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Oil production and exploration.

Oil Production and Exploration

An area of 193,700 sq.km. is under exploration in the petroleum sector and 29 foreign and local companies have been engaged for the purpose. As many as 42 concessions and facilities have been granted to the foreign and local companies during 1988-1989 and 1990.

INTRODUCTION

Oil contributes more than 40 per cent to the total energy supply. Discoveries of the new oil fields in different parts of the country have raised the local production to 70,000 barrels per day (bpd) thus meeting about 41 per cent of our total requirement of about 175,000 bpd. The recoverable reserves are estimated at 108.914 million barrels. Production of oil is estimated to have increased from 17.1 million barrels in 1988-89 to 20.0 million barrels in 1989-90 as illustrated in the following table.

Production of Crude Petroleum
Year (00 bbls)
1984-85 9,525
1985-86 14,366
1986-87 15,005
1987-88 16,310
1988-89 17,074


19889-90(*) 20,000 (*)IR Estimates. Source: Federal Bureau of Statistics.

Several companies applied for 47 blocks in Pakistan both in the form of joint ventures and as sole ventures. To accelerate exploration a two-member delegation of the Ministry of Petroleum went to U.S. and U.K. to hold talks with reputed oil firms beside appraising them of the prospects of oil and gas in Pakistan. An area of 193,700 sq.km. is under exploration in the petroleum sector and 29 foreign and local companies have been engaged for the purpose. As many as 42 concessions and facilities have been granted to the foreign and local companies during 1988-1989 and 1990. Foreign oil companies now exploring oil in Pakistan are as follows:

Companies Exploring or Likely to Exoplore Oil in Pakistan
- B.P. Exploration Co. (U.K.)
- Canterbury Resources Petroleum Ltd.
- Texaco Exploration Pakistan Inc.


(U.S.A.)
- British Gas, (U.K.)
- Lasmo Oil Co. (U.K.)
- Occidental of Pakistan (U.S.A.)
- Amoco Pakistan Exploration Co.


(U.S.A.)
- Union Texas Pakistan Inc. (U.S.A.)
- Crescent Petroleum Co. (Sharjah)
- Albion International (U.S.A.)
- American International Petroleum


Corporation (U.S.A.) - Canada North West Energy Ltd.

(Canada)
- Hawking Oil & Gas Inc. (U.S.A.)
- Euron (U.S.A.)
- Mark Resources International Inc.


(U.S.A)
- Phoenix Oil Co. (Canada)
- Pakistan Petroleum (U.K.)
- OMV A/G (Austria)
- Sabre Petroleum Ltd. (U.K.)
- Trinity Petroleum Co. (U.S.A.)
- Tullow Oil PLC (U.K.)
- Trend Adobe Pakistan Ltd.
- Unocal Pakistan Ltd. (U.S.A.)


Source: Ministry of Petroleum & National Resources

Oil Policy

The main feature of Oil Policy of the Government appears to be as follows:

[Right Arrow] Facilitating exploration for oil and gas in Balochistan. A number of foreign and native companies holding exploration licences for Balochistan blocks have declared force-majeure and have not been able to start work for almost two years. [Right Arrow] Accelerating the processing and finalisation of pending and new applications for grant of exploration licenses. [Right Arrow] Increasing the indigenous refining capacity by the expansion of the existing refineries and adding new refineries on line. [Right Arrow] Provisions of pipelines for crude oil from oil fields of Badin and Sanghar for stable, reliable and economical transportations. [Right Arrow] Application of Enhanced Oil Recovery (EOR) from the to old and depletion fields in the Potohar area. [Right Arrow] Removing restrictions from the utilisation of newly discovered gas fields for power generation to provide incentives for gas exploration. [Right Arrow] Revising gas pricing policies from deeper and expensive fields to give a reasonable rate of return on investment. [Right Arrow] Giving the OGDC a degree of professional freedom, flexibility and autonomy enabling it to compete more effectively with the native and foreign oil companies.

Recovering lost expenditures, one of the major problems confronting foreign oil companies so far has been solved by the government by amending the Income Tax Ordinance of 1979. Sources said the GOP solved the ring fence problem in April 1987, by amending rules, which interpreted various fields as separate concessions explored by a single foreign company. Inder the present state, a company can recover its lost expenditure on dry holes by showing it as part of expenditure on its successful exploration. The first American Company granted this facility was in the case of Dhurnal oil field.

Exploration Policy IMPORTS

It is fortunate that oil prices has taken a downswing and is around $16 and may go further down to 15. In this case the oil bill will go down. Oil import bill in 1990-91 is estimated to settle at $1300 million. The imports of POL products in the last five years were as follows:

Imports of Petroleum and Petroleum Products
 Quantity
 (000 Metric Value
 Tonnes) ($ Million)
1985-86 5,676 1,039.4
1986-87 6,668 813.6
1987-88 7,586 1,047.7
1988-89 7,953 963.2
1990-91 8,373 1,162.8


Source: State Bank Annual Report 1989-90

According to latest government statistics, about a quarter of Pakistan's foreign exchange earnings are spent on the import of crude refined oil. While only ten per cent of the country's foreign exchange was spent on the import of oil in 1981 it had increased to over 20 per cent in 1988-89. If we take the growth rates of energy demand and those of our foreign exchange earnings (9 per cent and 6.5 per cent respectively), in the next 5 years the country will be spending more than half of its foreign exchange earnings on importing oil alone-consequently reducing the foreign exchange necessary for other vital development and infrastructural needs. Despite such a huge import bill for oil and oil-related products the demand for energy far outstrips the per capita access to commercial energy in Pakistan, which remains abysmally low-a ninth of the world average, and half of that of other low income countries.

Oil Price

The Government effective November 13 announced a sweeping 41 per cent increase in prices of oil and petroleum products the second this year under IMF conditionalities. The price increase would bring Rs. 14 billion to the exchequer by the end of the financial year, but this would still not be enough to wipe out the daily loss of Rs. 70 million being suffered by the government.

Increase in Oil Prices
 (Rupees)
 Revised Previous
 Price Price
Hi Octane (Aviation) 14.20 10.00
Super 12.79 9.00
Regular 11.85 8.33
HSD 5.65 4.20
IDO 4.65 3.40
Kerosene 4.95 3.40
Lubes 14.90 3.30
Furnace Oil 3,280
Asphalt 5,300


Source: Dawn, November 14.

The highest increase came in the price of widely used kerosene which was increased by 50 per cent, followed by a 43 per cent raise in furnace oil, 42 pc in hi-octane, super and regular petrol, and 36 pc in light diesel oil. The last round of IMF-led price increase was in March this year when prices were pushed up by 16 per cent by the Benazir Government.

The massive increase in domestic oil prices fulfilled the third of the 12 conditionalities of the IMF to qualify for 240 million dollars of loan. The first two conditions were fulfilled by the caretaker government of Mr. Jatoi that was adoption of flexible pricing policy and imposition of General Sales Tax that Government has given indications that it would revise downward the prices of POL products if international oil price goes steeply down.

Oil Demand

The total oil availability in the country has increased from 42,639 thousand barrels in 1985-86 to 48,830 thousand barrels in 1989-90.

Availability of Oil
 (000 Barrels)
 Local
 Crude Crude
Year Imports Extraction Total
1985-86 28,291 14,348 42,639
1986-87 27,666 14,999 42,665
1987-88 28,332 16,310 44,642
1988-89 25,659 19,710 45,366
1989-90 27,350 21,480 48,830


Source: Ministry of Petroleum and Natural Resources

With the increase in oil demand existing refineries have planned to increase their refining capacities. Additional capacity thus available would be about 50,000 BPD. The break-up is as follows:

Existing & Envisaged Expansion of Refining Capacity
 (Barrels per day)
 Existing Additional Total
Attock 30,000 20,000 50,000
N.R.L. 65,000 15,000 80,000
P.R.L. 28,000 15,000 43,000


Sub Total: 173,000

Refineries Underway:
Pak-Arab Refinery -- 84,000 84,000
Badin Refinery -- 30,000 30,000


Pak-Iran Refinery -- 120,000 120,000 Sub Total: 234,000 Grand Total: 407,000

The demand for POL products is projected to increase with a growth rate of 10.03 per cent/annum during 7th Plan Period, on the basis of which the demand is projected to increase to over 14.5 million tonnes/annum by 1992-93, against the existing production capacity of about 7.5 million tonnes/annum. This would leave a supply gap of about 7 million tonnes. But the domestic expansion plans and the joint-venture project would have the potential to create additional capacity of 11.27 million tonnes as discussed above. However, about 1/3rd of the estimated production in the proposed joint-venture refinery, it is reported, would be bought by Iran. Even after this, about 4 million tonnes/annum would be available to Pakistan for domestic consumption form the proposed refinery. This together with planned expansion in domestic capacity up to 5.64 million tones, would make a total of 10.64 million tonnes, which appears to be far in excess of an estimated deficit of 7 million tonnes. Thus, in the light the new agreement reached for a joint-venture refinery, the Federal Government would have to shelve some of the expansion plans.
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Article Details
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Author:Haidari, Iqbal
Publication:Economic Review
Article Type:Cover Story
Date:Feb 1, 1991
Words:1614
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