) that only marginally met domestic requirement. After sixty odd years a second oil window was discovered in 1981 at Badin (both these windows are located in Indus Basin). Consequently, oil production significantly increased from a mere 10,000 b/d in 1980 to over 65,000 b/d in 1991 before observing a declining trend.

Despite significant increase in oil production, only 22 percent of the country's consumption demand is met by domestic production. But this meager share will tend to decline further as the existing fields deplete vis-a-vis growth in consumption - an inevitable gap between domestic production and consumption. In order to reduce the gap or at least maintain the existing level of production, a massive exploration effort shall have to be mounted in the quest of new fields.

It is evident that Pakistan can not achieve self-sufficiency owing to financial and technological constraints viz horizontal and off-shore drilling. Moreover, oil exploration is a risky and capital intensive process. The task of eliminating or reducing import dependency is both daunting and formidable and one which Oil and Gas Development (OGDC) - a national oil company can hardly accomplish solo. Huge frontier areas, a high cost of seismic survey, exploration cost and a complexity of the subsurface geological for a private investment and even greater participation of foreign oil companies. But so far the country has not been able to attract a sizeable foreign investment in oil and gas exploration despite a good success rate and large sedimentary basin.

Government of Pakistan is very much aware that failure to increase indigenous energy supply, particularly that of oil and gas (which constitute over 79 percent), will defeat its prime objective of rapid industrialization as well as bring about misery to the masses in the form of high inflation, unemployment and cut in current social welfare programs.

In an effort to develop indigenous petroleum resources to meet the ever increasing domestic demand for energy, the Government of Pakistan (GOP) has amended/revised petroleum policy four times since 1991. Each time it provided better and better incentives. The latest petroleum policy (announced in March 1994) was the result of broad objectives set by the current government before the Task Force on Energy. Prime Minister of Pakistan Mohatarma Benazir Bhutto has given top priority to the energy sector knowing that failure to increase domestic production will defeat the process of industrialization - a highly energy-intensive process. This in turn would hamper the economic growth, cause high inflation and unemployment. for the Task Force on Energy, Prime Minister set broad clearly defined objectives: framing a new energy policy, evolving a strategy for the elimination of load shedding, mobilization of resources, promoting private sector investment both domestic and foreign and enhancing indigenous oil and gas production.

The Task Force was headed by the Prime Minister's Special Assistant (Economic Affairs) which was sub-divided into sub committees for achieving the broad objectives: Power Sector, Privatization of Power and Oil and Gas. …

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