- Public-private partnerships and clean energy subsidies attract investment, aiding Pakistan’s shift from heavy reliance on oil imports
Interview with Ms. Natasha Haseeb — an analyst
PAGE: Tell me something about yourself, please:
Natasha Haseeb: I am an anchor, working at Pakistan Television News PTV. I have done my MPhil in Political Science from the University of Karachi and about my professional life I am conducting a business show named “Economy in Focus” which includes the different aspects of businesses, investments, economy, and stock market of the country as well as international economy with different segments and making it interesting day by day because of the quality of content, participants we invite and the authenticity of news and information making my show famous, popularity and rating in both means.
About my personal life I am very friendly by nature, talkative and jolly with friends. My enthusiasm and strengths are my research, the way I ask questions and the angles of my analytical approach are spoken by my on screen performance. I have done a lot of interviews of different people, business community, industrialists, dignitaries, economists and experts from different sectors who are very competitive. I have hosted and organised conferences as well.
About my leisure time, I enjoy spending time with my family, friends, listening to music, watching films, and dramas, reading, traveling and playing games etc.
PAGE: It is being claimed that a substantial deposit of petroleum and natural gas has been discovered in Pakistan’s territorial waters, a cache so large its exploitation could change the country’s destiny. How would you comment?
Natasha Haseeb: Well. After a long time, finally we are hearing some good news, yes, a significant discovery of oil and natural gas has been made in Pakistan’s territorial waters, which could have a major impact on the country’s economy. The reserves are said to be very large (as large as it can solve all problems), potentially enough to change Pakistan’s energy landscape. If fully developed, these resources could reduce the country’s reliance on energy imports and boost economic growth. However, it’s important to keep in mind that extracting these resources will be a long-term process. Developing the necessary infrastructure, drilling, and setting up production facilities will take time and hefty investment. So, while the discovery is promising, it might be years before it starts to significantly benefit the economy, therefore, you can say this news has given the optimism to the country.
Pakistan’s shale oil reserves present a significant opportunity to enhance its energy security and economic stability. However, several challenges must be addressed, including the need for advanced technology, infrastructure, regulatory reforms, environmental safeguards, and foreign investment. If managed properly, shale oil development could transform Pakistan into an energy-independent nation, reduce its reliance on imported fuels, and provide a boost to its economy. Strategic planning, collaboration with international partners, and a strong commitment to environmental sustainability will be crucial for realising this potential.
PAGE: What is your standpoint about shale oil reserves in Pakistan?
Natasha Haseeb: Pakistan’s shale oil and gas potential is indeed significant, with the ability to transform its energy landscape. According to a study by the US Energy Information Administration. Pakistan has around 105 trillion cubic feet. of technically recoverable shale gas and over 9 billion barrels of technically recoverable shale oil. Most of these resources are concentrated in the lower and middle Indus Basin, which includes regions like Sindh, Balochistan, and parts of Punjab.
Current status and potential of shale oil in Pakistan
Geological significance: The lower and middle Indus Basin is geologically similar to other shale-producing regions around the world. Studies indicate that the Sembar, Ranikot, and other geological formations in this region are rich in organic material that can potentially yield oil and gas. Pakistan’s shale formations are believed to have higher concentrations of organic matter compared to conventional fields, making them promising for exploration.
Technological and operational challenges, high production costs: Shale oil extraction is generally more expensive than conventional oil extraction due to the intensive use of equipment, chemicals, and water. Unless global oil prices are high enough to offset these costs, shale oil may not be economically viable in Pakistan.
Limited infrastructure: Developing a shale oil industry requires robust infrastructure, including drilling rigs, transportation networks, and processing facilities. Pakistan’s current energy infrastructure is largely focused on conventional oil and gas production, meaning that substantial upgrades would be necessary to support shale production.
Investment attraction: Pakistan needs to attract foreign direct investment (FDI) to develop its shale oil sector. The country has faced challenges in securing investments due to political instability, security concerns, and regulatory barriers. Creating a business-friendly environment with clear policies and incentives for investors is crucial.
Environmental concerns
Water usage: Fracking requires large amounts of water to be injected into wells to release oil and gas. Pakistan already faces water scarcity issues, and allocating water for energy production could lead to conflict with agricultural and residential needs.
Groundwater contamination: There are concerns about potential contamination of groundwater from chemicals used in the fracking process. Ensuring strict environmental regulations and monitoring is vital to address these risks.
Seismic activity: Fracking has been linked to increased seismic activity (minor earthquakes) in some regions. Pakistan needs to assess the seismic risks in its shale-producing areas to mitigate these concerns.
PAGE: What is your take on investment in exploration of oil in Pakistan?
Natasha Haseeb: Investing in oil exploration in Pakistan offers both opportunities and challenges. The country has a well-established history of oil and gas exploration, with both conventional and unconventional resources, including shale oil and gas. The energy sector is a key area for development due to Pakistan’s growing demand for energy and its reliance on imported oil. Here’s a detailed look at the state of oil exploration investment in Pakistan.
Geological potential: Pakistan’s sedimentary basins, including the Indus Basin, Balochistan Basin, and Potwar Basin, have shown significant promise for oil and gas discoveries. The Lower Indus Basin, in particular, is the most explored and productive, contributing a major share of the country’s oil and gas output.
Apart from conventional oil reserves, Pakistan also has substantial unconventional resources like shale oil and gas and tight gas reserves, which present untapped opportunities for exploration and development.
Government initiatives and incentives:
The Pakistani government has been actively working to attract foreign and local investment in the oil and gas sector by providing incentives and improving policies. It has introduced several policies to make oil exploration more attractive, such as the Petroleum Policy 2012 and subsequent amendments.
Strategic location and infrastructure
Pakistan’s location at the crossroads of South Asia and the Middle East makes it strategically significant for energy transportation and trade. The proximity to major oil and gas markets, like China and India, could potentially open up export opportunities. Pakistan has an established pipeline infrastructure and refineries, such as the Attock Refinery, Pakistan Refinery Limited (PRL), and the National Refinery Limited (NRL). However, significant upgrades and expansions are needed to handle an increased volume of domestic production.
Foreign investment and partnerships
Several multinational companies, including British Petroleum (BP), Eni, MOL Group, and Oil and Gas Development Company Limited (OGDCL), have already invested in Pakistan’s oil exploration sector. Their continued interest indicates a favourable investment environment and the potential for successful projects. Joint ventures with international oil and gas companies could be a key strategy for Pakistan to bring in the necessary technology, expertise, and capital investment to explore and develop its oil reserves.
Investment opportunities and strategies
Public-Private Partnerships (PPP): Encouraging public-private partnerships can be an effective way to share risks and costs associated with oil exploration. The government can leverage its regulatory control, while private entities can bring in technological expertise and capital.
Joint ventures between state-owned enterprises like OGDCL and private sector companies can accelerate exploration activities and lead to a more efficient extraction process.
Exploration of unconventional resources
Given the increasing global focus on unconventional resources, investment in shale oil, tight gas, and coal-bed methane presents a significant opportunity for Pakistan. Developing these resources can be key to reducing dependence on conventional hydrocarbons and imported fuels.
Incentives for foreign investors
To attract foreign direct investment (FDI), Pakistan could offer additional incentives like repatriation of profits, relaxed foreign exchange controls, and favorable tax regimes for exploration companies.
Ensuring legal protection for investors, reducing red tape, and providing stability in policies will be essential to build investor confidence and foster long-term investments in the sector. Investing in oil exploration in Pakistan presents a mixed landscape of significant opportunities and considerable challenges. With vast untapped conventional and unconventional reserves, Pakistan’s oil and gas sector offers potential growth prospects for local and foreign investors. The government’s commitment to providing incentives and improving the regulatory environment is a positive step towards attracting investments.
PAGE: What is your perspective about oil import bill in Pakistan?
Natasha Haseeb: Pakistan’s oil import bill is a significant concern for its economy due to its heavy reliance on imported energy resources. The country is highly dependent on importing crude oil and petroleum products to meet its energy needs, which puts substantial pressure on its foreign exchange reserves and trade balance. Here is a detailed perspective on the issue.
Current situation of oil import bill in Pakistan
Dependence on oil imports: Pakistan imports a significant portion of its energy requirements, with crude oil, refined petroleum products, and liquefied natural gas (LNG) making up a large share of its energy consumption. The country lacks sufficient domestic oil production to meet its demand, which means it relies heavily on imports from the Middle East, especially from countries like Saudi Arabia, the United Arab Emirates (UAE), and Kuwait.
Impact on the economy: The high oil import bill is a leading factor contributing to Pakistan’s current account deficit. The continuous rise in global oil prices further exacerbates the situation, increasing the burden on the economy. The need to pay for these imports in US dollars puts pressure on Pakistan’s foreign exchange reserves. A decrease in reserves can lead to currency depreciation, higher inflation rates, and increased costs for imported goods.
Vulnerability to global oil price fluctuations
Pakistan is highly vulnerable to fluctuations in global oil prices, which can have a direct impact on its economy. Any significant increase in oil prices leads to higher import costs, worsening the trade deficit, and putting pressure on the Pakistani Rupee.
The country’s economic stability is often affected by global market dynamics beyond its control, making it difficult to predict and manage the impact on its import bill.
Energy consumption and industrial demand
The rising demand for energy from Pakistan’s growing population and expanding industries has led to increased consumption of oil and gas. The transportation and power generation sectors are the largest consumers of imported oil. The lack of diversification in energy sources has limited Pakistan’s ability to reduce its dependency on oil imports, making it difficult to manage costs in the face of global price hikes.
Foreign exchange reserves pressure: The high oil import bill is one of the primary reasons for the depletion of Pakistan’s foreign exchange reserves. A decline in reserves makes it challenging for the country to meet its import needs and puts downward pressure on its currency. Lower reserves also affect the country’s ability to attract foreign investment and secure international loans, as it raises concerns about Pakistan’s economic stability.
Trade deficit and current account deficit: The high cost of oil imports is a major contributor to Pakistan’s trade deficit. The imbalance between imports and exports widens the current account deficit, which creates more economic stress and affects the country’s ability to invest in development projects. A persistent trade deficit also increases Pakistan’s debt burden as the government seeks external financing to bridge the gap, leading to higher interest payments and a greater fiscal deficit.
Inflationary pressures: An increase in the oil import bill often leads to inflationary pressures in the economy. Higher fuel prices directly impact transportation and production costs, leading to a rise in the prices of essential goods and services.
This inflation negatively affects the purchasing power of citizens, increases the cost of living, and can result in lower economic growth as consumer spending declines.
Strategies to reduce oil import bill
Promoting domestic oil and gas exploration: Investing in domestic oil and gas exploration is crucial to reduce Pakistan’s dependence on imports. Encouraging local and foreign companies to explore and develop Pakistan’s oil fields could lead to a significant increase in domestic production. Developing shale oil and gas reserves, as well as tapping into unconventional energy resources, can help meet the growing energy demand and reduce the need for imports.
Diversification of energy sources
Pakistan must focus on diversifying its energy mix by promoting renewable energy sources like solar, wind, hydroelectric, and biomass. Developing alternative energy sources will not only reduce the oil import bill but also contribute to a cleaner and more sustainable energy future.
Investment in nuclear energy and coal-based power plants can also play a role in reducing the reliance on imported oil for electricity generation.
Energy efficiency and conservation
Improving energy efficiency in industries, transportation, and households can significantly reduce energy consumption. Encouraging the use of energy-efficient technologies and practices can help lower the overall demand for oil. Promoting public transportation systems and electric vehicles (EVs) can reduce the dependence on gasoline and diesel, ultimately decreasing the oil import bill.
Strategic oil reserves and hedging
Building strategic oil reserves can help Pakistan manage its energy needs during times of price volatility and supply disruptions. Having a reserve stock of oil allows the country to buy and store oil when prices are low, providing a buffer against future price spikes. Implementing hedging strategies to lock in oil prices through futures contracts can help stabilise the costs and manage the impact of global price fluctuations on the import bill.
Government policies and incentives
The government needs to implement policies that incentivise investment in renewable energy projects, energy conservation, and the development of domestic oil and gas resources. Encouraging public-private partnerships and providing subsidies for clean energy initiatives can attract investment and facilitate the transition away from heavy reliance on oil imports. Pakistan’s high oil import bill is a significant challenge that affects its economic stability, foreign exchange reserves, and trade deficit. To address this issue, the country needs a comprehensive strategy focused on increasing domestic energy production, diversifying its energy mix, and improving energy efficiency. Promoting renewable energy, investing in oil and gas exploration, and implementing supportive government policies are essential steps to reduce dependence on oil imports. By reducing its reliance on imported oil, Pakistan can improve its economic resilience, stabilise its currency, and pave the way for sustainable growth.