Increased oil production

Advisor to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain while inaugurating the operational block of the recently completed Oil Refining Complex at Mouza Kund in District Lasbella stated that the country's crude oil production would be enhanced by 23 percent to 100,000 barrels per day within the next three months.
Pakistan's crude output is extremely low, around 24 million barrels per year which is insufficient to meet a significant portion of our daily requirements and hence a rise of 23 percent may appear to be significant yet, in terms of meeting our needs, it is small. In addition, data released by the latest Economic Survey indicates that petroleum groups' output under Large Scale Manufacturing (LSM) was a negative 5.9 percent in July-March 2009-10 and a negative 4.2 percent in July-March 2010-11. In other words, a negative trend has been evident, which may be due to law and order problems in the country, particularly in Balochistan.
The Advisor's objective in enhancing crude output is evident: the need to reduce the import bill to provide valuable support to the deteriorating balance of payment (BoP) position. Given that imports of petroleum and products account for well over 7 billion dollars per annum, the actual amount varying depending on its international price, any reduction in imports under this head would automatically reduce the pressure on BoP. In addition, Dr Hussain is, without doubt, a subscriber to the policy of attaining self-sufficiency in the production of items that are critical to the overall development of the country. And fuel no doubt is way ahead in this context.
Chief Executive Officer Byco during the inauguration stated that once operational the Lasbella refining complex would enhance overall refining capacity in the country from the existing 12.25 to 18 million tons per year; and capacity could at some future date be expanded from refining 155,000 barrels per day to 180,000 barrels per day.
However, there is a major concern that needs to be highlighted. Pakistan's refining capacity with the exception of Pak-Arab Refinery is obsolete and hence it is considerably more expensive to refine crude in this country relative to its refinement globally. In addition, it must be kept in mind that there has been a decline in refining margins in the rest of the world. Thus while Pakistan may well save some foreign exchange by enhancing refining capacity yet overall the cost of refining would be higher which, no doubt, would be passed onto the consumers. This, in turn, would lead to our manufacturing sector paying a higher input cost than their international competitors which would further disable this critical export sector from competing globally. In today's global economy a more economically feasible plan is to procure the cheapest available item world-wide, with obviously a built-in element of transport costs, and thereby provide a level-playing field to the manufacturing sector.
The major problem with respect to Pakistan's power sector today is how to pay for the fuel supply given the government's inability to sort out the intractable inter-circular debt which according to some estimates has again escalated to over 400 billion rupees. Government entities with Sindh the biggest defaulter simply do not clear their electricity bill arrears which accounts for the failure of power sub-sectors including distribution companies, generation companies and refining companies to clear their bills on time with a view to enabling the state fuel importer, Pakistan State Oil, to pay for imports. Dr Hussain, however, stated that the government was making prompt payment to companies for purchase of furnace oil which had reduced the inter-circular debt; however, independent sources indicate that the money is being released from the budget coffers and not from within the sector. If so, then remedial measures need to be taken as soon as possible.