Pakistan’s Reliance on Imported Oil and Natural Gas
In modern-day economies, energy is an important commodity as it plays a vital role in any nation’s economic development. Pakistan has been struggling with an energy crisis over the past decade due to its reliance on imported fuel, political instability, and absurd planning and governance. Pakistan generates power utilizing an energy mix that comprises oil, gas, coal, nuclear, renewable resources, and biomass. However, Pakistan mainly relies on oil and gas (natural gas and LNG) for power generation to meet energy demands.
However, the indigenous oil and gas resources are limited and have been depleting rapidly, reducing capacity to meet energy demands. Under such circumstances, Pakistan is at the mercy of imported fuels (oil and liquified natural gas, LNG). Last year, Pakistan spent $17 billion on energy imports, according to the Express Tribune. Hence, Pakistan must substitute imported oil and replace LNG imports.
Moreover, Pakistan produced 4.3 million tons of crude oil in 2019, only enough to meet 20% of the total requirement, while the rest of 80% was met through imports worth 15-16 billion dollars per annum. Therefore, the heavy dependence of Pakistan on imported fuel is a major stress on the economy and it has been worsening the economic conditions of the state.
Amid the energy crises and struggling economy, the groundbreaking discovery of oil and gas reserves in the territorial waters of Pakistan in 2024 could be a game changer for the state, its energy sector, and economy. According to some estimations, it could potentially be the fourth-largest gas and oil reserve found globally, opening up potential avenues to change the nation’s destiny.
Pakistan Discovers Oil and Natural Gas in its Territorial Waters
A three-year survey was conducted in collaboration with an allied state to verify the presence of gas and oil deposits in the territorial waters of Pakistan (Indus Basin). The joint team of Pakistani and international marine scientists, geologists, and experts undertook a survey utilizing advanced exploratory drilling techniques and seismic imaging to detect these resources. Key players in this discovery were the Special Investment Facilitation Council (SIFC), the Oil & Gas Development Company (OGDCL), Pakistan Petroleum Limited (PPL), Mari Petroleum Company Limited, and Pakistan Oilfields Limited.
This geographic survey assisted Pakistan in locating the deposits. The government of Pakistan has been reported to by the relevant departments about the resources found in territorial waters; however, the exact quantities of reserves, proposals for exploitation, and commercial viability are still being examined. The initial reports suggest that discovered deposits are significantly sufficient to alter the economic trajectory and energy dynamics of the state. Early estimations also suggest these reserves to be the fourth largest globally. Currently, Venezuela tops the chart in oil reserves, followed by Saudi Arabia, Iran, Canada, and Iraq.
Ramifications in Times of an Economic Crisis
The recent discovery of potentially one of the world’s largest oil and gas reserves can prove to be a transformative moment to reshape the energy and economic landscape of Pakistan. Pakistan’s energy sector has long relied on imported energy, directly and indirectly affecting all sectors of the economy. With new reserves, the state has an opportunity to reduce its dependence on imported fuel. This will not only save billions but also ensure a self-reliant and stable energy supply. The reliance on imported oil and gas makes the country’s energy sector vulnerable to international market fluctuations such as supply disruptions and price volatility.
Moreover, the discovery opens new doors to capitalize on the “blue water economy,” the substantial exploitation of ocean resources for economic benefits. Pakistan can bolster its position in the region’s maritime economy through a comprehensive plan, effective management, and extraction of these offshore reserves. These reserves are likely to attract foreign investments from global oil and gas giants. The revenue generation in return can be channeled for economic and infrastructure development, along with providing support for further exploration and extraction of resources.
Challenges Ahead
Despite the optimism and expected significant economic gains, challenges persist. Necessary regulatory frameworks are required to realize the full potential of recent oil and gas reserves. The former member of the Oil and Gas Regulatory Authority (Ogra), Muhammad Arif, while talking to DawnNewsTV, advised cautious optimism since there is no 100% certainty of finding the reserves as expected.
He further added the potential to meet the country’s energy demand depends on the size and efficient extraction of resources. “It can substitute LNG exports if these are gas reserves and we can replace imported oil in case of oil reserves,” said Arif. However, this is wishful thinking since the prospects are deepened by the thorough analysis and commencement of the drilling process.
The oil and gas exploration process alone requires a heavy investment of approximately 5 billion dollars and it could take four to five years to extract reserves. In case of successful exploration, further investments would be required to extract deposits and produce fuel through a well digging and infrastructure development.
Apart from regulatory frameworks and infrastructure, transparency in managing the reserves is a prerequisite to maximizing the benefits; otherwise, this discovery can become another victim of corruption and poor governance. Furthermore, adherence to global environmental standards is crucial since extracting hydrocarbons can have potential environmental consequences such as habitat destruction, oil spills, and pollution. Therefore, best environmental practices and stringent regulations are necessary to lessen these risks.
Conclusion
The recent discovery of significant oil and gas reserves in the territorial waters of Pakistan comes with benefits and challenges. Pakistan heavily relies on imported fuel, directly or indirectly affecting all sectors of the state’s economy. The discovery of reserves has the potential to be a game changer for the country’s economic and energy landscape. While it offers a route toward economic growth and energy security, comprehensive planning, investment, and regulatory frameworks are vital to unleashing these benefits. If exploited properly with a strategic framework, it could undoubtedly be a turning point for Pakistan. It could potentially open avenues to strengthen the economy, secure the energy sector, and bolster its global standing.
If you want to submit your articles and/or research papers, please check the Submissions page.
The views and opinions expressed in this article/paper are the author’s own and do not necessarily reflect the editorial position of Paradigm Shift.
Tahniyat Mobeen is a graduate of international relations from Kinnaird College for Women. As an aspiring researcher, her primary areas of interest encompass strategic studies, political economy, and foreign policy analysis. With a profound understanding of global affairs, she aims to provide meaningful insights into complex geopolitical issues.