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New petroleum policy to give big boost to oil production.

Pakistan is located at the edge of the socalled golden crescent which contains 68 per cent of the world's proven oil reserves. Only about 15 per cent of potentially oil rich sedimentary area has so far been explored, even though the oil-strike-ratio in Pakistan has proved considerably higher than the international average. While other energy-deficient developing countries like India, Brazil and lately Turkey have successfully entered the field of international oil exploration, Pakistan has made no efforts in this direction. India, for example, has acquired exploration and service contracts with countries like Sudan and Vietnam. Every day about 60 per cent of the world's oil passes literally by Pakistan's doorstep, through the Strait of Hormuz. No effort has been made to take advantage of oil in transit, by setting up refineries as Singapore has done.

The present government has made efforts to step-up oil exploration through increased international participation; 16 oil exploration deals with international oil companies have been signed. This is a much belated step in the right direction; but much more needs to be done to exploit Pakistan's oil potential.

At present Pakistan has been producing less than a lakh barrels of oil per day. If by the end of this century it starts producing 2.5 million barrels a day and exports 2.0 million barrel per day of crude and petroleum products, it will change the destiny of Pakistan as we will be earning about $ 18-20 billion annually only from oil exports.

Pakistan has been already exporting 15,000 barrels per day of Badin crude. The reason there is no refining capacity in the country for Badin type of crude which contains high wax. In Badin block just one oil company has discovered oil in 62 wells, whose total production comes to more than 125,000 barrels per day. But most of this oil is lying unutilised and dormant for the last three or four years. Recently the work on hydrocracker plant, to be set up at Karachi, has started and it is hoped that this plant will start functioning in 1994. This means that the discovered oil (which is about one lakh barrels per day) will remain un-utilised for a couple of years.

The government may increase the present export of 15,000 barrels per day to 25,000 barrel per day as there is no sense in keeping the discovered oil unutilised for so long. This is great national loss, indeed.

The new incentives extended through the country's first ever petroleum policy announced in November last have given a big boost to the petroleum exploration activity. To encourage the local investment in the petroleum exploration and production, the local companies have been allowed 100 per cent share in production after discovery prorated to the share of their investment in the exploration phase, as laid down in the policy already notified by the government.

Under the present rules, the international companies interested in exploration and production are required to meet full expenditures on exploration but on discovery they have a right only to 50 per cent of production.

The new incentive coupled with inducement from the government to international oil companies to take local companies as partners is expected to give a fillip to oil and gas exploration and production activity in the country. The bright prospects of this incentive will attract the local entrepreneur and the investors to participate in the petroleum exploration programme of Pakistan.
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Publication:Economic Review
Date:Feb 1, 1992
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