Economic Survey 2010-11: Circular debt hampers oil and gas sector growth

ISLAMABAD:

The overall consumption of petroleum products and gas witnessed negative growth, while electricity and coal consumption increased substantially during the first three quarters of fiscal 2011 (July 2010 to March 2011).

The overall consumption of petroleum products declined by 0.97 per cent and gas fell by 2.03 per cent, whereas the consumption of electricity and coal increased by 2.8 per cent and 10.29 per cent respectively, according to Pakistan Economic Survey 2010-11.

The consumption of petroleum products declined in household, agriculture and power sectors by 1.5, 18.2 and 5.7 per cent, respectively.

Inter-corporate circular debt

The electricity sector remained troubled by the circular debt which constricted growth. The total installed capacity of Pakistan Electric Power Company (Pepco) system was 20,681 megawatts (MW) as of March 2010.

An addition of 1,298MW was added to the system during 2009-10 and by the end of June 2011, 1,871 MW will be added to the system.

Thus, the expected capacity by June 2011 will be 21,117 MW and by 2029-30 expected cumulative capacity is expected to reach 106,656 MW.

Electricity

Overall electricity consumption increased by 2.8 per cent during July-March 2010-11, compared with the same period last year. The increase in electricity consumption indicated some revival in economic activities, as the industrial sector witnessed an increase of 7.3 per cent.

Electricity consumption in agriculture saw negative growth.

Gas consumption

Gas consumption in the transport sector increased by 14.3 per cent, mainly due to a shift from imported fuel oil to gas during July 2010 to March 2011, followed by the household sector, with almost negligible growth of 0.75 per cent. The cement sector showed a major decline of 64.7 per cent as it switched to coal-fired system.

Consumption in industrial, commercial and fertiliser sectors declined by 9.2, 5 and 2.7 per cent, respectively while power sector usage declined by 0.2 per cent.

The average production of natural gas stood at 4050.84 million cubic feet per day (mcfpd) during July-March 2010-11, compared with 4,048.76 mcfpd over the same period last year.

Drilling activities

30 wells were drilled, including 13 in the public sector and 17 in the private sector during July-March 2010-11. Exploratory wells witnessed a negative growth, whereas the development wells experienced positive growth in the public sector. Investment totaling $810 million had been made during July-March 2010-11 in the upstream petroleum sector.

Oil and Gas Development Company Limited (OGDCL) examined 20 wells, showing an increase of 33 per cent in drilling activities.

Published in The Express Tribune, June 3^rd, 2011.

The full text of The Economic Survey 2010-2011 can be viewed here.