Pakistan's E&P sector enjoys extremely favourable dynamics. Successful operational performance of this sector is the key to country's economic growth. The rising energy deficit, high vulnerability to oil prices, and expensive energy import options, all have resulted in significant government attention and incentives for the sector.
The government has been providing improving economic terms for investment in oil and gas exploration through its petroleum policies. Owing to the favourable policies, oil and gas exploration sector enjoys the high FDIs and diversity of local and foreign exploration firms. Several high potential areas in Pakistan's basin remain largely unexplored due to security concerns, whereas the offshore basin, hitherto untapped, also offers attractive exploration opportunities.
E&P sector has outpaced the growth of Pakistan's economy by growing at an average rate of 7.5 percent in the past five years, against the growth of 6.4 percent in national economy in the same period. Owing to the massive energy deficit faced by the country, the Ministry of Petroleum and Natural Resources has been pursuing the import of gas through pipeline and LNG projects from the neighbouring region that is Iran, Turkmenistan and Qatar. The latter two projects are currently in infancy stage as no material development has taken place so far.
The Iran-Pakistan (IP) Gas Pipe-line, however, has been in the limelight of late. The project cost is estimated at $1.25bn with debt equity composition of 70:30. The target date for completion is 2013 and the pipeline is expected to deliver 750mmcfd gas. For crude price of $70/barrel, local gas fields under Petroleum Policy 2001 in Zone - 1 (Zone-1 is the most attractive zone in terms of pricing) are priced at $3/mmbtu, whereas the recently announced Petroleum Policy 2009 offers $4.62/mmbtu
Considering the cost of imported gas could go as high 4-5 times that of local gas (and 3-4 times the cost of gas under 2009 policy), the development of unconventional hydrocarbon resources such as tight gas could offer significantly better economic terms to the country. This can come in shape of lower gas prices compared to imported gas, lower inflation, increased employment, and also lower the pressure on balance of payments amongst other benefits.
Pakistan's oil and gas reserve replacement has been impressive during the last decade. The country has managed a reserve replacement ratio of 196 percent for gas and 230 percent for oil, during 1998-2008. Oil and gas exploration firms have managed to discover 50 percent of country's total oil and gas reserves from 1980 onwards. In the last decade, 18 percent of country's total gas reserves were discovered owing to significant increase in exploration activity, improved knowledge of the sedimentary basin, and utilisation of better exploration techniques.
The reserve life of oil and gas, however, has been on a consistent decline in Pakistan owing to significant increase in oil and gas production. The country's gas production has more than doubled since 1998, thus the gas reserve life fell from gradually from 35 years in 1998 to 23 years by 2008. The oil reserve life has remained stagnant at 12.5 years.
Of the 26 total operators in Pakistan's exploration sector, 16 are foreign players whereas 10 are local. The exploration and development expenditures carried out by foreign operators have increased by 48 percent to Rs 43 billion in FY08 compared to Rs 29 billion in FY02. Despite overall increase in oil production of the country, foreign operators' oil production has dropped primarily due to more than two-third decline in oil production by BP.
The story of gas production by foreign operators, however, is much more heartening as it has increased seven times from 88bcf gas in FY98 to 618bcf in FY08. The production share has also nearly tripled to 42 percent in FY08 from 13 percent in FY98. The overall share of foreign operators in country's hydrocarbon production has increased from 17.6 percent in FY98, to 40.8 percent in FY08, primarily due to increased gas production.
It is hoped that with the onset of Balochistan package, the untapped, and unexplored in many cases, potential of the province will be better utilised and reduce the country's dependency on energy imports.
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Crude oil production
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Unit: bpd
FY03 FY04 FY05 FY06 FY07 FY08
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BHP 533 1,647 1,713 1,797 2,006 2,622
POL 9,411 10,375 10,319 13,078 8,852 6,333
ENI 70 260 330 317 343 340
MOL 151 837 1,848 2,483
OGDC 21,629 21,322 31,350 31,511 36,332 41,397
OPII 1,527 1,841 1,882 1,587 1,865 1,907
OMV 9 42 98 97 84 94
Petronsa 22 104 83 69
BP 27,822 22,305 16,572 12,675 11,029 9,541
Dewan Petroleum 106
PPL 3,268 4,025 3,642 3,575 4,996 5,060
Total 64,269 61,817 66,079 65,578 67,438 69,952
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