Pakistan's Oil and Gas sector's performance during the outgoing year 2011 remained stagnant as no significant oil/gas reservoir was discovered and the Petroleum Ministry was also unable to utilize nearly 700 Million Cubic Feet Per Day (MMCFD) already discovered gas.
The government time and again increased the prices of petroleum products, natural gas and LPG for all sectors to meet rising expenditures reflective of escalating international fuel prices as well as poor governance. At the end of the year gas prices were increased by 14 percent to 207 percent for different sectors/consumers of the economy. The government has announced an increase in gas prices effective January 1, 2012 for domestic, commercial, cement industry, for Water and Power Development Authority (Wapda) and Karachi Electricity Supply Company (KESC) by 13.98 percent and for industrial sector by 16.95 percent.
Additionally the government also decided to impose Gas Infrastructure Development Surcharge (GIDS) on five sectors excluding domestic and commercial sectors. For fertilizer sector under GIDS gas tariff would increase by Rs 197 per Million British Thermal Unit (MMBTU), industrial sector by Rs 13 per MMBTU, Karachi Electricity Supply Company (KESC) by Rs 27 per MMBTU and Independent Power Plants (IPPs) running on gas by Rs 70 per MMBTU" the officials maintained.
Government repeatedly announced that it would bring nearly 700mmcfd gas into the system but failed to do so as no appropriate steps were taken in this direction. An estimated 300 mmcfd gas supply from Sui, Kunar-Pasaki and Khand-Kot fields was planned to be added to the system, which due to slow speed of the work, has not yet been achieved.
Besides 300 mmcfd gas from above mentioned gas fields, another 30 mmcfd was planned to be brought to the system from Sinjhoro gas field followed by 15 mmcfd from Haseeb Field, 20 mmcfd from Rehman field and 15 mmcfd, each from Meher and Jhal Magsi fields, but none of these projects were completed due to minor disputes or poor governance. Dewan Petroleum has the capacity to supply up to 150mmcfd gas if the government resolves the issue of low prices. Osterreichische Mineral Olverwaltung (OMV) Austrian Oil/Gas Exploration and Production Company has the capacity to generate up to 50 mmcfd gas but is unwilling to at the prevailing prices.
If the government manages to complete these projects gas supply/demand situation could improve considerably.
The Petroleum Ministry failed to approve new 'Exploration and Production Policy' where onshore gas has been priced at more than $6/ Million British Thermal Unit (MMBTU) and offshore up to $9 per mmbtu for future exploration activities.
Taking a step forward on $1.25 billion Iran-Pakistan gas pipeline project, the government on December 22 selected a consortium led by Industrial and Commercial Bank of China (ICBC) to arrange financing within 12 months to implement the project for delivery of gas by December 2014 and has also simultaneously pursued gas imports from Turkmenistan.
The proposed Liquefied Natural Gas (LNG) plan which aims at importing 1.4 Billion Cubic per Day (BCFD) was also unsuccessful as the government and potential importers could not settle core issues including sovereign guarantees for purchase of gas for dedicated consumers or allow subletting capacity allocations and decided to strictly follow the initial conditions required under the expressions of interest.
The government also through legislation imposed Gas Infrastructure Development Surcharge (GIDS) on major gas consumers excluding domestic and petroleum levy on LPG in a bid to locally generate about Rs 57 billion per annum for the construction of IP, TAPI and LNG gas pipelines projects.
Gas shortfall is the highest in Punjab, because of reduction in supply to SNGPL system, which fell to about 1.9 bcfd from a peak of 2.5 bcfd. Punjab at present is facing 800 mmcfd gas shortage resultantly over 2,200 industries have been compelled to suspend their production. This has resulted in textile industry from Faisalabad relocating abroad particularly in Bangladesh. Analysts maintain that once the industry moves out it is extremely difficult to woo it back and hence there is an emergent need to resolve the energy issues.
Currently SSGC is receiving 1,100 million cubic feet per day (mmcfd) gas against the demand of 1,400 mmcfd. State run Oil and Gas Development Company limited (OGDCL) is the largest exploration and production company in the country with 77 fields, out of which 45 fields are 100 percent owned and operated, and 32 are non-operated fields.
OGDCL holds 48 percent of the country's recoverable oil reserves, and 37 percent of the country's recoverable gas reserves. In terms of production, currently OGDCL delivers 56 percent of Pakistan's oil out put, and 22 percent of its gas production
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