Pakistan’s undiscovered pot of gold?

Energy security is the key foundational block of the national and international energy frameworks across the world. From the geostrategic perspective, energy security is also deemed critical for national and international sovereignties. The International Energy Agency (IEA) defines energy security as “the uninterrupted availability of energy sources at an affordable price”. Energy security has many dimensions: long-term energy security mainly deals with timely investments to supply energy in line with economic developments and sustainable environmental needs. Short-term energy security focuses on the ability of the energy system to react promptly to sudden changes within the supply-demand balance. Lack of energy security is thus linked to the negative economic and social impacts of either physical unavailability of energy or prices that are not competitive or are overly volatile. Though, it may mean different things in different places. Those states which are highly dependent on imported oil and gas, for instance, tend to focus more on the supply side of the equation. Whereas, in countries with economies based on exporting oil and gas, the bigger concern is the demand side. Historically, energy security, at first, was purely about oil supply. It evolved as a policy response to the 1973 Arab oil embargo. At the time, the aim was to coordinate among the industrialised countries if supply gets disrupted, to avoid future supply problems and to deter exporters from using resources as a strategic weapon.

For Pakistan, energy security is no longer just a desire but rather a critical imperative for its struggling economy. Pakistan, for long, has been pulled back from getting on the path towards tangible economic growth with a real sense of development, due to its high dependence on oil and gas importation. The indigenous crude oil production meets only 15 percent of the country’s total requirements, whereas the other 85 percent is met through imports. Not only did Pakistan’s oil import bill rise to $12.928 billion in 2017-18, but the country also imported Liquefied Natural Gas (LNG) worth $2.123 billion. Needless to say, the huge costs entailed in these imports worsened the economy, substantially weakening the Rupee and consequently depreciating foreign exchange. Cumulatively, these costs translated into a higher current account deficit, which also precipitated a further decline in the value of the Pakistani currency.

In this backdrop, Mr. Arshad H Abbasi — a well-known energy and water expert and a member of the Center for Research and Security Studies’ (CRSS) Board of Directors — impresses upon a sense of urgency for fresh exploration efforts in both conventional and unconventional hydrocarbons. It is the only panacea for addressing the ills of the Pakistani economy which is beset by dwindling foreign reserves, a diminishing economic growth rate, and a deplorable balance of payments deficit. These ills have left the country’s economy vulnerable not only to external shocks but also to potential breaches from the national security perspective. Oil and gas exploration aimed at achieving self-sufficiency can ensure energy security which as a sub-set of national security can catalyse employment generation and economic development, thereby curbing religious extremism, radicalisation, and militancy, along with engaging the youth of the country in economic activity.

Pakistan today faces the daunting challenge of meeting its growing need for energy resources in a cost effective, sustainable and environment-friendly manner. Affordability or cost of energy is a major component of energy security, but this is badly ignored when decisions are being made to import LNG, while not unlocking the huge domestic hydrocarbon reserves within the country.

Energy insecurity can generate ripples in many sectors of the economy, deteriorating the aggregate growth pattern. Having said that, we do have a jackpot; all that requires to be done is to unlock it. The domestic oil and gas sector has enormous potential; the balance recoverable reserves of crude oil in the country are calculated to amount to more than 350.632 million barrels. The total oil resource potential is 27 million barrels with the production of 86,032 barrels per day. Furthermore, Pakistan as the largest consumer of gas has a total resource potential of 282 trillion cubic feet of shale gas with recoverable reserves estimated at 24 trillion cubic feet of conventional gas. Meanwhile, production of gas hovers at around 4 billion cubic feet per day. However, the biggest issue is a lack of will and commitment at the national level.

For Pakistan, energy security is no longer just a desire but rather a critical imperative for its struggling economy

However, the notion that some people flag that ‘nothing works in Pakistan’ is still not valid. As Mr. Abbasi spells out a success story of the Khyber-Pakhtunkhwa Oil and Gas Company Limited (KPOGCL) and proves that if there is commitment and will, then all other things fall into place. In Khyber-Pakhtunkhwa (KP) — a province badly hit by terrorism — the Provincial Oil and Gas Company KPOGCL (Khyber-Pakhtunkhwa Oil and Gas Company Limited) can brag about its unique story. Back then, law and order was one of the biggest hurdles in extracting oil and gas in KP, whereby all oil and gas exploration activities were stagnant after the onset of the Taliban insurgency in 2006. In this kind of environment, which was not receptive to healthy economic activity, KPOGCL not only established an innovative fool-proof security model in collaboration with the Pakistan Army and other law-enforcement agencies, but also set up a cost-effective ‘Single Window Facilitator’ Cell for national and international oil and gas exploration companies. Although, KPOGCL started operations from scratch in January 2014; within a short span and in receipt of only limited funding, the agency managed to achieve remarkable results; the province became the epicenter of oil and gas activities in Pakistan and also created an enabling environment for national oil and gas companies. The production of oil in KP jumped from 20000 BPD (barrel per day) in 2013 to 60000 BPD by 2018. Similarly, the KPOGCL showed phenomenal production of natural gas and liquid petroleum gas (LPG). Now, the enthusiastic team of KPOGCL has set an achievable and practical target of oil production of 200,000 BPD, gas production of 2,000 MMCFD and LPG production of 3,000 tons per day by the year 2025.  Now, the point to ponder is, what exactly did the KPOGCL do differently? Engineer Abbasi highlights three key lessons learned from KPOGCL’s success story: a) KPOGCL rolled out the red carpet for international investment in the oil and gas sector of the province, by removing red-tape; b) Transparency is the key to attracting foreign direct investment (FDI). Institutional transparency in KP OGCL fascinated international Oil & Gas Companies such as Rosgeo (Russian), Halliburton, Saudi Aramco, GE, Siemens, CCK, Jereh, Eriell Oil Field Services to invest in the province; and c) KPKOGCL successfully demonstrated that oil and gas exploration in a troubled area is possible, owing to the commitment and will of its team.

The path ahead is to capitalize on the initial optimism generated through the change in political leadership expected to help Pakistan start afresh, free from the legacy of corruption and successive economic fiascos over the decades that have crippled it as a country and as a nation.

In this context, Hydrocarbon Exploration Licensing Policy (HELP), proposed by Engineer Arshad H Abbasi represents a novel paradigm for a new cooperative framework for converting the dream of self-sufficiency into a reality. The examples of KPOGCL in Pakistan, while Norway and Brazil from around the globe have demonstrated that it can be achieved and that it is possible. Nonetheless, the new government ought to put self-sufficiency in oil and gas production at the top of its agenda. Neglecting to do this would not only further mire it into circular debt but also exacerbate the already devastating ramifications for economic as well as social solvency of our nation.

It is time that Pakistan realise the importance of energy security and developed its energy policy framework and implementation road-map around it. Capitalisation of indigenous resources, both conventional and unconventional, and energy conservation and management would have to be at its heart. Solutions to problems must be holistic rather than arbitrary.

The writer is a Research Fellow/Program Officer at Center for Research and Security Studies (CRSS), Islamabad

Published in Daily Times, February 23rd 2019.


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