Analysis of Pakistan industry

Muhammad Danish

Mohsin Hassan

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• The Chinese were the first to discover underground oil deposits. • The Chinese recognized early the importance and potential use of oil and

gas around 500 B.C.• Oil and gas are made up of a mixture of different hydrocarbons. • These are large molecules made up of hydrogen atoms attached to a

backbone of carbon.

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Oil was formed from the remains of animals and plants that lived millions of years ago in a marine (water) environment before the dinosaurs. Over the years, the remains were covered by layers of mud. Heat and pressure from these layers helped the remains turn into what we today call crude oil. The word "petroleum” combination of “patra”(rock) and “oleum” (oil) means "rock oil" or "oil from the earth."

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YEAR PAKISTAN(BBL)Billion Barrels

WORLD(BBL)Billion Barrels

1980 0.200 644.934

1981 0.197 651.930

1982 0.240 670.350

1983 0.196 668.262

1984 0.083 668.988

1985 0.082 699.813

1986 0.109 700.557

1987 0.096 699.779

1988 0.096 889.334

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YEAR PAKISTAN(BBL)Billion Barrels

WORLD(BBL)Billion Barrels

1989 0.170 907.768

1990 0.119 1,002.213

1991 0.162 999.190

1992 0.162 989.443

1993 0.412 996.105

1994 0.203 998.336

1995 0.203 999.261

1996 0.203 1,007.368

1997 0.208 1,018.515

1998 0.208 1,020.075

1999 0.208 1,032.753

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YEAR PAKISTAN (BBL)Billion Barrels

WORLD (BBL)Billion Barrels

2000 0.208 1,016.772

2001 0.208 1,028.132

2002 O.298 1,031.954

2003 0.310 1,213.112

2004 0.289 1,265.026

2005 0.289 1,277.228

2006 0.289 1,292.936

2007 0.289 1,316.662

2008 0.289 1,332.043

2009 0.339 1,342.207

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TOP 20 COUNTIRES

PROVED RESERVED. PRODUCTION. CONSUMPTION. EXPORT. IMPORT.

SOURCE:CIA WORLD FACT BOOK JAN 1ST 2008.

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SUB SURVEY

EXPLORATION(DRILLING)

REFINERIESDISTRIBU-TION

INDUSTRIAL & DOMESTIC USAGE

SURVEY

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1948 - 49:Establishment of Pakistan Petroleum Limited (PPL) and Pakistan Oilfields Limited (POL) for exploration and production was occurred.

1952:1952 Discovery of Pakistan's Largest Gas Reserves at Sui by PPL.

1954 : The Government of Pakistan executed agreements with Standard-Vacuum Oil Company.

1955: Hunt International oil Company.

1956: Shell oil Company.

1957: Sun oil Company.

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1954-59: Further discoveries of natural gas were made as a result of these activities during 1954-59, which included ,Discovery at Kandhkot by PPL.Discovery at Mari by Standard-Vacuum. Despite Significant new gas discoveries during this period, the exploration activities registered a downward trend because of lack of oil discoveries. Government of Pakistan then decided to undertake the search for oil and gas directly and established the state oil exploration company.

1961: Oil and gas Development Company Limited (OGDCL) in September 1961.

1965: OGDCL's first success was the small gas discovery at Sari Singh (Sindh).

1968:POL discovered oil at Meyal (Potwar, Punjab).OGDCL discovered oil at Toot (Potwar, Punjab) .

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1970:1970 - Gas at Hundi (Sindh).1972 - Rodho (Punjab).

1972:On 2nd January,1972.Zulfiqar Ali Bhutto, after the fall of East Pakistan, announced the nationalization of all major industries, including iron and steel, heavy engineering, heavy electricals, petrochemicals, cement and public utilities.

1973:1973 Kothar (Sindh).

1975: American oil Company (AMOCO) discovered a small gas accumulation at Jandran (Balochistan).

1975 - Gas / condensate at Dhodak (Punjab).

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1976:BP came to Pakistan after the modification of the petroleum regulations in 1976 .Government of Pakistan amalgamated three “Oil Marketing Companies” Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum as part of its “Nationalization Plan” formation of Pakistan State Oil (PSO).

1978 :1978 PPL Crude Oil discovery at Adhi field.

1981: When BP (formerly known as Union Texas Petroleum (UTP), a USA Company), discovered oil at Khaskeli (Sindh) in the Lower Goru Sandstone.

1984: The US-based Occidental Petroleum who discovered a major oil field at Dhurnal in 1984.

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1987:1987 Start of Commercial Production From Kandhkot Gas Field.

1989: OGDCL made very large gas discovery at Middle Indus Basin (Qadirpur).

Eni (formerly known as LASMO (U.K.) made a gas discovery at Kadanwari, south of Khairpur-Jacobabad.

1993: 1993 - OMV of Austria at Miano.

1995:In may 1995 formation of Pakistan Petroleum Exploration and Production Companies Association (PPEPCA).

1997:OGDLC converted into public limited company.

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1998:1998 - ENI discovered gas at Bhit .1998 - OMV of Austria at Sawan.

1999 -2002:1999 - BHP at Zamzama (Kirthar foldbelt and foredeep). 1999 - OGDCL at Chanda oil located in Kohat. 1999 -MARI GAS COMPANY at Mari Deep. 2002 - PETRONAS of Malaysia at Rehmat. 2002 - OGDLC at gurguri (N.W.F.P).

2002 - 28th March Oil and Gas Regulatory Authority (OGRA) has been set up.

2007:3 discoveries; 1 oil and gas discovery at Mela-1 well (Nashpa Block). 2 gas discoveries Latif-1 (Latif Block) and Tajjal-1 (Gambat Block).

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To accelerate E&P activities in Pakistan with a view to achieve maximum self sufficiency in energy by increasing oil and gas production.

To promote direct foreign investment in Pakistan by increasing the competitiveness of it in terms of investment in the upstream sector.

To promote the involvement of Pakistani oil and gas companies in the country’s upstream investment opportunities.

To train the Pakistani professionals in E & P sector to international standards and create favorable conditions for their retaining within the country.

To promote increased E&P activity in the onshore frontier areas by providing globally competitive incentives.

To enable a more proactive management of resources through establishment of a strengthened Directorate General of Petroleum Concessions (DGPC) and providing the necessary control and procedures to enhance the effective management of Pakistan’s petroleum reserves.

To undertake utilization of oil and gas resources in a socially, economically and environmentally sustainable and responsible manner.

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1985 35 159.67 1986 42 165.75 1987 42 180.43 1988 45 194.2 1989 48 205.63 1990 62 220.05 1991 62 221.06 1992 61.35 227.21 1993 60.36 256.42 1994 55 282.17 1995 57.1 298.09 1996 55 326.9

1997 57 333.04 1998 54.91 346.84 1999 53 368.57 2000 54.42 365.01 2001 59.87 360.12 2002 64.27 355.89 2003 60 336.6 2004 62 326.85 2005 65.63 336.19 2006 65.67 359 2007 67.43 390 2008 70.16 383

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PROVINCE SHARE %SINDH 56.36 %

PUNJAB 31.91 %

NWFP 11.619 %

BALOUCHISTAN 0.1 %

PAKISTAN 100 %

2006 – 2007 = 42 wells drilled.2007 – 2008 = 52 wells drilled.Public sector= 14 wells.Private sector = 38 wells.

Total investment of US $ 836 million in 2007-2008.Total investment of US $ 252 million in upstream.

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OIL 30.5%GAS 47.5%LPG 0.7 %COAL 9.2%HYDRO ELECTRICITY 10.9 %NUCLEAR IMPORTED ELECTRICITY 1.3 %

Pakistan’s Primary energy supplies for the year 2007-08amount to 63 million tones.

SOURCE:MINISTRY OF PETROLEUM AND NATURAL RESOURCES

HOUSE HOLD 0.6 % INDUSTRY 6.5 % AGRICULTURE 0.7 % TRANSPORTATION 51.1 % POWER 39.4 % OTHER GOVERNMENT 1.8 %

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Pakistan State Oil (PSO)

Pakistan Petroleum Limited (PPL)

Oil and Gas Development Company Limited (OGDCL)

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(OGRA) has been set up under the Oil and Gas Regulatory Authority Ordinance dated 28th March 2002.

All properties and works done by the (NGRA) Natural Gas Regulatory Authority were transferred to and protected under the OGRA Ordinance.

(OGRA) Increase private investment ,Ownership in the midstream and downstream petroleum industry, Protect the public interest while respecting individual rights and provide effective and efficient regulations.

Any Corporation or person interested in getting license for the LPG and CNG activities may apply to the (OGRA).

OGRA as an Authority in place of the Director General (Gas) of the Ministry of Petroleum and Natural Resources.

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Pakistan Petroleum Exploration and Production Companies Advisory Committee (PPEPCAC) as a representative body of local and foreign companies engaged in exploration and production of petroleum.

It was originated in 1988. Its establishment was an important Landmark in the history of petroleum

industry of Pakistan. It was culmination of five private sector companies namely; Mari Gas, Oxy,

POL, PPL, UTP and OGDCL a public sector company. In May 1995, the organization was converted into a limited company

through blessing of Ministry of Petroleum.

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The Downstream Oil Sector (Refining, Marketing, Distribution) plays a very significant role in Pakistan’s economic development.

Annual sales of Rs. 1 trillion. Direct employment of over 100,000 people. Indirect employment (transport sector) of another 24,000 persons. The members of OCAC are ; five Refineries PARCO, NRL, PRL, ARL and BPL. Ten Oil Marketing Companies (PSO, SPL, CPL, APL, dTPPL, AGPL, HSL,

ASOPL, OOTCL, BTCPL . One Pipeline Transportation Company (PAPCO). World class IT infrastructure, skill sets ranging from Technical, IT, Finance,

Sales, Marketing & HR, and plans initiated for provision of better product and better service, the Downstream Oil Sector is a significant contributor to the national well-being.

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Hycarbex Inc.(USA) PAIGE Limited (PAIGE).(USA) BP Pakistan Exploration & Production.(USA) Premier Oil Pakistan.(UK) Tullow Pakistan (Developments) Ltd.(UK) NATIVUS Resources Limited.(UK) Rally Energy Pakistan Ltd.(CANADA) BHP billiton.(AUSTRALIA) Eni Pakistan Ltd.(ITALY) MOL Oil & Gas Company B.V. (HUNGARY) OMV Pakistan Inc.(AUSTRALIA)

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Petronas Carigali (Pakistan) Ltd.(MALAYSIA) Polish Oil & Gas Company.(POLAND) Saif Energy Limited.(PAKISTAN) RDC International (Pvt) Ltd.(PAKISTAN) Pakistan Petroleum Ltd.(PAKISTAN) Orient Petroleum Inc.(PAKISTAN) Petroleum Exploration (Pvt) Ltd.(PAKISTAN) Mari Gas Company Ltd.(PAKISTAN) Oil & Gas Development Company Ltd.(PAKISTAN) Pakistan Oilfields Ltd.(PAKISTAN)

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SOURCE:MINISTRY OF PETROLEUM

First exploration well 1866First oil discovery 1915Total exploratory wells drilled 716Total discoveries 213Success rate 1 : 3.4Sedimentary basin area 827,268 Sq. km.

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PAK-ARAB REFINERY (PARCO). NATIONAL REFINERY LIMITED (NRL). ATTOCK REFINERY LIMITED (ARL). BOSICOR PAKISTAN LIMITED (BPL). DHODAK REFINEY LIMITED (DRL). PAKISTAN REFINERY LIMITED (PRL). INDUS OIL REFINERY LIMITED(IRL).

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PAKISTAN STATE OIL CO.LTD.(PSO) 64.2% SHELL PAKISTAN LTD.(SPL) 19.9% CHEVRON PAKISTAN LTD.(CALTEX)(COPL) 7.3% TOTAL PARCO PAKISTAN LTD.(TPPL) 4.00% ATTOCK PETROLEUM LTD.(APL) 2.6% PARC0-PEARL 1.3% ADMORE GAS (PVT)LTD 0.7%

NEW ENTERENED IN THE MARKET ASKAR OIL SERVICES(PVT)LTD HASCOMBE STORAGE(PVT) LTD. OVERSEAS OIL TRADING CO.(PVT)LTD. BAKRI TRADING COMPANY PAKISTAN(PVT)LTD. BOSICOR PAKISTAN LTD.

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SUI NORTHERN GAS PIPELINE LIMITED(SNGPL) SUI SOUTHERN GAS COMPANY LIMITED(SSGCL) PAK-ARAB PIPELINE CO. LTD.

Organization of the Petroleum Exporting Countries (OPEC) Originated in 1960 is a group of 12 countries ;

Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela they produce 36% of the world’s oil.

The biggest producer is Saudi Arabia. Iran, United Arab Emirates, Kuwait and Venezuela are also major producers.

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Organization for Economic Co-operation and Development (OECD). It originated in 1948 is a group of 30 countries; Austria ,Belgium ,Canada ,Denmark , France ,Germany ,Greece ,

Iceland ,Republic of Ireland ,Italy ,Luxembourg ,Netherlands ,Norway ,Portugal , Spain ,Sweden ,Switzerland ,Turkey ,United Kingdom , United States, Japan , Finland , Australia , New Zealand ,Mexico , Czech Republic , South Korea , Hungary , Poland ,Slovakia. It produces 24% of world’s oil.

The USA is the biggest single producer in OECD but Mexico, Canada and the UK are also major producers.

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Natural gas obtained from soil ,alone or along with petroleum it have low molecular weight.

COMPOSITION OF NATURAL GAS:a) Methane 70-90 % b) Ethane - Propane 0-20 % c) Butane - carbon dioxide 0-8 % d) Oxygen 0.02 % e) Nitrogen 0-5 % f) Hydrogen sulphide 0-5 %

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60-90% less smoke - producing pollutants. Less expensive than gasoline . Power generation. Automobiles. Residential use. Production of fertilizers .(urea) Uses in manufacturing of fabrics, glass, steel, plastics, paint

etc.

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The Government is promoting the use of Compressed Natural Gas (CNG) to reduce pollution caused by vehicles using motor gasoline and to improve the ambient air quality.

Pakistan has become the largest CNG consuming country among Natural Gas Vehicle (NGV) countries.

There are about 2,068 established CNG stations in the country and approximately 1.7 million vehicles are using CNG.

A large number of vehicles auto ,cars and buses) have been and are still being converted to CNG.

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The provincial governments are working on this policy to encourage the use of CNG, which will ultimately cut down the cost of diesel oil import.

The Govt. has made program to convert vehicles on to CNG which are commonly used by general public (it includes buses, mini-buses and wagons) in Karachi ,Hyderabad, Lahore, Faisalabad, Peshawar, Quetta and Islamabad/Rawalpindi. This program will have a major impact on air quality of urban areas and will improve health standards as well.

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Its contribution is about 0.7% of country’s total energy supply mix.

The use of LPG as a domestic fuel is being encouraged to slow the on-going deforestation in the areas where supply of natural gas is technically not viable.

LPG supplies have been increasing at annual rate of 12.6 percent during the last few years with supply of 648,572 Metric Ton in 2006-07.

The LPG marketing companies have imported around 23,362 MT during July 2007-08.

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The government is encouraging LNG import by the Private sector and announced its first-ever LNG policy in 2006.

The PGPL (Philips Gas Pipe line Company) has signed an Implementation Agreement with Port Qasim Authority for establishment of an off-shore LNG Import Terminal at Port Qasim, Karachi having a capacity of 3 million tones/annum (400 mmcfd).

Production 2007-2008 is 285 metric tons which is decrese by 8% by previous year.

Sulphur production 71 metric tons per day which is increase by 9 % by the previous year.

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TOP 20 COUNTIRES

PROVED RESERVED. PRODUCTION. CONSUMPTION. EXPORT. IMPORT.

SOURCE:CIA WORLD FACT BOOK JAN 1ST 2008.

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PROVINCE %

SINDH 70.7 %PUNJAB 4.52 %NWFP 1.84 %BALOUCHISTAN 22.5 %

PAKISTAN 100 %

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POWER 33.5 %FERTILIZER 15.6 %CEMENT INDUSTRY 0.9 %GENERAL INDUSTRY 23.8 %DOMESTIC (HOUSE HOLDS) 18.1 %COMMERCIAL 2.7 %TRANSPORT (CNG) 5.4 %

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Oil & gas drilling, intervention, completion. Heavy furnace oil pipeline operating. Oil refining. Oil & gas exploration and production. Furnace manufacturing of gas dictator and other equipment for

environment. Industrial hardware & Oil wax products. Oil terminal operating. Fabrication, installation steels structure, piping oil/gas/water & insulation

cladding. Medical and industrial Oxygen, Types of special gaseous mixture. Oil, gas and petrochemical equipment.

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Motor oil Gasoline (petrol) Kerosene oil Jet fuel High speed diesel (HSD) Furnace oil (virgin) Naphtha for petrol Lubrications (Adhesives)

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Liquid petroleum gas (LPG)Liquefied natural gas (LNG)Compressed natural gas (CNG)Sulphur dieselHi-octaneFertilizersGreaseTurpentineParaffin wax (candles)Mineral oil (Nylon,Rayon,PVC,Vinyl)

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Chemical industryInk industryPlastic industryPaint industryAutomobile industryTar (Raw material for making roads)Sprits (Perfumes,Body sprays)Gas welding (Oxyethyne torch uses for welding)Artificial ripening of green fruits (ethene)

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As a part of an integrated investment promotion strategy under WTO, the government undertook a comprehensive program of economic reforms, including liberalization, privatization and deregulation of oil and gas services and infrastructure were opened to foreign investment.

Under the argument of privatization by WTO, in FY07 the government plans to privatize 26 companies including Sui Northern Gas Company (Pakistan’s largest gas company); Sui Southern Gas Company; Pakistan State Oil (PSO), Pakistan's largest gasoline retailer; and Pakistan Petroleum, Ltd. The government also plans to offer the global depository receipts of the oil and gas Development Company (Pakistan’s largest energy exploration company) in the international securities markets.

In 2000, Pakistan enacted a patent law that protected both process patents and product patents in accordance with its WTO obligations. Under this law, both the patent owner and licensees can file suit against those who infringe.

The government does not invite private tenders for the transportation of crude oil and requires all crude oil to be transported by the state-owned Pakistan National Shipping Corporation. Though a member of the WTO, Pakistan has yet to agree to the WTO Government Procurement agreement.

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Directly effect on human life in the region. Oil’s spill over effect.Air emissionLiquid waste.Soil contamination.Extinction of plants and species.

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Sector attracts by far the highest level of foreign direct investments and raises significant tax income for the government.

Pakistan is among the most gas dependent economies of the world. About 52 TCF of gas reserves have been discovered of which 19 TCF have already been produced.

Success rate of oil and gas exploration in Pakistan is good as compared to international discoveries. In Pakistan 3-4 wells 1 find and internationally 8-10.

Government sets target to drill 100 new oil, gas exploration wells in year 2009. OGDCL and PPL is being expanded to other countries like Yemen, Iraq, Nigeria

and Sudan. The exploration activities would be intensified in Balouchistan’s area of Kohlu,

which is famous for having natural resources in abundance. 7 refineries almost working in the sector foreign countries interested to set up

new refinery plants in the country. Two gas distribution companies (SNGPL) and (SSGPL) investing over 200 million

US $ a year to increase the capacity of existing distribution network of 80,000 kilometers.

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In Pakistan demand of oil and gas is higher then the supply it only meets the 18 % of domestic demand.

There are total 7 refineries working in Pakistan still not fulfill the local demand of oil and gas.

The on-going deforestation in the areas where supply of natural gas is technically not viable.

Only 20 % of population easily access to natural gas.

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The government has demonstrated a strong political commitment and taken a number of steps to deregulate the oil and gas sector in keeping with the overall vision of a liberalized economy. This will be resulting in a number of structural changes and contributed to a somewhat competitive market and generally improved quality of service.

Thar field is the 5th largest (185 billion tones) coal field in the world but has remained un-exploited. The reserves could be used in the production of electricity to overcome power shortage.

960 Appraisal wells of oil and gas estimate by ministry of petroleum in the country which shows how much potential in the country.

Ministry has so far awarded 119 exploration licenses to public and private sector.

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Oil and gas pipeline projects with Turkmenistan should be finalized soon because energy requirements are increasing rapidly. Rise in gas rates would put a negative impact on the economy and make the industry uncompetitive.

Persistently high global oil prices pose a threat to Pakistan’s balance of payments. Pakistan imports more than 50mn barrels of oil a year to satisfy local demand for fuel products and record-high prices have led to widening of the trade deficit.

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Resources of gas and coal should be properly utilized for power generation to reduce the dependence of imported crude oil, and to reduce heavy burden on foreign exchange.

Government takes steps to improve Hydel power, solar power & Wind power generation. It supplies the power at cheaper rate to both industrial and residential sector. It shows high reduction on import of crude oil.

We have ingenuous reserves of natural gas in the country government should need to encourage the transport sector to switch to CNG. Conversion of HSD (high speed diesel) to CNG to reduce the import bills.

The government should continued to provide a conducive and congenial business environment for the existing investors in the oil & gas sector, as they are the best ambassadors for attracting new investment in the country.

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Government policies should be targeted to attract reputable companies with required resources in both the upstream and downstream sectors of the oil & gas industry to avoid fly-by-night operators.

Government should need to plan such polices to promote the quality of local transport in the big cities to over come the excess consumption of oil and gas. It Over come the problem of Traffic Jams in cities.

Government take plan to Developed the Infra Structure of Signal Free Zone. It helps to reduce Time & Less Consumption of Oil & Gas.

Government take plan to introduce research centre to find a new way of resource, this help to reduce the dependence of Oil & Gas Resources.

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