Pakistan seeks investors for exploration and development


Sam Fletcher
OGJ Online

HOUSTON, June 28 -- Pakistan is looking for international investors to increase drilling activity in that country so that it can essentially double its production of oil and natural gas by 2012, government officials said Thursday in Houston.

The country needs some $3-$4 billion of new investment to jump-start its ambitious energy program, and the government is offering incentives by liberalizing its policies and privatizing state-owned operations, said Usman Aminuddin, Pakistan's minister for petroleum and natural resources.

The goal is to increase Pakistan's oil production to 100,000 b/d over the next 11 years from 56,000 b/d currently and its gas production to 5 bcfd from 2.4 bcfd, he said at the opening of the 2-day conference with US industry representatives.

To accomplish that, Pakistani officials want a quantum leap in exploration drilling to at least 100 new wells each year, up from 15 wells/year at present. "That's an absolutely unacceptable level of exploration now," said M. Abdullah Yusuf, secretary of Pakistan's Ministry of Petroleum and Natural Resources.

Moreover, Pakistan needs 6 million tonnes of added refinery capacity to eliminate expensive imports of fuel oil, he said. It also is looking to eliminate lead content from the gasoline it produces and to reduce the sulfur content of its diesel to 0.05% from 1% currently.

In addition, the country needs to add pipelines for oil transportation and develop a pipeline infrastructure for natural gas, said Yusuf.

Pakistan's total proven reserves were estimated at 39.4 tcf of natural gas and 728 million bbl of oil, with 25.9 tcf of gas and 298 million bbl of oil still remaining. Government officials claim independent international studies indicate the country's total oil and gas potential is many times more than that.

Compared to other emerging countries competing for foreign investments, Pakistan's oil reserves are low and its oil production has leveled off, signifying a mature industry, said Bill Cline of Gaffney, Cline, & Associates. However, he said, its natural gas operations are still growing.

The country has a low drilling density so far, averaging one well/1,681 sq km, said Cline. A large increase in drilling activity should translate into good prospects for additional large discoveries, he said.

Pakistan amended its regulatory policies earlier this year to provide more incentives for private oil and gas operators on both land and offshore. That included reducing the tax rate to a uniform 40% from a previous range of 50-55% (OGJ Online, May 17, 2001).

Some observers claim that the push toward liberalization and privatization is aided by the fact that, for the first time, the current heads of all of Pakistan's ministries have backgrounds in the industries that they regulate. A 43-year veteran of both upstream and downstream operations in the oil and gas industry, Aminuddin came out of retirement to accept his position with the government that gained office in October 1999.

Sakib Sherani, chief economist for ABN AMRO Bank, said the new government has made good progress in handling the economic problems that it inherited. The 1990s were "a lost decade" for Pakistan, as its economy declined and outside debt increased.

However, with drought and other weather-related problems still threatening its agrarian-dependent economy, he said, Pakistan's economic prospects remain "cloudy."

Pakistan officials made a similar pitch for outside investors Wednesday in London.

Contact Sam Fletcher at samf@ogjonline.com

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