Development of Oil and Gas Sector

By Asad, S. Hasan | Economic Review, April 2001 | Go to article overview

Development of Oil and Gas Sector


Asad, S. Hasan, Economic Review


On December 15, 1999 General Pervez Musharraf outlined eight-point strategy on oil and gas sector one of the four sectors (the other three being agriculture, small and medium industries and information technology) identified as priority areas for the revival of the economy The primary objectives of the strategy are:

i) to expand the production of oil and gas and

ii) to reduce the growing import bill of petroleum currently running at around $3 billion annually (27 per cent of imports).

The eight-point agenda are:

i) toencourageforeign investment in the sector.

ii) to accelerate the exploration and development of oil and gas fields,

iii) to establish regulatory authorities for the development of the sector,

iv) to convert power plants from furnace oil to gas,

v) to develop upstream infrastructure including pipeline, vi) to deregulate and privatise the sector,

vii) to rationalise margin of oil marketing companies and

viii) to deregulate the price of LP and encourage the use of CNG.

In a short span of one and a half years, oil and gas sector has outperformed and made more rapid progress than any other priority sector. The production of gas jumped 11 per cent from 20.9 billion cubic metres in 1998-99 to 23.2 billion cubic metres in 1999-2000 while oil production inched up from 20 million US barrels to 20.4 million US barrels over the same period, constituting 37 per cent of total supply. The search foroil and gaswas prompted by uantum leap in imports of petroleum from $1.7 billion ($1.2 billion petroleum products and $0.5 billion crude) in 1994-95 to $2.8 billion ($2 billion petroleum products and $0.8 billion crude) in 1999-2000 or by 11 per cent per annum. In quantitative term, the increase was over 5 per cent during the same period.

According to World Bank report, overall consumption of petroleum products had grown by annual 4 to 5 per cent in recent years. However, this average masquerades the wide variations in the consumption pattern for different fuels. Consumption of fuel oil (largely for thermal power generation) expanded rapidly by almost 8 per cent during 1995-99 mainly in 1997-99 due to commissioning of about 3,000 MW of generating capacity through fuel-based IPPs. Consumption of diesel and petrol was fairly robust (3.5 per cent and 2.5 per cent a year respectively), though petrol demand declined in 1999-2000 due to consumers' rising preference to CNG in their vehicles.

Exploration and Production

According to a source, resource potential of Pakistan is 200 trillion cubic feet of gas and 40 billion barrels of oil. Only a tiny part of these resources have been tapped so far as proven reserves of natural gas and oil are estimated at 26 trillion cubic feet and 300 million barrels respectively. Presently, 25 companies Including 22 foreign ones are engaged in exploration under 62 licenses and 90 leases.

OGDC has struck major oil and gas reserves in March with about 4,300 barrels and 13.37 million cubic feet of gas per day output in NWFP. Oil and gas deposits have also been found in Qadirpur near Ghotki, Jacobabad, Sukkur, Badin and Kundari in Sindh. Security problems have thwarted the exploration activities in Balochistan, although experts opine that there are huge reserves of oil and gas

Oil production rose from 55,700 barrels per day in 1999-2000 to 56,000 barrels per day in 2000-01 or by 0.5 per cent. Gas production jumped from 23.2 billion cubic metres to 27.8 billion cubic metres over the period or by 20%.

Oil Refining

During the currentfiscal year (200001), Pak Arab Refinery (PARCO), the biggest oil refinery has commenced operation at Mahmoodkot, 65 km from Multan, with the cooperation of Japan and UAE. The refinery will expand oil capacity by 70 per centfrom 6.5 million tonnes to 11 million tonnes per annum, resulting in import substitution of $100 million besides the opportunity o export surplus 0. …

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