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As a result of continuity of previous regime policies and further steps taken by the present Government to accelerate the pace of development activities, the petroleum sector continues to play a vital role towards boosting the national economy.
During the preceding year the oil and gas exploration and production activities remained in full swing which attracted an investment of US $960 million in last one year.
During the last year 13 licenses were granted over an area covering almost 20,000 sp. Kms. in all the four provinces. A total of sixty-eight wells, 27 exploratory and 41 appraisal / development wells were drilled.
Five oil & gas discoveries of good commercial volume were made, three of OGDCL and one each of MOL and OPL.
Four new gas fields viz; Zamzama, Mazarani, Bhit, and Sawan were put into production.
The first ever Production Sharing Agreement (PSA) for exploration in ultra deep waters of Pakistan, was signed with M/s TOTAL of France.
M/s Shell Development & Offshore Pakistan B.V commenced its seismic acquisition operations in its offshore block which are ongoing to date at an expenditure of $12 million approximately.
Total exploration and production expenditure incurred by the Exploration and Production Companies during the year 2002-2003 was Rs 51.816 billion.
Under the GOP policy of Economic Reforms, the system of deregulation of pricing of petroleum products is being implemented successfully.
The prices of petroleum products are being fixed in accordance with the changes in international market prices as per approved formula by the Oil Companies Advisory Committee and Oil Marketing Companies on fortnightly basis.
Under the system, the benefit of decrease in prices in international market is immediately passed on to the consumer.
As a result of Government policies, the production of Natural Gas in the country has increased substantially. Due to this increase the additional gas has been allocated to the Power Plants and other industry using Furnace Oil, resulting import of Furnace Oil has been eliminated and hence saving of US $290 million during the period of July-December 2003 as compared to the import figure for corresponding period of last year.
Further the gas is environment friendly fuel and by the use of it, tremendous benefits through clean environment will be passed on to the masses.
As there was no fixed criteria for the establishment of oil company, therefore, to attract investment this Ministry with the help of oil industry and Oil and Gas Regulatory Authority (OGRA) has developed as criteria for the establishment of oil marketing company which was approved by the ECC in its meeting held on 25th October 2003.
The Government took a step further in the deregulation process of Furnace Oil by allowing the traders to import of Furnace Oil besides oil marketing companies and direct consumers.
In addition to above, the local refineries have also been advised to supply Furnace Oil to the traders, direct consumers and bunkering companies.
This would not only encourage investment in the downstream oil sector especially development in the infrastructure but also will create an additional job opportunity.
Bosicor Pakistan Limited (BPL), a second hand refinery of capacity of 30,000 Barrels per Day (BPD) has been set up at Hub District Lasbella, Balochistan in the private sector.
The cost of the project was US $48 million. The refinery has started its operation in November 2003. BPL refinery will add the local production of various POL products ie LPG, Motor Spirit, HOBC, SKO/Jet Fuel, HSD and Furnace Oil to the tune of 30,000 BPD which would result foreign exchange saving of US $0.22 million on import of HSD.
MOU has been signed between State Petroleum and Petrochemical Corporation (PERAC), Pakistan State Oil Company Limited (PSO) and Sunaid Khair Consortium (SKC), a joint venture of Saudi Arabia and Canadian companies for setting up of 6 million tons per annum refinery project.
The estimated cost of the project is $1.5 billion. The refinery is expected to be completed by the year 2007. A 500 million dollars pipeline from Karachi to Mehmood Kot is being constructed which is planned to be completed in 2004.
In order to operate the local refineries at maximum capacities and hence to produce all the products to the optimum level, there was surplus quantity of 63 million tons of Naphtha.
The same was exported and the country earned the foreign exchange of US $159.25 million during 2002-2003.
The government under a well-thought policy approved a Gas Infrastructure Rehabilitation Project in 2000-2001 to enhance gas transmission capacity of the two Utility Companies by 1 billion Cubic feet per day ie an increase of 50% capacity to ensure that 1 billion cubic feet of unutilised gas could be brought into the system for replacement of liquid fuel imported at a cost of $1400 million per annum.
The project was scheduled to be completed by February 2004, however, with the efforts of the present government, SNGPL has completed the project six months ahead of schedule at a total cost of Rs 9.5 billion against the project cost of Rs 12.428 billion.
The gas has started flowing into SNGPL system from July 2003 and about 550 MMCFD gas is being supplied to power plants around Multan and to industrial sector to save the precious foreign exchange of Pakistan.
Similarly, Sui Southern Gas Company Ltd, has also completed major components of their project and all pipelines and compressors have been put to operation.
The remaining part ie 16 inches ILBP Rehabilitation and SCADA work will be completed during the current financial year. The revised cost estimates are Rs 3153 million as against Rs 5635 million.
Both the projects have been undertaken without any financial help either from the foreign financial institutions or from the Government of Pakistan. Besides no foreign technical assistance was obtained and the two companies completed the work with their own local expertise and utilising major components for the project, which were locally made.
During the period November 2002 to November 2003 around 600 MMCFD additional gas has been injected in the system replacing furnace oil import worth Rs 49 billion per annum. Both the companies have provided 1,67,000 new gas connections during the period November 2002 to November 2003.
This will save $1400 million per annum on import of furnace oil besides contribute towards improvement in environment, as clean gas would become available for power, industrial, commercial, automotive and domestic sector.
It will also reduce road and rail congestion as less liquid fuel would be transported through road and rail.
Thus saving HSD utilised for transportation of liquid fuel. Attract more investment in gas exploration, as gas transportation arrangement to the consumption centers is now available.
The Prime Minister of Pakistan is taking special interest in development of this sector and during Ministry's briefing in April 2003, he instructed to gear up efforts to supply this cheap fuel to new areas including remote areas of the country for their economic up-liftment.
In pursuance thereof the Utility Companies have planned to supply around two hundred thousand domestic connection in the country besides providing industrial and commercial connections.
The Government is also providing financial help to the companies for extension of gas facilities under Tameer-a-Pakistan Programme and under special directives of the Prime Minister.
The Companies have received Rs 159 Million under the Tameer-e-Pakistan Programme against 69 schemes and Rs 1765 Million against 51 schemes under directives during November 2002 to November 2003.
In addition to above the Companies are also planning to supply gas within five kilometre's of the gas fields on priority basis on the special directive of the Prime Minister. For this purpose most of the survey work has been completed.
Road transport sector is the major consumer of petroleum products mainly diesel and petrol.
Government of Pakistan is encouraging the use of Compressed Natural Gas (CNG) as an alternate environment friendly, indigenous and economic motor fuel for auto-motives with a view to reduce environment degradation, save foreign exchange and generate employment.
The use of CNG as a replacement of petrol has been successfully implemented in the country. The conversion to CNG has increased at a rate of 64% during last year.
Over 130 new CNG stations have been established during last year, bringing total number of CNG stations to over 450.
CNG stations on Motorway M-2 have been established to facilitate the commuters and also to increase utility of the Motorway for enhancing revenues. Approximately 80,000 gasoline vehicles converted to CNG during last year, bringing total number of vehicles converted to CNG to around 400,000, thus replacing about 380,000 tons of motor gasoline, which is a big contribution towards self-reliance and control on environment degradation.
The increasing use of diesel is not only putting burden on our foreign exchange earnings but also polluting ambient air especially in urban areas with high emissions of particulate matter and other pollutants causing serious health problems to the public.
Therefore, the conversion/ replacement of HSD buses with CNG buses in the urban cities is also being planned.
Green buses have already been introduced in Karachi. Pakistan has developed advanced CNG expertise and is providing assistance to neighbouring countries in development of CNG infrastructure.
In order to ensure safety and to look after interest of all stakeholders Government has established Oil & Gas Regulatory Authority and all regulatory work has been transferred to them.
LPG is an economical, clean and environmentally friendly fuel. It is the most popular domestic fuel in areas where supply of natural gas is technically or operationally not feasible.
At present out of 19.7 million house holds around 2 million are using LPG where as the rest are using natural gas, firewood, coal, kerosene etc.
The Government is pursuing its deregulation policy. All the LPG producers can either market their own LPG or through licensed marketing companies.
Similarly, all marketing companies can now develop their LPG market, as they wish, except for use in automotive.
In order to ensure LPG supply in remote hilly areas, with a view to protect our precious forests each company is obligated to supply a fixed quota to these areas.
During the last year number of LPG Companies have been increased from 25 to 62 and an investment to the tune of Rs 1000 Million was made.
The Regulatory body namely Oil and Gas Regulatory Authority has been established to safeguard interest of all stake holders.
Nature has endowed Pakistan with adequate mineral resources. Due to pragmatic policies of present government Mineral Sector like others has shown marked improvement including in exploration, development and mining. The significant achievement in the sector are as under:
The project has been handed over to Chinese company for a period of 10 years. The project has started commercial production on 6.8.2003 with an annual target of production of 15810 metric tonnes blister copper containing 1.47 tonnes gold and 2.76 tonnes silver.
First consignment of export of 1000 tonnes of blister copper worth US $3.07 million has been made in October, 2003.
Keeping in view the better metal prices in the market an MOU has been signed between Saindak Metals Limited and MCC China for enhancement of production from 30 to 40% during the recent visit of President of Pakistan to China (1st week of November, 2003) which will increase the annual copper production upto 24000 tonnes. MCC China will invest about US $20 million for the enhancement of the project.
Pakistan imports its industrial requirements of lead and zinc metal. Large deposits of Lead-Zinc at Duddar have been discovered by GSP and PMDC in Balochistan having a proved 14.31 m tonnes of deposit containing 8.6% zinc and 3.2% lead.
For development and mining of the deposit an agreement has been signed between MCC China and Pakistan Mineral Development Corporation during the recent visit of President of Pakistan to China.
According to agreement the project will produce 100,354 tonnes zinc and 32,584 tonnes lead concentrate during 14 years mine life.
Government of Balochistan will get US $9 million as 2% of sale as royalty and GOP will get US $7.88 million per year as presumptive tax and as EPZ and surcharge.
M/s Tethyan Copper Company Limited (TCCL) of Australia, a subsidiary of BHP having a joint venture with Government of Balochistan has so far proved 78 million tonnes of high quality copper ore containing 0.8% copper at Reko Dik, district Chagai in Balochistan, from the overall copper-gold potential of 730 million tonnes.
The Company has formulated plans to launch a pilot project with an investment of US $170 million aiming to produce 40,000 tonnes of pure copper, to be exported for US $75 million annually.
To encourage the foreign investment and to introduce metal mining in Pakistan, GOP has declared the Reko Dik project as Export Processing Zones.
On successful completion, the pilot deposit would be converted into a mega project requiring investment of about US $1.50 billion within next 5-10 years.
To reduce import dependencies, present government has accorded high priority for utilisation of indigenous coal in processing industry and for power generation which has resulted 30% (about 800,000 tonnes coal) of the total energy requirement of the cement industry is presently being catered by indigenous coal.
Cost of cement production to be reduced by Rs 350 per tonne, on full aconversion. A private investment of Rs 500 million is the offing to enhance present production of coal and another Rs 1000 million to convert cement plants on coal.
About 200 million tonnes Iron Ore Deposit containing an average of 40% iron oxides has been discovered in Balochistan, proved suitable for utilisation in Karachi Steel Mill by blending up to 15-20% with imported iron ore.
On the initiation of this Ministry, an agreement is being finalised between Bolan Mining Enterprises (Lessee) and Pakistan Steel wherein 100,000 tonnes of this ore shall be supplied to Pak Steel.
This deal would harness an indigenous natural resource and generation of an economic activity, besides, saving 15% exchange being spent by Pak Steel on import of iron ore. Mining of the deposit is in process.
Through exploitation of ore socio economic uplift of the Dilband area would take place, besides, providing sufficient job opportunities.
In pursuance of a directive of the Cabinet, this Ministry prepared a strategy or Mining, Cutting, Polishing and Marketing of Gemstones with a view to increase export.
The strategy has been approved by the Chief Executive/President of Pakistan. The recommendations of strategy interalia included development of Small Scale Mining at high altitude.
The activity envisages imparting training to the inhabitants of gem bearing areas, already engaged in mining of gemstones using rudimentary mining techniques. To achieve this objective an amount of Rs 100 million was sanctioned by GOP.
The Ministry invited the project proposals from the N.W.F.P, AJ&K and Northern Areas Administration on PC-1 proforma. This Ministry has approved the projects and work on the scheme is in progress.
TURKMENISTAN - AFGHANISTAN - PAKISTAN GAS PIPELINE: The Government of Turkmenistan floated the idea of a gas pipeline from Turkmenistan to Pakistan in 1991.
Different MOUs were signed during the inter-mittent period but no visible progress could take place due to instability in Afghanistan.
During the trilateral Summit held between the Heads of states of Pakistan, Turkmenistan & Afghanistan from May 29-30, 2002.
The agreement provides for the formation of a Steering Committee represented by the respective Petroleum Ministers of the three countries to over-see the progress on the project periodically.
Five meetings of the Committee have been held so far and Sixth meeting is scheduled to be held in June in Ashgabat, Turkmenistan.
A Gas Framework Agreement for the TAP Project was signed by the Heads of states in a trilateral Summit held in Ashgabat on December 27, 2002.
ADB has provided financial assistance to the tune of US $1.00 million for the feasibility study of the TAP project. The Feasibility study in likely to be completed by September 30, 2003.
ADB is also in acting as a lead partner in the project, to co-ordinate and provide necessary assistance to expedite the construction of project.
IRAN - PAKISTAN - INDIA GAS PIPELINE: Iran - Pakistan Gas Pipeline Project was conceived in 1993, which was later proposed to be extended in India.
Pakistan has conveyed its full support and assurance for security of supplies to India.
A Committee co-chaired by the Secretary, MPNR along-with Deputy Minister of Iran National Oil Company (INOC) has been constituted to review the progress on the project.
The committee is assisted by the technical experts from both sides.
There are three different routes under consideration for the Iran-India gas pipeline viz deep sea, shallow water and over-land.
Feasibility study for the deep sea route is being conducted by M/s. Snam Progetti of Italy, while that of overland route is being conduct by M/s BHP of Australia. BHP has completed the phase-I of the study.
The Feasibility study for the shallow water route is to be conducted by GAZPROM of Russia but they have not yet started the study.
India will weigh those options after completion of studies on different routes.
QATAR - PAKISTAN GAS PIPELINE: Crescent Petroleum International (CP) a Sharjah based company, contemplated a gas import project through an offshore pipeline from Qatar to Pakistan in 1990.
An MOU for initiation Qatar - Pakistan gas pipeline project was signed in April, 1990 between the Governments of Qatar and Pakistan but it could not take off and expired in 1994.
Crescent Petroleum signed Heads of Agreement with the Government of Qatar in the Year 2000 giving them exclusive rights to export gas to Pakistan. It also entered into an MOU with Government of Pakistan on 17th July 2000.
A joint Co-ordination Committee consisting of the officials from Government of Pakistan, Crescent Petroleum and Qatari Government have been constituted to discuss gas sale agreement.
The route of the proposed gas pipeline has not yet been finalised.
In recent exchanges with Crescent Petroleum, it was suggested to them that pipeline terminating in Pakistan may not be feasible due to lesser requirement of gas in Pakistan. C.P. was advised for extending the pipeline to India.
(Minister for Petroleum & Natural Resources)

Copyright Business Recorder, 2004

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