By Jalal Ud Din Kakar
Despite sitting on a treasure trove of natural resources, Pakistan still leans heavily on energy imports to keep the lights on.
Pakistan’s energy puzzle remains unsolved. Pakistan covers 29 per cent of its gas, 85 percent of its oil, and 50 per cent of liquefied petroleum gas (LPG), 20 percent of its coal requirements through imports. It created a significant strain on its economy. Saudi Arabia provides around 34 per cent of Pakistan’s oil, the UAE supplies around 56 per cent, and Kuwait covers about 4 percent of the country’s oil needs. This analysis highlights Islamabad’s recently discovered oil and gas reserves and outlines the steps needed to exploit them. The future of Pakistan’s energy is a story of both challenges and opportunity, as the country tackles economic and geopolitical headwinds.
The Promise of Pakistan’s Reserves
1. Sedimentary Basin Size:
– Pakistan is home to a vast and large enviable sedimentary basin (area) of 827,268 square kilometers.
– It’s ten times larger than the size of the United Arab Emirates (UAE), and seventy-two times more than Qatar.
2. Exploration Density and Discoveries:
– Despite the vast basin, exploration drilling density remains low.
– Only 1,123 exploratory wells and 1496 appraisal or development wells have been drilled.
– The exploration density stands at 1.35 wells per square kilometer.
– However, the success ratio is attractive, 411 discoveries have been made, resulting in a ratio of 1:2.8 (meaning one successful discovery for every 2.8 wells drilled).
3. Geographical Concentration:
– Approximately 95 per cent of these wells are concentrated in the Indus Basin.
– Other regions, such as Balochistan, Khyber Pakhtunkhwa, and the Eastern flank of Punjab & Offshore still remain largely unexplored.
To put the numbers into perspective, Pakistan is also on the list blessed with abundant oil and gas. Based on a combination of statistical data and expert judgment, estimates indicate that Pakistan’s estimated oil reserves of Pakistan may be at 27,000 million barrels, and 150,000 billion cubic feet of natural gas. This includes 235 trillion cubic feet (TCF) of gas reserves recently discovered off the coast of Pakistan.
Among these major discoveries, it’s often said that if even just 10 percent is trapped, it could solve the energy crisis in the land of the pure. This could be a game-changer, turning the nation into a shining example of prosperity in South Asia. The potential is a gold mine waiting to be tapped, and the benefits could be spread like wildfire, lighting the way to a brighter future. However, the country is still producing a modest 72,000 barrels of oil per day and 3.6 billion cubic feet of gas—far below its domestic needs.
The land of the pure is blessed with abundant oil and gas reserves, estimated reserves of 27,000 million barrels of oil and 150,000 billion cubic feet of gas. However, the country’s production is much lower, at only 72000 barrels of oil and 3.6 billion cubic feet of gas per day. This production level doesn’t even come closer to meeting the daily demand of 550,000 barrels of oil and 6.2 billion cubic feet of gas. If there were no constraints, the demand would skyrocket to around 1 million barrels of oil and 8 billion cubic feet of gas per day. Tapping into these reserves properly could turn things around, transforming the nation into a powerhouse, and making energy shortage a thing of the past.
Why Are the Reserves Still Untapped?
Despite these promising figures, international oil companies (IOCs) have shown little interest in rushing to tap into Pakistan’s newfound wealth. This hesitation stems from unfriendly FDI policies, significant security concerns, and the political rollercoaster, including frequent sit-ins. It’s no surprise they are reluctant to dive in headfirst.
Offshore drilling is a tough nut to crack, requiring advanced technology and a very friendly atmosphere for FDI. Unfortunately, Pakistan is lagging in these areas. Developing these resources and integrating them into the economy will need an investment of around $25-30 billion over the next decade. That’s a tall order for a country already grappling with economic instability. Pakistan’s debt keeps climbing, inflation has skyrocketed to nearly 30 per cent, and economic growth has been sluggish.
The biggest issue is the longstanding security concerns in Pakistan, which have long been a throne on the side of foreign investors. The territorial waters of Pakistan, where many of the newly discovered resources lie, need proper security to attract investors; it is a tall order. Recent attacks on Chinese infrastructure projects, such as the March 2024 suicide bombing that killed five engineers, underline the dangers of operating in the region. These incidents have foreign investors thinking twice, and until Pakistan can turn things around, the road ahead looks rocky.
China: A Likely Development Partner
It’s a well-known fact that Western companies have a keen interest in India, with less enthusiasm for Pakistan. However, since 2013, China has emerged as the largest investor in Pakistan and a key partner in developing the oil and gas sectors. Under the China-Pakistan Economic Corridor (CPEC), China has already poured billions into Pakistan. Despite the security concerns, Chinese companies are still willing to dive into Pakistan. Talks are already underway between the two nations about Chinese investment in oil and gas exploration. It seems China is ready to step up to the plate, showing that where there is a will, there is a way.
However, it is clear that the partnership brings its own set of challenges. Relying too heavily on China could make Pakistan susceptible to Beijing’s strategic and economic interest. Any delay or withdrawal of Chinese support might throw Pakistan’s already fragile economy into further turmoil. It is a risky game to play, where one missteps could cause everything to unravel.
Economic Impact of Self-Sufficiency
Despite the well-known challenges, the benefits of tapping into Pakistan’s oil and gas reserves far outweigh the risks. By cutting down on energy imports, Pakistan can save billions of dollars annually. In 2023 alone, the country’s energy import bill was a staggering $17.5 billion, and projections indicate that it could balloon to $32 billion within the next seven years. It is clear that exploiting these resources could be a game-changer, turning the tide in Pakistan’s favor and easing the financial burden.
If Pakistan can secure the necessary investment and beef up its security environment, its vast oil and gas reserves could play a critical role in turning around the country’s future. Major reductions in its oil dependence could pave the way for Pakistan to become a major economy, potentially leaving India in the dust.
Indeed, Pakistan’s local production presently meets 50% of its liquefied petroleum gas (LPG) needs, 70% of its diesel demand, and 30% of its petrol requirements. By ramping up local production, Pakistan could lower energy costs. The ripple effects would be felt across the economy, turning the tide in Pakistan’s favor and setting the stage for a brighter future
The Role of Private Investment
The role of the private sector cannot be ignored. They can play a significant part. For example, companies like OKTA Exploration and Production Company Limited are leading the charge of winning exploration blocks in Balochistan and KPK. The involvement of private sector companies could unblock new horizons in oil and gas exploration in Pakistan and provide immense relief. With everyone pulling together, the potential benefits could be huge.
Encouraging more private investment through favorable policies, such as easier stock exchange listings for oil and gas companies, could spur competition and accelerate development in the sector. Currently, only four oil and gas exploration companies are listed on the Karachi Stock Exchange (OGDCL, POL, PPL, and MPCL), highlighting the need for more players in the market.
Conclusion: The Path Forward
Pakistan stands at a crossroads. It is hoped that this discovery will change the fate of the nation. However, the responsibility falls on the statesmen to attract at least $5 billion to turn this dream into reality. With China being the only partner showing an interest in drilling for oil, high costs, security concerns and a challenging business environment have kept major international players at bay. Pakistan must stand on its two feet: relying too heavily on others can sometimes come at a high price. Be smart and cautious as you navigate these waters.
The key question is: will Pakistan rise to the challenge and transform its untapped reserves into a cornerstone of its economy, or will the promise of energy independence remain just that—a pipe dream? Time will tell if Pakistan can seize this golden opportunity and make it a reality.
Author: Jalal Ud Din Kakar – Research Fellow at the Center for Security Strategy and Policy Research) and Ph.D. Scholar in International Relations at the School of Integrated Social Sciences, University of Lahore.
(The views expressed in this article belong only to the author and do not necessarily reflect the views of World Geostrategic Insights).
Image Source: Pakistan Petroleum Limited (PPL)