Pakistan's E & P Sector

The Pakistan E & P sector offers an attractive investment opportunity given the country’s growing energy demand deficit, developed gas infrastructure and established hydrocarbon potential.

Pakistan imports around 33% of its overall energy requirements in the form of crude oil, petroleum products, coal and LPG. The Pakistan economy is heavily reliant on natural gas which meets around 49% of its overall needs. Pakistan’s energy consumption growth rate was comparable to the fastest growing global economies during 2001 to 2007 even though Pakistan’s energy consumption per capita remains amongst the lowest in comparison to the 10 most populace countries.

While domestic energy demand has continued to grow, during recent years gas supply growth in Pakistan has stagnated at around 4 bcf per day from indigenous resources. As a result demand has outgrown supply and the consumers have been forced to shift to imported fuels where possible. This factor along with increase in international oil prices has resulted in the country’s annual petroleum import bill increasing exponentially to US$ 10 to 12 bln levels in recent years.

The domestic production outlook of oil and gas from existing fields shows a declining trend even with expected additional production from new discoveries. Furthermore, it is expected that even with aggressive utilisation of local coal resources and development of hydel, nuclear and renewable energy, Pakistan requires substantial energy imports to meet demand under various economic growth scenarios. The cost of imported energy would depend on long term contracts and future energy prices but may be as high as US$45 – US$60 million by 2020/25.

With a rising energy (and particularly gas supply) deficit there is increasing recognition in the E & P sector and amongst policy makers that after the 1994 Petroleum Policy, subsequent policies have not provided attractive pricing incentives for the E & P industry and this has resulted in supply stagnation. The Government of Pakistan by offering an attractive price in the proposed 2012 petroleum policy price (around US$ 6.3/mmbtu) aims to incentivize the local E & P sector to step up efforts to meet the growing energy deficit in the country.

To date discoveries of more than 44 tcf of gas and 700 mmbl of oil have been made in Pakistan with major discoveries in the Indus River Basin and Baluchistan areas. Since the first major gas discovery at Sui in early 1950s, the Pakistan gas transmission and distribution infrastructure has continuously been developed. Today 130,000 kms of T&D pipelines span the entire length and breadth of the country offering ready access to new gas discoveries to feed the energy starved consumer market.

Despite significant gas discoveries and recent finds in frontier areas, vast areas of Pakistan remain unexplored with drilling density of one well per 1,376 sq.km. A total of 769 exploratory wells have been drilled to date resulting in 233 discoveries with an overall success ratio of around 1:3. Most of the exploration activities remained focused in Potowar, Central Indus and Sindh Platform areas. Large parts of Baluchistan and frontal areas of Khyber Pakhtunkhwa are prospective and need more exploration work. The Government is also looking at exploiting the significant shale gas and tight gas potential in the country and in this respect a tight gas policy offering attractive pricing has been announced while shale gas policy is currently under consideration.