Why no major oil company is rushing to drill Pakistan’s huge oil reserves

A long exploratory effort led to it seems massive discovery of oil and gas reserves in Pakistan’s territorial waters, a cache so large they say it could change the economic trajectory of the beleaguered country. But no one is rushing to drill in Pakistan, and experts are worried about jumping the gun.

According to DawnNewsTV, the three-year survey was undertaken to verify the presence of oil and gas reserves. “If this is a gas reserve, it can replace LNG imports, and if it is oil reserves, we can replace imported oil.” Muhammad Arif former Ogra (Oil and Gas Regulatory Authority) member told DawnTv.

However, Arif warned that it would take years before the country could exploit its new fossil fuel resources, adding that exploration alone required a substantial investment of around $5 billion and could take four to five years to extract reserves from a wide. location.

Pakistan meets 29% of its gas, 85% of its oil, 50% of its liquefied petroleum gas (LPG) and 20% of its coal requirements through imports, according to the Economic Times. Pakistan’s total energy import bill in 2023 was $17.5 billion, a figure expected to rise to $31 billion in seven years, according to an Express Tribune report. The new discovery is undoubtedly a big boon for the struggling economy.

As of 2021, Pakistan has been plagued by mounting debt and skyrocketing inflation, with inflation reaching nearly 30%. Meanwhile, the economy expanded by just 2.4% in 2023, missing the 3.5% target. This has forced the country to rely heavily on foreign aid, which is often elusive. In January this year, Pakistan sought $30 billion for gas production to reduce its fuel import bill.

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According to Pakistan’s Energy Minister Mohammad Ali, Pakistan has 235 trillion cubic meters (tcf) of gas reserves, and an investment of 25 to 30 billion dollars would be enough to extract 10% of these reserves in the next decade to reverse the current gas decline. energy production and import substitution.

Persistently high inflation could push Pakistan over the edge.There is no precedent in the history of Pakistan with such a long and intense period of inflation engulfing the countrycolumnist Khurram Husain wrote in Dawn.

A game changer? May be.

Although of Pakistan hydrocarbon resources yet to be quantified, some estimates suggest that this discovery constitutes the fourth largest oil and gas reserves in the world. This could be a potential game changer in the region’s energy flows.

In July, S&P Global Commodity Insights reported that four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil. In fact, the lesser-known Category II and III basins namely Mahanadi, Andaman Sea, Bengal and Kerala-Konkan contain more oil than the Permian Basin, which has already produced 14 billion of the 34 billion barrels. recoverable oil reserves.

Rahul Chauhan, an upstream analyst at Commodity Insights, highlighted the potential of India’s untapped oil and gas sector, ”ONGC and Oil India hold acreage in Andaman waters under the Open Surface Licensing Program (OALP) and have several significant projects planned. However, India is still awaiting the entry of an international oil company with expertise in deep and ultra-deep water exploration to participate in the current and future OALP bidding rounds and to explore these frontier regions.s”, he declared.

Currently, only 10% of India’s 3.36 million sq km sedimentary basin is being explored. However, Petroleum Minister Hardeep Singh Puri says this figure will increase to 16% in 2024 after blocks are awarded under the Open Area Licensing Policy (OALP) rounds. So far, the OALP has resulted in the award of 144 blocks covering approximately 244,007 sq km. Under the OALP, India allows upstream exploration companies to create areas for oil and gas exploration and express interest in any area throughout the year. Interest accrues three times a year after which it is auctioned. According to Puri, India’s exploration and production (E&P) activities in the oil and gas sector offer investment opportunities worth $100 billion by 2030.

So why isn’t anyone in Pakistan rushing to drill?

Shell announced it would sell its Pakistan stake to Saudi Aramco last June and a tender for 18 oil and gas blocks at the same time, it received a muted response from international bidders at best last year. No international company even bid for 15 of the blocks, according to The Nation.

In July, the country’s oil minister, Musadik Malik, told a parliamentary committee that no international companies were interested in offshore oil and gas exploration in Pakistan, and those in the country were eyeing the exit door.

It comes down to security and risk versus reward Malik explained the committee that the cost of security is a major rupturing factor because “in areas where companies are looking for oil and gas, they have to spend a significant amount to maintain security for their employees and assets.” And security is provided by Pakistan, which has not been up to the mark.

In March this year, five Chinese engineers were killed in a suicide attack in northern Pakistan when a vehicle rigged with explosives rammed a bus carrying personnel from Islamabad to the giant Dasu Dam project in Khyber Pakhtunkhwa province. The project is part of the $62 billion China-Pakistan Economic Corridor (CPEC). This incident triggered a series of temporary shutdowns in other projects as well.

Earlier that month, insurgents attacked Chinese assets in southwestern Pakistan, storming the Chinese-run Gwadar Port Authority complex. The attacks were carried out by the Balochistan Liberation Army (BLA), separatists fighting for an independent Balochistan, as reported The Lowy Institute.

Essentially, what this means is that it will be China or be ruined for Pakistan, as Chinese state-owned or state-controlled explorers have a very different risk appetite. And those massive reserves aren’t likely to come out of the ground without Aramco showing more willingness or the Chinese stepping in, for which talks are already underway, according to Malik.

Meanwhile, Iran is said to be smuggling a billion dollars in fuel in Pakistan every year as the country’s oil and gas crisis encourages black market trade.

By Alex Kimani for Oilprice.com

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