Uncertain future

12 min read

In line with many studies that have been conducted in the past, Pakistan is home to extensive oil and gas resources, which are primarily found in Balochistan, Sindh, and Khyber Pakhtunkhwa. During a study conducted by the United States Agency for International Development (USAID), it has been demonstrated that 14 billion barrels of crude oil can be recovered technically in the Indus basin alone, which indicates a significant potential for increasing the production of crude oil and natural gas in order to meet the energy needs of the future. This potential has been further substantiated by recent discoveries that have been made in various exploration blocks.

Last month, Pakistan Petroleum Limited (PPL) announced a large gas condensate discovery on its Shah Bandar exploration block in the Sujawal district of Sindh. The discovery generated 13.69 million cubic feet per day of gas and 236 billion cubic feet of condensate.

Earlier this year, Oil & Gas Development Company Limited (OGDCL) made a discovery of 1.1 million cubic feet of gas in the Mari East Block (District Rahim Yar Khan, Punjab). This is the first gas discovery that has been made in the Mari East Block.

It was discovered in September 2023 by Petroleum Exploration (Pvt) Ltd (PEL) in the Badin IV South Exploration Block (Sindh province) that there was 16.65 million cubic feet of gas and 54 million cubic feet of condensate.

The discoveries are certainly valuable in terms of adding to hydrocarbon reserves, but they only have a marginal effect on decreasing the gap between supply and demand for energy. In order to meet the increasing demand for oil and gas driven by escalating population growth and urbanization, the petroleum sector, an essential component of the economy, heavily relies on oil and gas imports. Achieving a balance between energy supply and demand becomes increasingly important for the national security of the country.

Natural gas and crude oil reserves are diminishing at an alarming rate as a consequence of the rapid depletion of their recoverable resources. It is estimated that Pakistan had proved oil reserves of 1,245 million barrels of oil as of June 30, 2023, with 84.5% of those barrels already being consumed. As long as no new discoveries are made, the remaining 193 million barrels will expire within the next five years unless there is a significant increase in production. Similarly, of the 63.24 trillion cubic feet (TCF) of natural gas resources in the ground today, we have consumed 44.90 TCF of them, which leaves us with a balance of 18.34 TCF, which will last another fifteen years at our current rate of production.

There has been a consistent decline in exploration and production activities over the last few years, and there has even been a decline in the number of wells drilled in potential oil and gas fields. In more than two decades, no significant discoveries have been made when it comes to crude oil or natural gas. There is a growing need in Pakistan for oil and gas exploration, exploitation, and development practices, both onshore and offshore, in order to tap into the untapped hydrocarbon reserves in the country. In order to deal with this problem, the country has initiated a comprehensive program for these activities.

It is believed that as part of a first phase of the program, the government has reinstated eleven licenses that were revoked by three petroleum companies earlier this year for the failure to undertake commitment works within the five-year licensing period for prospective exploration blocks. Despite this lack of interest, both domestically and internationally, there appears to be a noticeable lack of interest in obtaining licenses for petroleum exploration and rights in Pakistan, for a variety of reasons, mainly related to global economic conditions and concerns about regional security.

In Balochistan, Sindh, and Punjab, the government attempted to attract the interest of international exploration and production firms by inviting them to participate in 18 prospective onshore exploration blocks. On January 27, 2023, the government had decided to invite interested bidders to apply for allocation of the exploration blocks, but due to a very poor response, the last date for receiving applications was extended until June 20, 2023. These included Parkini-II Block-A, Parkini-II Block-B, Rasmalan-II, Rasmalan-II West, Khanpur-II, Khiu-II, Layyah-II, Alipur-II, Zindan-II, Sanghar-II South, Armala-II, S.W. Miano-III, Zamzama-II South, Sehwan, Thano Beg-II, Paharpur-II, Sohbatpur, and Zorgarh-II. SW Miano-III, Zindan-II, and Sehwan were the only three blocks which received applications. As a result, OGDCL was assigned SW Miano-III and Zindan-II, and Prime Pakistan Ltd was assigned Sehwan.

Ten new Blocks were advertised for exploration license grants for the remaining 15 Blocks, which were not offered for bidding again. It was announced on August 10, 2023, that 10 new blocks will be awarded an exploration license for the exploration of those blocks. There are many places in Balochistan such as Kalat North (Balochistan), Rachna-II (Punjab), Malir-II (Sindh), Saruna West (Balochistan), Kotra East (Balochistan), Murradi (Sindh), Sawan South (Sindh), Mithiani (Sindh), Gambat-II (Sindh), and Zamzama West (Sin The last date for receiving the applications, which was extended a number of times, was November 30, 2023. The bidding process has begun. It was expected that the response would be lukewarm, and this has been the case. In the case of four of the blocks, namely Kalat North, Rachna-II, Malir-II, and Zamzama West, there have been no bids received. E&P firms that are already operating in Pakistan have submitted bids for the remaining six blocks. Consequently, the government has awarded the two Blocks to United Energy Pakistan (UEP), the two Blocks to OGDCL (OGDCL), the joint venture between OGDCL and Pakistan Petroleum Ltd-PPL (one Block) and the joint venture between Pakistan Oilfields Ltd (POL) and OGDCL (one Block) provisionally.

Natural gas is being exploited and developed from non-conventional resources, such as shale and tight rocks, albeit with limited success, despite several attempts having been made at the same time. Based on studies conducted on shale and tight gas formations, it is estimated that there are 3,778 trillion cubic feet of gas present with 95 trillion cubic feet of gas technically recoverable. There are also 2,323 billion barrels of oil in place with 58 billion barrels of oil technically recoverable. As a result of a complex geological landscape, a scarce water supply, concerns about security, and issues regarding the environment, developing shale gas can be challenging.

In the offshore basins of Pakistan, there is considerable potential for the discovery of hydrocarbons; however, to date, the basins have largely remained unexplored. As of today, no commercial discoveries have been made in the Indus Offshore Basin, although there have been a dozen test wells drilled in the area. It should be noted that the initial phase of the project involves the offering of 12 offshore blocks for the purpose of granting Exploration and Production (E&P) rights. The large number of species occur in shallow water (under 200 meters), in deep water (between 200 and 1,000 meters), and in ultradeep water (above 1,000 meters). It has been noted that no response has been received from potential investors in spite of this. There are also plans for the government to hold auctions in the Indus Basin and Makran Basin, both domestically and internationally, in order to sell off offshore oil and gas blocks. A total of twenty offshore oil and gas blocks are currently in the process of being marketed by global firms on behalf of the government, and the process is currently underway.

As a way to quickly and efficiently advance exploration and production activities, it is essential that a new oil and gas exploration policy, or a revision of the last Petroleum Policy 2012, is formulated in accordance with global market dynamics. For such a policy to attract potential investors, financial and fiscal incentives, as well as regulatory concessions, should be offered in addition to attractive financial and fiscal incentives.

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