20 Feb

Oil, gas sector’s performance remains stagnant
during 2011
Pakistan’s Oil and Gas sector’s performance during
the outgoing year 2011 remained stagnant as no
significant oil/gas reservoir was discovered and the
Petroleum Ministry was also unable to utilize nearly
700 Million Cubic Feet Per Day (MMCFD) already
discovered gas.
The government time and again increased the prices
of petroleum products, natural gas and LPG for all
sectors to meet rising expenditures reflective of
escalating international fuel prices as well as poor
governance. At the end of the year gas prices were
increased by 14 percent to 207 percent for different
sectors/consumers of the economy.
The government has announced an increase in gas
prices effective January 1, 2012 for domestic,
commercial, cement industry, for Water and Power
Development Authority (Wapda) and Karachi
Electricity Supply Company (KESC) by 13.98
percent and for industrial sector by 16.95 percent.
Additionally the government also decided to impose
Gas Infrastructure Development Surcharge (GIDS) on
five sectors excluding domestic and commercial
sectors. For fertilizer sector under GIDS gas tariff
would increase by Rs 197 per Million British Thermal
Unit (MMBTU), industrial sector by Rs 13 per
MMBTU, Karachi Electricity Supply Company
(KESC) by Rs 27 per MMBTU and Independent
Power Plants (IPPs) running on gas by Rs 70 per
MMBTU” the officials maintained.
Government repeatedly announced that it would bring
nearly 700mmcfd gas into the system but failed to do
so as no appropriate steps were taken in this direction.
An estimated 300 mmcfd gas supply from Sui, Kunar-
Pasaki and Khand-Kot fields was planned to be added
to the system, which due to slow speed of the work,
has not yet been achieved.
Besides 300 mmcfd gas from above mentioned gas
fields, another 30 mmcfd was planned to be brought
to the system from Sinjhoro gas field followed by 15
mmcfd from Haseeb Field, 20 mmcfd from Rehman
field and 15 mmcfd, each from Meher and Jhal Magsi
fields, but none of these projects were completed due
to minor disputes or poor governance. Dewan
Petroleum has the capacity to supply up to 150mmcfd
gas if the government resolves the issue of low prices.
Osterreichische Mineral Olverwaltung (OMV)
Austrian Oil/Gas Exploration and Production
Company has the capacity to generate up to 50
mmcfd gas but is unwilling to at the prevailing prices.
If the government manages to complete these projects
gas supply/demand situation could improve
The Petroleum Ministry failed to approve new
‘Exploration and Production Policy’ where onshore
gas has been priced at more than $ 6/ Million British
Thermal Unit (MMBTU) and offshore up to $ 9 per
mmbtu for future exploration activities.
Taking a step forward on $ 1.25 billion Iran-Pakistan
gas pipeline project, the government on December 22
selected a consortium led by Industrial and
Commercial Bank of China (ICBC) to arrange
financing within 12 months to implement the project
for delivery of gas by December 2014 and has also
simultaneously pursued gas imports from
The proposed Liquefied Natural Gas (LNG) plan
which aims at importing 1.4 Billion Cubic per Day
(BCFD) was also unsuccessful as the government and
potential importers could not settle core issues
including sovereign guarantees for purchase of gas for
dedicated consumers or allow subletting capacity
allocations and decided to strictly follow the initial
conditions required under the expressions of interest.
The government also through legislation imposed Gas
Infrastructure Development Surcharge (GIDS) on
major gas consumers excluding domestic and
petroleum levy on LPG in a bid to locally generate
about Rs 57 billion per annum for the construction of
IP, TAPI and LNG gas pipelines projects.
Gas shortfall is the highest in Punjab, because of
reduction in supply to SNGPL system, which fell to
about 1.9 bcfd from a peak of 2.5 bcfd. Punjab at
present is facing 800 mmcfd gas shortage resultantly
over 2,200 industries have been compelled to suspend
their production. This has resulted in textile industry
from Faisalabad relocating abroad particularly in
Bangladesh. Analysts maintain that once the industry
moves out it is extremely difficult to woo it back and
hence there is an emergent need to resolve the energy
Currently SSGC is receiving 1,100 million cubic feet
per day (mmcfd) gas against the demand of 1,400
mmcfd. State run Oil and Gas Development Company
limited (OGDCL) is the largest exploration and
production company in the country with 77 fields, out
of which 45 fields are 100 percent owned and
operated, and 32 are non-operated fields.
OGDCL holds 48 percent of the country’s recoverable
oil reserves, and 37 percent of the country’s
recoverable gas reserves. In terms of production,
currently OGDCL delivers 56 percent of Pakistan’s oil
out put, and 22 percent of its gas production.
(Business Recorder: January 02, 2012)



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