To be or not to be?: Untapped resources, battered economy and a lack of decision-making ability

Despite large reserves, Pakistan still no closer to solving energy crisis.

KARACHI:

In October 2009 Andrew Gould, then CEO of Schlumberger − the world’s largest oilfield service provider − was on a conference call with analysts. He was discussing regulatory concerns surrounding fracturing — a gas drilling process which helps bring out hydrocarbons from difficult shale formations.

He talked about how it was no coincidence that the United States (US) witnessed a shale revolution as there were expertise and infrastructure, especially a vast service industry, already in place. And then, of all the countries, he mentioned Pakistan.

“Pakistan has a huge amount of shale gas,” he said, according to Reuters. “But, you know, there is no infrastructure in Pakistan to exploit it today.”

Nothing has happened in the four years since then. As a matter of fact, Pakistan’s energy crisis is worse than ever. Demand for natural gas, which remains the mainstay of the economy, far outstrips supply.



In some cities, shortages leave garment factories without gas for five days at a stretch. Winters are the worst. Even in Karachi, which remained largely immune, piped supply to households in some neighbourhoods has tapered off. The economy is battered by high electricity tariff because relatively cheaper gas is unavailable for power plants.

Instead of solving the problem, policymakers have become stuck in endless debate. Take Engro’s $1 billion fertiliser plant, which has been shut more days than not since starting production in 2011, as they discussed if limited gas be used for urea or electricity or stoves?

The discovery of shale changed the energy outlook in the US which had been a net energy importer. But experts now believe that Washington is a few years away from an energy surplus.



In recent months, China has enhanced efforts to exploit its own shale reserves. Most of the petroleum giants like ExxonMobil have set up offices there for the purpose.

But what about Pakistan, a country specifically pointed out by a Schlumberger CEO? Unfortunately, whatever little work that was done didn’t produce results.

Where officials should have rushed to coordinate with industry to exploit the reserves, they have been caught up with corruption enquiries, the rental power scam and futile attempts to import gas.

State-run Pakistan Petroleum Limited, which – along with a multinational company – did some work on a field, has also gone back to focusing on conventional reserves. Security concerns in Balochistan and the circular debt crisis leaves little time for executives to focus on anything else in any case.



It is also interesting that Pakistan, which is the largest producer of guar after India, has been left behind in the race for shale reserves. Guar or cluster bean has emerged as a key ingredient used by drilling companies to crack open shale formations to release hydrocarbons.

Last year, the US Energy Information Administration’s (EIA) placed Pakistan at ninth place when it comes to shale oil reserves.

The report indicates that Pakistan has ‘technically’ recoverable reserves of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil, enough to feed Islamabad’s energy needs from domestic resources for the next half a century.

Some industry officials were skeptical about the numbers as the EIA projection was based on scanty data from an article published in 1986.

The scepticism is not out of place. Pakistan remains one of the unlucky countries that have yet to carry out a survey to determine recoverable petroleum reserves. A national database of potential reserves helps attract foreign investment.

This is not the only front where policymakers have failed.

Soon after coming to power last year, the new government moved to solve the dilapidating power crisis by releasing Rs500 billion to companies stuck in circular debt. But along with that, came a condition. Some of the oil-fired power plants were to switch to coal.

It has been over six months since that decision was taken. Firms like Karachi Electric Supply Company and Hub Power Company have started work on their part but the government has yet to come out with policy guidelines in this regard. How long will it take for this to materialise is anyone’s guess.

Published in The Express Tribune, January 20^th, 2014.

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