Problems of Pakistan Petroleum Industry

By Haidari, Iqbal | Economic Review, June 1999 | Go to article overview

Problems of Pakistan Petroleum Industry


Haidari, Iqbal, Economic Review


Petroleum Industry in Pakistan has been faced with several problems. It will be seen that oil production has not only been stagnant but it has shown a declining trend despite the fact that several packages of incentives were announced. No new Refinery was set tip since 1978 although there were several proposals to this effect. Mid-Country Refinery is now likely to be functional in the year 2000 if every thing goes smooth. Only this year prospect are looking bright and new discoveries may yield good result.

Petroleum Industry in Pakistan has been faced with several problems. It will be seen that oil production has not only been stagnant but it has shown a declining trend despite the fact that several packages of incentives were announced. No new Refinery was set up since 1978 although there were several proposals to this effect. Mid-Country Refinery is now likely to be functional in the year 2000 if everything goes smooth. Only this year prospects are looking bright and new discoveries may yield good result. In the following paragraphs we have discussed the following problems:

Bureaucratic Control: Petroleum sector has to far been a bureaucratic network without active participation of the private sector. The formulation of policy was the Governments sole prerogative. On the implementation side instead of carrying along private sector as a partner in the field it was one side government's dictated policy and decisions. The case in point is Pak Iran Refinery Project, which was dragging on For more than a decade. Perhaps, this project will now be off the ground. Another glaring example is the Hydrocracker Project for which land had been purchased and an amount of Rs.700 million was spent on the feasibility and planning. The project is now reported to be abandoned.

Depletion of Resources: About 10 per cent of the natural gas goes waste annually due to decadence of the pipelines in Pakistan as compared to one per cent in other parts of the world. Pakistan had a gas reserve of 21 trillion cubic feet, which could cater to the needs of the country for next 25 years. "But the gas resources may be exhausted much earlier by virtue of high rate of population and proportional increase in demand of gas consumers. At the present rate of extraction, Pakistan's oil reserves will last another seven years, and natural gas another twenty years. In the near future Pakistan will face a serious challenge to its energy security, unless additional oil and gas discoveries are made in the country. Self-sufficiency in oil will decline from 40 per cent in 15.47 to 10.15 per cent by year 2000. Self-sufficiency in gas will decline from 100 per cent to 60 per cent by 2005.

Infrastructure Problems: There is a great exploration potential in Balochistan, but security problems are hindering implementation work, as the Sardars of the areas want to have a share in exploration a non-feasible phenomenon for the Government. Several companies had to withdraw themselves from exploration work in Balochistan. So far 46% of the natural gas resources of Pakistan had been discovered in this province, and it was contributing more than 90% to the indigenous gas production till 1968-69, which has now dropped to about 45% of total gas production of 1800 -1900 million cubic feet per day. So far only gas had been discovered in Balochistan and all the fields/discoveries were located in the eastern part of the province, western part of Balochistan was virtually unexplored. "Only 24 wells (6%) had been drilled as compared to 370 wells in other provinces.

Despite the low rate of exploratory activities in Balochistan 14 trillion cubic feet (TCF) of gas reserves have been discovered which currently, account for 45 per cent of the total gas production in the country. On the other hand only 16 TCF of gas had been discovered in the rest of Pakistan. Mr. Azam Malik, Acting General Manager Exploration, OGDC, in a paper on "Prospectively Zones of Balochistan & Potential Resources. …

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