Pakistan

Pakistan’s Energy Security Paradigm; an Invisible Jackpot?

Pakistan currently meets its energy demands mostly through imported oil and gas; however, unlocking the country’s huge domestic hydrocarbon reserves holds an indigenous potential alternative. This write-up is based on a paper written by Arshad H. Abbasi, a well-known energy/water expert and a member of the CRSS’ Board of Directors. The paper is available on CRSS website under the link – https://crss.pk/story/hydrocarbon-exploration-licensing-policy-help-way-forward-to-self-sufficiency-in-oil-gas/ 

CRSS would welcome comments and arguments – both for and against – to take this discourse on possible cost-effective energy solutions for Pakistan.

Energy is considered to be the cornerstone of social progress and economic growth of any country. That is why, since the beginning of this century, energy seems to be the focal point for economic development and social progress of nations around the globe; likewise, energy security precipitated as a new dimension in the contemporary security paradigm. For Pakistan, energy security is no longer just a desire but rather a critical imperative for its struggling economy.

Pakistan, since long, is being pulled back from getting on to the path towards tangible economic growth with real sense of development, due to its high dependence on oil and gas importation. The indigenous crude oil production meets only 15% of the country’s total requirements, whereas rest of the 85% demand is met through imports. Not only did Pakistan’s oil import bill rose to $12.928 billion in 2017-18, but also the country 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 – energy expert and an engineer by profession – 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 catalyze employment generation and economic development, thereby curbing religious extremism, radicalization, 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 country.

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

However, the notion some people flag that ‘nothing works in Pakistan’ is still not valid. As Mr. Abbasi spells out a success story of Khyber-Pakhtunkhwa Oil and Gas Company Limited (KPOGCL) and proves that if there is a 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. Amid this kind of environment, which was not receptive to the healthy economic activity, KPOGCL not only established an innovative fool-proof security model in collaboration with 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 that what exactly KPOGCL did different? 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 mire it more deeply into circular indebtedness but also exacerbate the already devastating ramifications for economic as well as social solvency of our nation.

The author Saddam Hussein is a Research Fellow/Program Officer at Center for Research and Security Studies (CRSS), Islamabad. He graduated as a Development Economist from Quaid-i-Azam University (QAU) and also holds Master of Philosophy degree in Public Policy from Pakistan Institute of Development Economics (PIDE), Islamabad. He tweets @saddampide

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