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Introduction
The Pakistan government has provisionally awarded two exploration blocks to the state-owned Oil and Gas Development Company Limited (OGDCL) as part of an initiative to discover fresh hydrocarbon deposits and reduce the country’s reliance on energy imports. OGDCL reported that it has been provisionally awarded the Sehwan 2,667-19 block in Sindh and the Zindan-II 3,271-9 block in Punjab, with a 100% working interest. This strategic move aligns with OGDCL’s core business investment strategy to accelerate exploration activities and augment hydrocarbon reserves. However, the lackluster response from other domestic and foreign firms during the competitive bidding process highlights the need for a new exploration policy and attractive tariffs to attract more investment.
Addressing Depletion of Reserves and Energy Imports
Pakistan’s energy sector has faced challenges due to the depletion of hydrocarbon reserves and heavy reliance on energy imports. With reserves depleting at a rate of 15% per year and no significant discoveries in the past two decades, the government’s decision to award exploration blocks to OGDCL aims to address this critical issue. By encouraging domestic exploration and production, Pakistan seeks to enhance its energy security and reduce the burden of costly energy imports.
The Need for a New Exploration Policy
The poor response from bidders in the recent auction for exploration and production blocks underscores the need for a new exploration policy. Energy companies have been awaiting the announcement of an updated policy that is expected to include attractive tariffs. Existing tariffs are no longer appealing to investors, leading to a lack of interest in exploration activities. A revised policy that addresses the concerns of energy companies and provides a favorable investment environment could potentially attract more participation and lead to greater discoveries of hydrocarbon reserves.
Reviving Production Capacity
OGDCL has been actively working to revive production capacity in various regions of Pakistan. The company has managed to revive the Jhal Magsi plant, which now has a production capacity of 13.7 million standard cubic feet of gas per day (mmscfd) and 45 barrels of crude oil per day. Additionally, OGDCL plans to complete three other oil and gas exploration projects in Balochistan, Sindh, and Punjab between March and November 2024. These efforts aim to increase domestic production and reduce the country’s dependence on imported energy resources.
Challenges and Implications
Pakistan’s energy landscape faces multiple challenges, including the law and order situation in remote areas and delays in the announcement of a new hydrocarbon exploration policy. The government’s efforts to boost exploration and production are crucial to meet the country’s energy needs and stabilize the economy. With approximately 70% of energy requirements currently being met through imports, reducing this dependency is a significant step towards achieving energy security. Additionally, reducing reliance on energy imports will positively impact the country’s trade balance and strengthen the overall economy.
Conclusion
The provisional awarding of exploration blocks to OGDCL by the Pakistan government signals a proactive approach to counter the depletion of hydrocarbon reserves and reduce the country’s reliance on energy imports. While the low response during the competitive bidding process highlights the need for an attractive exploration policy, this initiative is a crucial step toward enhancing energy security and stimulating domestic production. By encouraging exploration activities and attracting investment, Pakistan aims to discover new hydrocarbon deposits, meet its energy needs, and establish a more sustainable and resilient energy sector. These efforts will contribute to a stronger economy and reduce the burden of costly energy imports on the country.
