The government has yet again failed to woo domestic and foreign investors to inject funds into hydrocarbon blocks as a chronic circular debt and bureaucratic hurdles impeded progress on plans to ramp up Pakistan’s oil and gas production.
The government received poor response in a recent bidding round held to grant licences for exploration of potential hydrocarbon reserves at different sites.
Director General Petroleum Concession (DGPC) had floated bids for 10 blocks but it received bids for only six. Existing oil and gas exploration companies participated in the bidding.
Owing to Ukraine war, international oil prices have gone up, which promise higher returns to oil and gas firms. Pakistani companies have also made windfall gains.
However, bureaucratic hurdles, policy inconsistencies, poor economic conditions and uncertainty about the movement of Pakistani rupee weigh on investors’ mind, preventing them from coming up with attractive offers.
Over the past many months, several companies had not been able to open Letters of Credit for import of necessary equipment because of dollar shortage in Pakistan.
In a statement on Friday, the Petroleum Division said that the bid opening committee, under the chairmanship of DGPC, publicly unveiled bids on November 30, 2023 for 10 onshore blocks for granting petroleum exploration rights.
It received bids for six blocks. The highest bidder for two blocks was UEP (100%) while Pakistan Oilfields Limited (40%) with joint venture partners Pakistan Petroleum Limited (30%) and Oil and Gas Development Company (30%) offered bid for one block. OGDC (100%) submitted bids for two more blocks while PPL (70%) with partner OGDC (30%) gave bid for one block.
The minimum investment required to be made by the exploration and production (E&P) companies will be $23.25 million over three years.
Read: ‘Domestic debt restructuring will be painful’
Apart from E&P activities, the successful companies will spend over $540,000 on social welfare projects in their respective blocks. In blocks where discoveries are made, investments of several hundred million dollars will be made for hydrocarbon production.
Experts say bureaucratic hurdles have been a major factor discouraging the oil and gas exploration sector. Almost all foreign exploration firms have left the country due to such obstacles and poor economic conditions. Inconsistency in policies also has a role in driving foreign companies away.
Experts point out that major discoveries had been made before the year 2000 when wellhead prices were attractive. Qadirpur gas field was also discovered during that period.
As no major discoveries had been made over the past few decades, experts say, the foreign companies were not seeing any potential, which was why they stayed away from the bidding process.
Published in The Express Tribune, December 2nd, 2023.
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