Pakistan is facing a growing energy crisis despite the discovery of large oil and gas reserves that could change the country’s economic standing, in addition to security concerns and instability, along with high costs that constitute an obstacle for international companies to invest in the Pakistani energy sector and extract it from the ground.
Long-term exploration efforts have led to the discovery of vast oil and gas reserves in Pakistan’s territorial waters, a large stock that is said to change the country’s economic course, but no company has yet extracted it, writer Alex Kimani said in a report published by Oil Price.
If there is gas reserve, it can replace LNG imports, and if there is oil reserve, it can replace imported oil, said Mohammad Arif, a former member of the Petroleum and Gas Regulatory Authority of Pakistan.
Aref warned that it would take years before the country could exploit the discovered fossil fuel resources, adding that exploration alone would require huge investments of more than $5 billion, and extracting reserves from a single offshore site could take 4 to 5 years.
Pakistan imports
The writer stated that Pakistan imports 29% of its gas needs, 85% of its oil, 50% of its liquefied petroleum gas, and 20% of its coal needs. Its total energy import bill in 2023 amounted to about $17.5 billion, and this number is expected to rise to $31 billion in 7 years.
Since 2021, Pakistan has been suffering from mounting debt and high inflation that has approached 30%, while at the same time the economy grew by only 2.4% in 2023, and it has been forced to rely heavily on foreign aid.
In January, Pakistan sought $30 billion for gas production to cut its fuel import bill.
According to Pakistan’s Energy Minister Mohammad Ali, Pakistan has 235 trillion cubic feet of gas reserves, and an investment of $25-30 billion would be enough to extract 10% of those reserves over the next decade to increase currently declining gas production and replace energy imports.
Persistently high inflation could push Pakistan into social and economic turmoil, with writer Khurram Hussain saying there is no precedent in Pakistan’s history for such a level of inflation to sweep the country.
Exploration Initiatives
The writer pointed out that Shell announced last year that it would sell its stake in Pakistan to Saudi Aramco, and that the auction held at the same time last year for 18 oil and gas sectors did not receive a response from international companies.
Last July, Pakistan’s Petroleum Minister Musadiq Malik told a parliamentary committee that there were no international companies interested in exploring for offshore oil and gas in Pakistan, and that companies already in the country were seeking to exit.
It is a matter of security and risk versus reward, Malik explained to the committee that the cost of security was the main reason the deal failed, because oil and gas companies have to spend a lot of money to keep their employees and assets safe and the security provided by Pakistan was not up to the task.
In March this year, five Chinese engineers were killed in an attack in the far north of Pakistan when a car bomb rammed into a bus carrying employees from Islamabad to the giant Dasu Dam project in the northern Khyber Pakhtunkhwa province.
The project is part of the $62 billion China-Pakistan Economic Corridor, and the incident has led to a series of temporary closures in other projects as well.
Earlier the same month, militants attacked Chinese facilities in Pakistan’s southwestern Balochistan province, storming the Chinese-run Gwadar Port Authority complex.
What this essentially means, the report concludes, is that Pakistan’s choices are between turning to China or failing. Chinese explorers, who are state-controlled, have a very different appetite for risk, and these huge reserves are unlikely to come out of the ground without Aramco showing more interest or the Chinese intervening.
