Pakistan’s import bill for the petroleum group increased to US$ 14.8 billion in the first nine months of the current financial year 2022, up by 96.09% on Year on Year basis, indicated Pakistan Federal Bureau of Statistics data recently. The situation is likely to worsen because of increased geopolitical tensions that have forced Europe and the US to increase their reliance on Liquefied Natural Gas, causing LNG spot prices to soar, rising by 30% recently. Resultantly, increased global demand will keep prices elevated in the medium term.
A direct impact of increased LNG prices is increased import bills, with LNG constituting 24% of Pakistan’s energy imports bill. At the same time, recent defaults by suppliers will force Pakistan to choose between higher LNG prices or gas shortage locally.
On the other hand, as per the latest hydrocarbon reserves data by PPIS, oil reserves during Dec’21 have reduced by 16% YoY, arriving at 223 million bbl compared to 266mn bbl in Dec’20. The decline is attributable to the decrease in oil reserves of major fields. Likewise, total gas reserves in Dec’21 dropped by 6% YoY, settling at 19,986 billion cubic feet. Gas reserves of areas such as Qadirpur, Nashpa, Kandhkot, Shahdadpur, Mari, and Uch witnessed a fall of 14%, 8%, 7%, 6%, 5% and 5% YoY, respectively. Presently, the country’s total hydrocarbon reserves have a reserve life of 15 years.
Pakistan has a strong desire to augment oil and gas exploration activities to meet energy challenges in the long-term and cut the import bills, a major concern in the trade deficit.
It is engaging to note that the Ministry of Petroleum, DGPC, had opened bids for 14 onshore Blocks for grant of Petroleum Exploration Rights through open bidding on April 18, 2022, at Petroleum House, Islamabad. The minimum investment to be carried out by the Exploration and Production (E&P) companies in these Blocks will be over USD 70.2 million in three years. For blocks that have discoveries, these companies will make investments of several hundred million dollars to develop the production. Apart from E&P activities, the successful companies will also spend over USD 810,000 on social welfare for the areas of their respective Blocks.
It is further heartening to note that Pakistan is considering amending its petroleum policy to offer more incentives to foreign local oil and gas exploration and production firms. Reportedly, changes are being made in the new E&P policy draft, including cutting the period of exploration license from nine years to seven years and reducing the appraisal of renewal period from two to one year. Apart from this, a better gas price has been given to E&P companies to attract more investment.
On a “negative” note, over the last several years, the E&P activities in Pakistan have significantly reduced, and several companies have left the country, resulting in the “increased requirement for more foreign oil and gas imports”, it’s reported.
The government is also vetting the Draft Model Petroleum Sharing Agreement as per Pakistan Petroleum Exploration and Production 2012, approved by the Council of Common Interests (CCI). This draft agreement will facilitate offshore oil and gas exploration in Pakistan. The government has sent the draft to the Law Division, which will review it.
We hope Petroleum Minister in the new government setup would take the matter on a priority basis and offer further incentives to attract investments in the oil and gas sector. Pakistan has a good success ratio, and there is a need for full exploration of onshore and offshore areas on better terms, conducive atmosphere and conditions.