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Oil and Gas Industry of Pakistan

2009-2010

(Analysis)

By

Muhammad Danish(FA07-BB-0051)

For

Analysis of Pakistan Industries

Submitted To Mr. Afaq Ali Khan

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LETTER OF TRANSMITTAL

20 Nov 2009

Mr. AFAQ ALI KHAN


ANALYSIS OF PAKISTANI INDUSTRY
MAJU

Respected Sir,

As you requested 5-10-2009, here is our report on OIL and GAS industry of
Pakistan.
.
This report includes the details of the world issues and the complete data of the
most scare resource of the world that is oil and gas ,and also having 50 year
history of Pakistan and current volumes of oil and gas sector both in comparison
with power sector and their consumption and production difference, there
backward and forward linkages and industries depend on this sector, SWOT
analysis and remedies of this sector.

We are certain that the report will be of immense help to enable you to evaluate
the situation finally and to encourage the Student’s Morale .It was great
experience which is accomplished by the hilarious work behind it .

Please let me know if we can be of further assistance.

Yours Sincerely

Muhammad Danish

Mohsin Hassan

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ACKNOWLEDGEMENT

This report is a case Oil and Gas Industry which has been prepared as a part of
the course requirement for Analysis of Pakistani Industry .The material
compiled and presented in this report is a result of comprehensive work.

This report has proved to be a great experience. For this, I would like to thank
our course instructor “Mr. Afaq Ali Khan” for providing us with the opportunity,
as well as his guidance in the light of his vast experience.

THANKS

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REASONS OF SELECTING OIL AND GAS INDUSTRY

 There are three major forms of fossil fuels:

 1:OIL
 2:NATURAL GAS
 3:COAL

o Non renewable resources of the world.

 Pakistan has a great potential of Oil and Gas reserves many foreign
countries interested to invest in this sector.

 Almost 5000 different products are in the forward linkage use for the
consumption of domestic and industrial purposes.

 Pakistan has the 5th largest coal field in “Thar desert” a substitute for
energy formation.

 In Automobile gasoline, petroleum, diesel, cng, and lpg are used, on the
other hand aero planes need jet fuel. Gas is needed in our Domestic and
industrial purposes

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HISTORY
How Was Oil Formed?

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"
means "rock oil" or "oil from the earth."

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Where Do We Get Our Oil?

Crude oil is a smelly, yellow-to-black liquid and is usually found in underground


areas called reservoirs. Scientists and engineers explore a chosen area by
studying rock samples from the earth. Measurements are taken, and, if the site
seems promising, drilling begins. Above the hole, a structure called a 'derrick' is
built to house the tools and pipes going into the well. When finished, the drilled
well will bring a steady flow of oil to the surface.

IMPORTANCE
 An Economy depend on crude Oil if we see the history .We analyze crude
oil is the basic issue of global conflicts.

 America world’s 5 % population uses 25 % world’s crude oil .In future 25


years reserves of America are gone.

 80 % of future reserves of (oil, gas & coal) are in Eurasia (Iran, Iraq, Saudi
Arabia and countries near khaleej etc)..

 Only Iraq has 10 % of world’s future reserves out of 80 %.

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INTRODUCTION:
• 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.

CRUDE OIL RESERVES TILL 9TH FEB,2009.


(sOURCE:ENERGY INFORMATION ADMINISTRATION)

COMPARISION BETWEEN PAKISTAN AND WORLD

YEAR PAKISTAN(BBL) WORLD(BBL)

Billion Barrels 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

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1986 0.109 700.557

1987 0.096 699.779

1988 0.096 889.334

YEAR PAKISTAN(BBL) WORLD(BBL)

Billion Barrels 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

YEAR PAKISTAN (BBL) WORLD (BBL)

Billion Barrels Billion Barrels

2000 0.208 1,016.772

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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

ONE BARREL OF CRUDE OIL CONTAINS

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GASOLINE= 19.5 GALLONS

19.5(3.8) = 74.1 LITERS

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THE INDUSTRY’S CONTRIBUTION TO THE GDP OF THE
COUNTRY

The total contribution of gas distribution in GDP during 2001-02 was 3.6 per cent
including electricity. Separately oil and gas are not indicated in the official
documents but their contribution is estimated at around 1 per cent. The indirect
contribution of oil and gas, however, is enormous. Investment on electricity and
gas is Rs. 48 billion, constituting 10 per cent of the total. In the oil and gas sector,
an investment of Rs. 16 billion or over 3 per cent of the total is estimated. It
accounts for over 80% of total energy supplies with an average growth rate of 6%
a year.

Oil and gas as a priority sector (beside other three sectors e.g. agriculture, small
and medium industry and information technology), primarily motivated by the
reduction in import of oil. Over the last couple of years, substantial progress was
made in the sector like commissioning of PARCO, White Oil Pipeline (from
Karachi to Mahmoodkot), oil and gas prospecting and consequently policy
measures such as deregulation were undertaken. Between 1990-91 and 2000-
01, the crude oil imports rose from 28,178,000 barrels to 52,505,000 barrels or
by 6.4 per cent a year. Compared to this, the increase in import of petroleum
products was 8.8 per cent, from 4.3 million tones to 10 million tones, over the
same period. In value term, the import doubled from $1.7 billion to $3.4 billion or
by an annual 7.2 per cent. In total imports, the share soared from 22 percent to
32 percent. During 2001-02 oil imports fell 17 per cent to $2.8 billion due to both
decline in prices and in quantity, primarily because of world slump following 9/11
event as well as the recessionary trend in Pakistan as the growth rate was
restrained to only 3.6 per cent below the target of 4 per cent. Nonetheless, the
import of crude continued to surge from 6.85 million tones to 7.1 million tones or
by over 4 per cent during 2001-02 over the preceding year, but below the
average of 6.4 per cent over the period 1990-91 to 2000-01. While the import of
refined oil has remained stagnant t at 10 million tones over the last few years,
that of crude has continued to surge mainly because of commissioning of
PARCO during 2000-01. During 2001-02, the price of crude has averaged $172.4
per tone ($22.99/barrel), which is unlikely to persist during the current fiscal year
2002-03 as in the first quarter (July-September 2003) the average price of crude
went up to $194 per tone ($25.87/barrel), 12.5 per cent higher than the average
of last year. During the first quarter of 2002-03, the share of oil was 25.5 per cent
of total imports compared to 29.1 percent in 2001-02. By the end of February
2003, the price of oil has jumped to $40 per barrel, 55 per cent higher than the
first quarter. The value of oil import during the year, estimated at $3 billion (on

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the basis of $250 million a month during July-January 2003) will be higher than
the last year, even if the prices remain constant at the present level. In the case
of war with Iraq, the prices are going to skyrocket and thus pushing up our import
bill l beyond $3.4 billion of 2000-01.

Unfortunately the domestic production meets only 15 per cent of oil


requirements. During 2001-02, the production was 23 million US barrels, up from
21 million US barrels during the preceding year, thanks to the strenuous
exploration efforts of oil companies. With oil reserves at 184 million US barrels
(according to Economic Survey 2001-02), they are just for few years and hence,
the reliance on imports will continue to grow.

The heavy oil bill is stoked by the emergence of power projects dependent upon
imported furnace oil and more recently by decline in hydroelectricity generation
as a result of drought prompting further reliance on thermal power generation.

One of the reasons of recent stagnation in refined oil import is the commissioning
in February 2001 of PakArab Refinery Company (PARCO) with a capacity of 4.5
million tones a year which increased the country's refining capacity by 40 per
cent to 11per cent.

TOTAL EMPLOYMENT OF THE SECTOR

OIL
Average Daily employment in numbers=11790

Employment Cost (Million Rs.)=1921

GAS
Average Daily employment in numbers=20854

Employment Cost (Million Rs.)=4142

Total trading statistics of the sector.

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Crude oil (000) Natural gas

Year Barrels MMCFT

Import and export Import and export

1996-97
21270 697762

1997-98 20543 699709

1998-99 19986 744942

1999-00 20395 818342

2000-01 875308
21084

2001-02 23195 923758

2002-03 23458 992589

2003-04 22625 1202752

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2004-05 24119 1344953

2005-06 23935 1400043

Crude oil and refined products are significant imports. Their value varies with
internal demand and changes in the world oil price. In FY 1982, oil products
accounted for around 30 percent of Pakistan's imports, falling to an annual
average of 15 percent in FY 1987 to FY 1990, rising to over 21 percent in FY
1991, but dropping back to 15 percent in FY 1992.

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PROVED RESERVED
PRODUCTION
CONSUMPTION
EXPORT
IMPORT

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STATE OF OIL AND GAS INDUSTRY AFTER INDEPENDENCE

OIL

Pakistan's first oil field was discovered in the late 1952 in Balochistan near a
giant gas field at Sui in Balochistan. It is 122.67 sq. km. In area and covers the
sandy Datta Formation in Pakistan. Pakistan Petroleum Ltd. (PPL) and Pakistan
Oilfields Ltd. explored and began drilling these field with Soviet help in 1961 and
activity began in Toot during 1964.

Since the late 1980s, Pakistan has not experienced many new oil fields coming
online. As a result, oil production has remained fairly flat, at around 60,000
barrels per day (bbl/d).

The Toot area is one of the oldest oil producing regions in Pakistan with the first
oil well was drilled in 1964. It is located in the Potwar region, Punjab Province,
which is near the capital city of Islamabad. It has grown steadily since then,
producing both oil and, to a lesser degree, natural gas

Gas

Pakistan's first gas field was discovered in the late 1952 near a giant gas field at
Sui in Balochistan. The Toot oil and gas field was discovered in the early 1960's
the Islamabad in the Punjab. Some promising natural gas fields have also been
found near the Punjab Toot oilfield, in Sindh province and off the coastline of
Pakistan; but contain smaller reserves.

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CHRONOLOGY OF PAKISTAN

TIME WISE EVENTS HAPPEN IN THE HISTORY OF PAKISTAN

 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.

 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.

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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) .

 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).

 1976:
BP came to Pakistan after the modification of the petroleum regulations in
1976 .

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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.

 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:

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OGDLC converted into public limited company.

 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).

PETROLEUM POLICY 2009


Mar 20, 2009

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The Government of Pakistan (GOP) is committed to accelerate an exploration
and development programme in order to reverse the decline in crude oil
production, to increase the domestic gas production and supply and to reduce
the burden of imported energy which otherwise will have adverse effect on the
balance of payments & trade.

The principal objectives of this Policy are:

1. To accelerate E&P activities in Pakistan with a view to achieve maximum


self sufficiency in energy by increasing oil and gas production.

2. To promote direct foreign investment in Pakistan by increasing the


competitiveness of its terms of investment in the upstream sector.

3. To promote the involvement of Pakistani oil and gas companies in the


country’s upstream investment opportunities.

4. To train the Pakistani professionals in E& P sector to international standards


and create favourable conditions for their retaining within the country.

5. To promote increased E&P activity in the onshore frontier areas by


providing globally competitive incentives.

6. 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.

7. To undertake exploitation of oil and gas resources in a socially,


economically and environmentally sustainable and responsible manner.

E&P companies could be offered $4.08 per mmbtu

Friday, April 03, 2009


By our correspondent

ISLAMABAD: The Exploration and Production (E&P) companies would be


offered $4.08 per mmbtu in as per 2009 petroleum policy, which was
$3.65 per mmbtu in 2007 and $2.99 per mmbtu in 2001 petroleum
policy, Dr Asim Hussain unveiled this while formally announcing the
Petroleum Policy 2009, here on Thursday.

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“The policy is aimed at ensuring higher rate of returns to Exploration
and Production (E&P) companies.” Hussain said lucrative incentives
have been offered in the Petroleum Policy 2009 to attract maximum
foreign investments.

He said: “The last petroleum policy was drafted in 2007 by a foreign


consultant but the industry had strong objections to this policy which is
why no exploration license had been granted for more than 2 years in
the past.

About the new policy Adviser to the PM on Petroleum Dr Asim Hussain


said that it would meet the future challenges of the energy demand
and encouraged foreign investment.

“The government will take benefit from the expertise of local and
foreign oil and gas exploration companies to meet the growing energy
demand in the country.”

He said the government has set a target of drilling 100 new oil and gas
exploratory wells during the year 2009 to meet the country’s growing
energy demand. He said presently about 45 rigs are producing and
supplying oil and gas across the country. The E&P companies would
pay 12.5 per cent royalty and 40 per cent income tax to the
government. The disputed biddable Gas Price Gradient (GPG) factor
had been eliminated in the new policy, he added.

The discount during Extended Well Test (EWT) phase had been
reduced from 15 per cent to 10 per cent to encourage the companies
for early production. To fulfill the Corporate Social Responsibility (CSR)
for local population of the area, several steps had been taken. 50 per
cent job quota would be ensured for local population from where
discovery had been made. The amount of social welfare obligation in
the exploration phase had been razed from $25,000 to $30,000 in each
zone. He claimed that the new Petroleum Policy 2009 would attract
more foreign investment in the sector despite having law and order
problem.

He said the government has set a target of drilling 100 new oil and gas
exploratory wells during the year 2009 to meet country’s growing

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energy demand.

Giving a brief account of oil and gas production he said presently about
45 rigs are producing and supplying oil and gas across the country. He
informed that the work in 25 blocks of Balochistan was held up for
want of security clearance but with hectic efforts the government
succeeded and obtained clearance in 16 blocks. He said the seismic
survey of Dhaddar Block in Balochistan was completed in 2004 but the
law and order situation the well could not be drilled.

Now after taking the stakeholders in to confidence, the well had been
spud on March 29 2009. The adviser informed that Pakistan Petroleum
Ltd (PPL) had entered into joint venture with a Yemeni company for
undertaking exploration work in Yemen. Further a MoU had been
executed with ENI, Italian company, to further boost exploration and
production activities particularly in offshore.

About downstream oil sector, the adviser said when the oil prices
peaked, the ex-refinery pricing formula was revised to stabilize the
prices and bring relief to the customer.

Now when the prices have dropped, resultantly the refineries were
financially unmanageable to run.

In this regard he said a revised formula had been agreed protecting


the overall interest of all the stakeholders. This formula was now being
processed for approval of the ECC. On the LNG import he informed that
the Letter of Support needed for the LNG project by 4 gas, which was
pending since long was approved by ECC and issued.

Resultantly, the company was in an advance stage of negotiating the


LNG supplies which entails a fixed terminal at Port Qasim of 3.5 million
tons capacity.

About IPI gas pipeline project, Dr Asim stated that the ECC had
approved the project in principle and details would be given
separately, after a final decision had been taken by the cabinet very
shortly. The work on TAPI was also in progress, he maintained.

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Giving details about oil and gas sector, the adviser said so far 728
exploratory wells have been drilled across the country, out of which a
total 219 remained successful. The adviser said the success rate in oil
and gas exploration was ‘very high’ in Pakistan as compared to other
discoveries at the international level.

He said the ministry has so far awarded 119 exploration licences to


public and private sectors, while 100 new licences with more
incentives would be awarded under the new petroleum policy to local
and foreign investors. Commenting on oil and gas production of the
country, he said the gas production was 3.9 billion cubic feet per day
(bcfd) and the oil production is 66,000 barrels per day (bpd) against
the demand of 9 to 10 bcfd of gas and 77,000 bpd of oil.

OIL AND GAS REGULATORY AUTHORITY (OGRA)

MISSION STATEMENT

Safeguard public interest through efficient and effective regulation in


the midstream and downstream petroleum sector.

INTRODUCTION

• Oil and Gas Regulatory Authority (OGRA) has been set up under the Oil
and Gas Regulatory Authority ordinance to foster competition, increase
private investment and ownership in the midstream and downstream
petroleum industry, protect the public interest while respecting individual
rights and provide effective and efficient regulations
• The Federal Government has now assigned functions for the regulation of
activities relating to LPG (Liquefied Petroleum Gas) and CNG
(Compressed Natural Gas) sectors in the country to the Oil and Gas
Regulatory Authority and has designated the OGRA as an Authority in
place of the Director General (Gas) of the Ministry of Petroleum and
Natural Resources.

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FOLLOWING ARE SOME OF THE MAJOR LAWS

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

• In exercising its functions the Authority shall, as far as practicable, look


after the interests of the consumers and the licensees along with the
nation as a whole. A license may be restricted by the category of
regulated activity, area of operation, period of authorization and such other
terms as the Authority may determine.

• No licensee shall charge for any regulated activity any fixed or variable
amount in excess of the relevant tariff the Authority may, from time to time,
approve and publicized by the licensee in the print and electronic media or
provide service on terms and conditions other than those approved by the
Authority from time to time in accordance with the Natural Gas Regulatory
Authority (Tariff) Rules, 2002.

• No person or corporation shall, without first obtaining a license from the


Authority, undertake, or cause to be undertaken under any agreement, the
operation or construction of works connected with compression of natural
gas for the purpose of storing, filling or distribution of CNG.

• No company shall, without first obtaining a license for the purpose from
the Authority, undertake or cause to be undertaken under any agreement,
the construction and operation of any works.

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Pakistan Petroleum Exploration and Production Companies
Association (PPEPCA).

In the eighties the rising curve of activities and the unprecedented surge in the E&P
activities necessitated frequent coordination among those engaged in this sector
and the need to exchange ideas on a variety of subjects of common interest. After
consultation between the concerned organizations a need was felt to establish an
umbrella organization which, while playing an advisory role, could safeguard the
interest of its member companies.

The few E&P companies operating in Pakistan at that time undertook to form the
umbrella organization.

In 1988 it was originally conceived under the name and style of Pakistan
Exploration and Production Companies Advisory Committee (PEPCAC) as a
representative body of local and foreign companies engaged in exploration and
production of petroleum. Its establishment was an important Landmark in the
history of petroleum industry of Pakistan.

It was culmination of Endeavour's, spread over a long period, 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 company,
limited by guarantee, without any share capital, through the blessing of Ministry
of Petroleum & NR under the new title of 'Pakistan Petroleum Exploration and
Production Companies Association (PPEPCA).

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PROFILE OF PAKISTAN PETROLEUM LIMITED
Mission
Statement
Our mission is to optimize hydrocarbon production and pursue an aggressive
exploration programme in the most efficient manner on the local as well as
international horizons through a team of professionals utilizing the latest
developments in the exploration and production technology and maintaining the
highest standards of health, safety and environment.

Company Overview
The pioneer of the natural gas industry in the country, Pakistan Petroleum
Limited (PPL) has been a key player in the energy sector since the
1950s.The company has managed to sustain its positioning due to its robust
business programme and persistent efforts to optimize production from
existing fields and new discoveries, currently contributing about 25 percent
of the country’s total natural gas supplies in addition to crude oil, Natural
Gas Liquid and Liquefied Petroleum Gas.

PPL’s history can be traced back to the establishment of a public limited


company in June 1950, the majority shares of which were held by Burmah
Oil Company (BOC) of the United Kingdom. In September 1997, BOC
disinvested from the E&P sector worldwide and sold its equity in PPL to the
Government of Pakistan. In July 2004, the government, in turn, sold 15
percent of its holding in PPL to the general public through an Initial Public
Offer, reducing its share to 78.4 percent. The remaining equity is divided
between International Finance Corporation and private investors, holding 1.3
percent and 20.3 percent respectively.

The company operates five producing fields across the country at Sui
(Pakistan’s largest gas field), Adhi, Kandkhot, Chachar and Mazarani and
holds working interest in seven partner-operated producing fields. These are
Qadirpur, the second largest gas field, Miano, Sawan, Block 22 (Hasan,
Sadiq and Khanpur) and Tal Block (Manzalai).

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As a major stakeholder in securing a safe energy future for the country, PPL
pursues a dynamic exploration agenda aimed at enhancing hydrocarbon
reserves. In Pakistan, the company’s exploration portfolio comprises 22
exploration blocks. Of these, PPL operates seven through joint ventures with
other Exploration and Production (E&P) companies and has working interest
in 15 more exploration areas, including three off-shore blocks, as non-
operating partner. PPL is also among the first local E&P companies to extend
its operations beyond national borders and has an interest in an exploration
licence in Yemen in a joint venture with OMV.

Over the years, PPL has developed a reliable foundation and infrastructure
for providing clean, safe energy through sustainable exploitation of
indigenous natural resources while adhering to the highest standards of
health and safety and constraining the ecological footprint of its operations.
As a result, Monitoring and Inspection and Design & Construction
departments, Mazarani and Kandhkot gas fields, Adhi field, Sui Field Gas
Compressor Station, Sui Production, Sui Field Engineering and Purification
Plant were certified for ISO 9001:2000 Quality Management System.

As such, the company believes in value addition for all its stakeholders and
remains committed to a transparent financial and corporate regime. This
factor has been recognized by the prestigious Management Association of
Pakistan that selected PPL as the recipient of its 25th and 26th Corporate
Excellence Awards.

At PPL, the health and safety of employees and sustainable use of natural
resources are key requirements of operational excellence. Every effort is
made to enhance Health, Safety and Environment awareness among staff
and other stakeholders. This commitment is evident from the landmark
certification of Mazarani Gas Field, Sui Production, Sui Field Gas Compressor
Station and Adhi Field for ISO 14001 and OHSAS 18001 certification.
Besides, PPL was also awarded the Annual Environmental Excellence Award
in 2006, 2008 and 2009 by the National Forum for Environment and Health.

PPL has played a significant role as a responsible corporate citizen since the
inception of its commercial activities in Sui by establishing Model School Sui
in 1957 for children of workers and local communities. Over time, the
outreach of PPL’s Corporate Social Responsibility (CSR) portfolio has gone
well beyond obligatory requirements. In 2001, PPL Welfare Trust was
founded to provide geographical and thematic diversity within its CSR
initiatives, which include education, health, infrastructure development and
socio-economic uplift of disadvantaged communities, particularly those living

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in and around its operating areas. In recognition of these efforts, PPL has
won the Corporate Philanthropy Award for four consecutive years from 2004
to 2007 for its commitment to social development.

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P
L

35 Analysis of Pakistani Industry Sec A


Year Event

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


Commencement of pipeline quality Natural Gas supply to Karachi for
1955 industrial and domestic use within record time of three years of discovery at
Sui.
1959 Discovery at Kandhkot Gas Field. Discovery of Gas at Mazarani Field.
1976 Commercial Production of Barytes by Bolan Mining Enterprises.
1978 Crude Oil discovery at Adhi field.
1980 Commercial Production of Crude Oil from Adhi field.
Execution of Sui Gas Well Head Price Agreement (1982 GPA) stipulating
1982
cost-plus fixed return Gas Pricing Formula.
Commissioning of Sui Field Gas Compression Project (Phase 1) in Sui Main
1986
Limestone (SML) formation.
1987 Start of Commercial Production From Kandhkot Gas Field.
1990 Installation of Liquefied Petroleum Gas (LPG) and Natural Gas Liquid (NGL)

36 Analysis of Pakistani Industry Sec A


Plan and Commencement of LPG, NGL and gas production from Adhi.
Commencement of gas production from Qadirpur Gas Field (operated by a
1995
Joint Venture Partner).
Completion of Phase II Extension of Sui Field Gas Compression Project at
1997
SML and three Turbo Compressor Trains in Sui Upper Limestone Reservoir.
Commencement of Extended Well Test (EWT) Production from Block-22,
2000
Shikarpur.
2001 Supply of gas from Miano Gas Field (Operated by a Joint Venture Partner).
- Dismantling of 1982 GPA and execution of new market based Sui and
Kandhkot Gas Price Agreement linking the Sui and Kandhkot gas price with
2002
international oil prices.- Acquisition of Sui gas Purification Plant jointly
owned by SSGCL and SNGPL
- Commencement of gas supply from Mazarani Gas Field.
- Commissioning of Gas Processing Facilities (Phase 1) and supply of gas
2003 from Sawan Gas Field. (Operated by a Joint Venture Partner). - Discovery of
Pipeline Quality Gas Reserves in Tal Exploration block, NWFP (operated by a
Joint Venture Partner)
- Country's first ever supply of 100,000 tonnes of indigenous iron ore from
2004
Dilband, District Mastung, Balochistan, to Pakistan Steel, Karachi.
Discovery of significant quantities of oil and gas/ condensate from the second
2005
exploratory well Makori-1 drilled within Tal Block.
- Completion of Extended Well Testing of Manzalai-1, first discovery well in
Tal Block.
2006
- Commencement of production from Early Production Facility at Makori-1
well site in Tal Block.
- Three discoveries; one oil and gas discovery at Mela-1 well (Nashpa Block)
and two gas discoveries Latif-1 (Latif Block) and Tajjal-1 (Gambat Block)
2007 were made.
- Completion of the first exploratory well Mela-1 at Nashpa Block as oil and
gas producer and commencement of Extended Well Test production.
-For the first time in the Company’s history, two horizontal development wells
were drilled and successfully completed as producers at Kandhkot field.
-Exploration well Memikhel-1 at Tal Block was successfully competed as gas/
2008
condensate discovery.
-Appraisal well Mela-2 at Nashpa Block was successfully completed as
producer and tied in with EWT facilities.

37 Analysis of Pakistani Industry Sec A


OIL COMPANIES ADVISORY COMMITTE (OCAC)

The Downstream Oil Sector (Refining, Marketing, Distribution) plays a very


significant role in Pakistan’s economic development, ensuring uninterrupted
supply of petroleum product to the country in order to keep the wheels of the
economy moving. With an annual sales of Rs. 1 trillion, direct employment of
over 100,000 people, indirect employment (transport sector) of another 24,000
persons, capital investment of over 30 billion Pak Rupees over last 5 years,
annual generation of taxes around Rs. 200 Billion, a 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.

The members of OCAC currently comprise of the country’s five Refineries (Pak-
Arab Refinery Limited PARCO, National Refinery Limited NRL, Pakistan Refinery
Limited PRL, Attock Refinery Limited ARL and Bosicor Pakistan Limited BPL),
Ten Oil Marketing Companies (Pakistan State Oil Co. Limited PSO, Shell
Pakistan Limited SPL, Chevron Pakistan Limited CPL, Attock Petroleum Limited
APL, Total Parco Pakistan Limited TPPL, Admore Gas (Pvt) Limited AGPL,
Hascombe Storage Limited HSL, Askar Oil Services (Pvt) Limited ASOPL,
Overseas Oil Trading Co. (Pvt) Limited OOTCL, Bakri Trading Company
Pakistan (Pvt) Limited BTCPL) and one Pipeline Transportation Company (Pak-
Arab Pipeline Co. Limited PAPCO). New entrants in the refining sector are
coming in the country and the number of member companies is likely to increase.

The significant objectives of the Committee are as under:

• To represent the downstream oil industry at various forums in matters of


common interest affecting their operations in Pakistan
• To establish short/long range demand/supply balances for various oil
products and advise the Government and Member Companies in this
respect
• To pro-actively plan any Infrastructure Upgrades De-bottlenecking needed
as per medium/long term petroleum product availability projections
• To collect, prepare and circulate various trade statistics and other relevant
information to member companies as well as the Government
• To comment on and convey collective views of various members on
matters concerning the oil industry’s well being such as proposed
legislation relating to taxation and other fiscal measures

38 Analysis of Pakistani Industry Sec A


• Develop plans/suggestions to help Government to streamline the oil and
gas sector

The oil industry has seen considerable change over the last 30 years. From an
era of nationalization and governmental controls in the 1970s, the Industry is
being gradually deregulated. Pakistan is deficit in crude oil, diesel and fuel oil.
The Government has given permission to bulk consumers and traders to import
fuel oil while bulk consumers have also been given permission to import diesel.

In order to coordinate all activities, OCAC plays a pivotal role in rationalizing


these imports in such a manner that supply/demand is balanced. It is also a focal
body for the Government and other agencies to interact with the oil industry.

Health Safety and Environment (HSE) is a very important aspect within the oil
industry. There is also a growing awareness within the public that had hitherto
not been present. To coordinate implementation of HSE standards within the oil
industry, OCAC has set up a separate sub-committee for this purpose. This
provides a forum to member companies who, even whilst competing in the
market place, cooperate in HSE matters. This provides an opportunity to the
members in sharing information and expertise, which in turn helps them in safe
operations.

The OCAC is governed by a Main Committee comprising of the Chief Executives


of each of the member companies. A Chairman who is nominated from among
the member companies for a working term of one calendar year, heads the Main
Committee. OCAC’s overall functioning is the responsibility of the Secretary
General who is assisted by two Secretaries. The Secretaries are responsible for
various sub-committees, which form the focus groups from within the industry
that deliberate upon various issues and come up with the recommendations.

Some of the areas of OCAC work and areas of focus are:

• Effective petroleum product supply logistics management


• Plan to overcome any port constraints
• Identifying the right energy wise for Pakistan
• Petroleum product improvement plans: better, more environment friendly
product for the Pakistani consumer
• Follow-up with the Ministries of Petroleum and Finance to ensure the
continued viability of the Downstream Oil Sector.

OCAC SUB-COMMITTEES

39 Analysis of Pakistani Industry Sec A


• Licensing and Supply Sub-Committee
• Distribution Sub-Committee
• Rules Sub-Committee
• Refining and Technical Sub-Committee
• Finance Sub-Committee
• Trade Estimates Sub-Committee
• CNG Sub-Committee
• HSSE Sub-Committee

CAPITALIZATION (In terms of Pakistani rupees and US dollars)

The Oil and gas sector, due to major reforms introduced during the last two and
half years, has so far benefited the economy to the tune of Rs.25 Billion and in
US$420.88 millions.

2001-02 2002-03 2003-04 2004-05

Export of 238,606 240,444 110,000 40,599

Crude Oil

Export of 339,846 394,731 755,969 955,754

Petroleum
Product

Total Exports 578,452 635,175 865,969 996,353

Value in 114.95 160.55 203.78 354.92

million US$

Value in 7,121,152,500 9,946,072,500 12,624,171,000 21,987,294,000


million PKR

40 Analysis of Pakistani Industry Sec A


NUMBER OF INSTALLED FACTORIES.

The total number of installed factories of oil in Pakistan = 83


The total number of installed factories of gas in Pakistan=82

DIMENSSION AND INDIVISUAL STATISTICS


OIL:
S# Company Total Wells (Province wise) Production

Sindh Punjab Balochistan (BOPD)

1 Oil & Gas Development Co. 21 11 10 - 20430.25

2 Orient Petroleum Inc., 3 - 3 - 1061.09

3 Pakistan Oilfields Ltd. 9 - 9 - 10711.3

4 Pakistan Petroleum Ltd. 4 - 3 1 4290.71

5 BHP billiton. 1 1 - - 1695.52

6 BP Pakistan E & P 43 43 - - 25877.21

41 Analysis of Pakistani Industry Sec A


7 Lasmo Oil Company Ltd. 2 2 - - 401.08

Total 83 57 25 1

GAS:
S# Company Total Wells (Province wise) Production

Sindh Punjab Balochistan (MMCFD)

1 Oil & Gas Development Co. 13 5 6 2 687.36

2 BP Pakistan E & P 46 46 - - 234.67

3 Pakistan Oilfields Ltd. 6 - 6 - 42.41

4 Pakistan Petroleum Ltd. 4 2 1 1 772.93

5 Orient Petroleum Inc., 4 1 3 - 18.76

6 OMV Pakistan Inc. 2 1 1 - 531.6

7 BHP billiton 1 1 - - 247.93

8 Eni Pakistan Ltd 2 2 - - 367.1

9 Mari Gas Company Ltd. 1 1 - - 446.13

10 Tullow Pakistan Ltd. 2 1 1 - 16.53

11 Petroleum Exploration Ltd. 1 1 - - 11.15

42 Analysis of Pakistani Industry Sec A


Total 82 61 18 3

TOTAL EMPLOYMENT OF THE SECTOR

OIL
Average Daily employment in numbers=11790

Employment Cost (Million Rs.)=1921

GAS
Average Daily employment in numbers=20854

Employment Cost (Million Rs.)=4142

Total trading statistics of the sector.

Crude oil (000) Natural gas

Year Barrels MMCFT

Import and export Import and export

1996-97
21270 697762

43 Analysis of Pakistani Industry Sec A


1997-98 20543 699709

1998-99 19986 744942

1999-00 20395 818342

2000-01 875308
21084

2001-02 23195 923758

2002-03 23458 992589

2003-04 22625 1202752

2004-05 24119 1344953

2005-06 23935 1400043

44 Analysis of Pakistani Industry Sec A


Crude oil and refined products are significant imports. Their value varies with
internal demand and changes in the world oil price. In FY 1982, oil products
accounted for around 30 percent of Pakistan's imports, falling to an annual
average of 15 percent in FY 1987 to FY 1990, rising to over 21 percent in FY
1991, but dropping back to 15 percent in FY 1992.

THOUSAND BARRELS PER DAY CRUDE OIL PRODUCTION


AND CONSUMPTION OF PAKISTAN

YEAR PRODUCTION CONSUMPTION

 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

45 Analysis of Pakistani Industry Sec A


 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 53 368.5

YEAR PRODUCTION CONSUMPTION

 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

46 Analysis of Pakistani Industry Sec A


PROVINCE WISE OIL PRODUCTION SHARE

PROVINCE SHARE %

SINDH 56.36 %

PUNJAB 31.91 %

NWFP 11.619 %

BALOUCHISTAN 0.1 %

PAKISTAN 100 %

DRILLING ACTIVITIES:

47 Analysis of Pakistani Industry Sec A


 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.

PAKISTAN’S PRIMARY ENERGY SUPPLIES FOR


THE YEAR 2007-2008.
 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 2007-08

amount to 63 million tones.

SOURCE:MINISTRY OF PETROLEUM AND NATURAL RESOURCES

CONSUMPTION OF PETROLEUM PRODUCTS 2007-2008.


 HOUSE HOLD 0.6 %

48 Analysis of Pakistani Industry Sec A


 INDUSTRY 6.5 %

 AGRICULTURE 0.7 %

 TRANSPORTATION 51.1 %

 POWER 39.4 %

 OTHER GOVERNMENT 1.8 %

49 Analysis of Pakistani Industry Sec A


STEPS OF OIL PRODUCTION

50 Analysis of Pakistani Industry Sec A


OIL AND GAS PROCESSES
Gases are used for welding and cutting in the construction of an oil platform and
for maintenance on the rig.
When oil and gas arrive on the platform, specialty gases are utilized as reference
in determining the composition and value of the oil and gas. Specialty gases are
also used in monitoring the environment with respect to leakages of hazardous,
inflammable gases .

51 Analysis of Pakistani Industry Sec A


52 Analysis of Pakistani Industry Sec A
PRODUCTION CHART OF PETROLIUM PRODUCTS

53 Analysis of Pakistani Industry Sec A


Products Quantity

M. Tons

POLYPROPYLENE 15,000

POLYETHYLENE 200,000

POLYVINYL CHLORIDE 90,000


POLYSTYRENE 30,000

MONOETHYLENE GLYCOL 400,000

SYNTHETIC FIBRES 730,000

PURE TEREPHTHALIC ACID 400,000


Total 2,000,000

FACTOR AFFECTING OIL AND GAS PRICES

Following are some critical factors that affect the pricing.

• Petroleum development levy.


• Rate of inland freight margin including maximum ex-depot.
• Rate of dealer’s commission including prescribed price.

54 Analysis of Pakistani Industry Sec A


• Rate of distributor’s margin of oil marketing company.
• General sales tax.
• Maximum ex-depot sales sales prices.

Pricing also depends upon the type of consumer according to demand and
consumption such as,

• Domestic consumers.

For domestic consumers, including residential colonies, mosques, churches,

temples, madrassas, other religious places and hostels attached thereto,

Government and semi-Government offices and hospitals, Government guest

houses, Armed Forces messes, langars, universities, colleges, schools and


Private

Educational Institutions, orphanages and other charitable institutions.

• Commercial consumers.

All establishments registered as commercial units with local authorities or dealing

in consumer items for direct commercial sale like cafes, bakeries, milk-shops, tea

stalls, canteens, barber shops, laundries, tandours, places of entertainment like

cinemas, clubs, theaters and private offices, clinics, maternity homes, etc.

• Industrial consumers.

All establishments registered as commercial units with local authorities or dealing

in consumer items for direct commercial sale like cafes, bakeries, milk-shops, tea

55 Analysis of Pakistani Industry Sec A


stalls, canteens, barber shops, laundries, tandours, places of entertainment like

cinemas, clubs, theaters and private offices, clinics, maternity homes, etc.

MAJOR ELEMENTS OF COST


Following are the major elements of cost determination:

• Exploration cost of oil and gas.


• Research and development cost.
• Raw material cost.
• Refining cost.
• Production cost.
• Machinery cost
• Maintenance cost.
• Over head costs.
• Transportation and distribution cost.
• Labor cost.
• Government taxes.

INTRODUCTION
The oil and gas sector has a considerable impact on the economy – the sector attracts
by far the highest level of foreign direct investments in the country, and raises significant
tax income for the government. At the same time, high imports of crude oil and
petroleum products affect the balance of payments adversely. In addition, the annual
economic cost of guarantees and subsidies in the sector is significant as it is estimated
at about Rs. 33 billion (in the form of direct and implicit subsidies, and foregone taxes).
Substantial progress has been made in the restructuring and reform of the oil and gas
sectors, deregulation of prices, and privatization of selected assets. The reforms have
enhanced transparency, making decision makers aware of the various aspects of the
business.

56 Analysis of Pakistani Industry Sec A


POTER’S FIVE FORCES MODEL ANALYSIS

Michael Porter developed a technique for analyzing industrial structure and its
competitive forces known as Porter’s five forces model. This model describes an
enterprise in relation to its economic environment. The competitive position of an
industrial enterprise depends on five competitive forces.

1. Industrial rivalry.
2. Potential substitutes.
3. Bargaining power of buyers.
4. Bargaining power of suppliers.
5. Threats of new entrants.

All five forces together provide a good overview of the attractiveness of the oil and gas
industry, and can help to estimate its further profit potential.

INDUSTRIAL RIVALRY
This describes the intensity of competition between existing firms in an industry. In case
of oil and gas industry the major competing companies are National refinery limited
(NRL), Pak-Arab refinery limited (PARCO) and Pakistan refinery limited (PRL). They are
competing with each other on the basis of their products and pricing making it heard for
any new rivals to enter. The major competing products of National refinery limited are
motor gasoline (Rs22.61), kerosene (Rs28.75), JP1 (Rs27.27), JP4 (Rs24.66), High
speed diesel (Rs29.99) Light diesel oil (Rs27.44) Furnace oil (17576 RS / MT) LPG
(17000 RS / MT) Naphtha (for export). Pak-Arab refinery limited maintaining the
products such as furnace oil (35795 Rs/ton), LPG (45,878.10 Rs/ton), Sulpher
(12,157.80 Rs\ton). In Pakistan refinery limited the products are motor spirit (48.55
Rs\liter), kerosene (31.60 Rs\liter), JP1 (58.53 Rs/liter), JP8 (61.30 Rs\liter), HSD (64.43
Rs\liter), furnace oil (36165 RS / MT), LPG (39809 RS / MT). The rivalry is intense

57 Analysis of Pakistani Industry Sec A


because there are many small or equally sized competitors. Oil and gas industry have
high fixed costs that encourage competitors to fill unused capacity by price cutting. The
switching cost in oil and gas industry is relatively low.

THREAT OF POTENTIAL SUBSTITUTES


Threat of substitute exist in oil and gas industry because the product’s demand is
affected by the price change of a substitute product e.g. LNG substituting CNG. The
price elasticity of Oil and gas products like Petrol, CNG, and HSD etc is affected by the
substitute products because more substitutes are becoming available and the demand
become more elastic since customers have more alternatives such as CNG, LPG, and
LSD etc. Because of the availability of close substitute of oil and gas product the firms in
oil and gas industries raise prices. While the threat of substitutes typically impacts oil
and gas industry through price competition, there are other concerns in accessing the
threats of substitute like the substitutability of liquid oxygenated products and bio-fuels
versus gas, oil and diesel. New technologies are available and the changing structure of
oil and gas industry is contributing to competition among these substitute means of fuel
consumptions.

THE BARGINING POWER OF THE BUYERS


The major buyers for oil and gas products are ATTOCK PETROLEUM LIMITED (APL),
PAKISTAN STATE OIL COMPANY LTD, SHELL PAKISTAN LTD, CALTEX OIL
PAKISTAN LTD and TOTAL PARCO PAKISTAN LTD. The bargaining power of the
buyers is weaker because they have the threat of forward integration by the producers
like SAUDI ARABIAN OIL COMPANY (SAUDI ARAMCO), British petroleum, etc who
can take over their own distribution or retailing. Significant buyer switching cost which
means buyer cannot easily switch to another product. Buyers are fragmented which
means the buyers have no particular influence on product and producer supply critical
portions of buyers input.

THE BARGINING POWER OF THE SUPPLIERS

58 Analysis of Pakistani Industry Sec A


Major suppliers of crude oil and natural gas are SAUDI ARABIAN OIL COMPANY
(SAUDI ARAMCO), E.N.I PAKISTAN LTD, OIL & GAS DEVELOPMENT
COMPANY LTD, B.H.P PETROLEUM, PAKISTAN PETROLEUM LTD,
PAKISTAN PETROLEUM LTD, O.P.I (PVT) LTD, O.M.V PAKISTAN, and
BRITISH PETROLEUM. As the suppliers are powerful they have an influence on
producing industry such as selling raw material at a higher price to capture some
of the industry profits. They can integrate forward. They have the information of
their buyer.

THREATS OF NEW ENTERANTS

Oil and gas have barriers to entry which are more than the normal equilibrium
adjustments that oil and gas markets typically make i.e. when the earnings
increases it is expected that the additional firms will enter in the oil and gas
markets to take the advantage of high profit levels and when the income
decreases the some of the firms exit the market restoring the market equilibrium.
On the other hand raising prices or expectation that future prices of oil and gas
will rise encourage rivals to enter in the market. But if the firms individually keep
the prices low as a strategy to prevent potential entrants from entering the market
it can be an established entry deterring pricing barrier. Barriers to enter in oil and
gas industry are arising from following sources which are Government created
barriers (taxes, fright margin, petroleum development levy etc), patents and
proprietarily knowledge to restrict entry into an industry(ideas and knowledge that
provide competitive advantages treated as private property) , asset specificity that
inhibits entry in to an industry (asset specification to the extent to which the firm’s
asset can be utilize to produce a different product) and organizational internal
economies of scale (cost efficiency level of production).

59 Analysis of Pakistani Industry Sec A


 Pakistan State Oil (PSO)

 Pakistan Petroleum Limited (PPL)

 Oil and Gas Development Company Limited


(OGDCL)

60 Analysis of Pakistani Industry Sec A


MAJOR OIL AND GAS FIELDS :

Chanda, Tando Alam, Thora, Sono, Bobi, Pasakhi, Lashari, Toot, Chak Nurang,
Fimkasar, Dakhni, Sadkal, Rajian, Missa Kiswal, Kal, Dhodak, Missan, Loti,
Qadirpur, Nandpur, Uch, Daru, Kunnar, Palli and Pirkoh.

(OGDCL)Highlights HY 2008 -2009.

o NET CRUDE OIL PRODUCTION 41,573 bbl per day.

o NET GAS PRODUCTION 964 mmcf per day.

o NET LPG PRODUCTION 229 tons per day.

o NET SULPHUR PRODUCTION 66 tons per day.

o Net profit after tax stood at Rs.31,782 million resulting in earning per share
7.39 as Rs.24,093 million and earning per share 5.60 respectively during
last year.

61 Analysis of Pakistani Industry Sec A


EXPLORATION AND PRODUCTION
COMPANIES WORKING IN PAKISTAN

 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)

 Petronas Carigali (Pakistan) Ltd.(MALAYSIA)

 Polish Oil & Gas Company.(POLAND)

 Saif Energy Limited.(PAKISTAN)

62 Analysis of Pakistani Industry Sec A


 RDC International (Pvt) Ltd.(PAKISTAN)

 Pakistan Petroleum Ltd.(PAKISTAN)

 Orient Petroleum Inc.(PAKISTAN)

 Petroleum Exploration (Pvt) Ltd.(PAKISTAN)

 Oil & Gas Development Company Ltd.(PAKISTAN)

 Mari Gas Company Ltd.(PAKISTAN)

 Pakistan Oilfields Ltd.(PAKISTAN)

EXPLORATION OF OIL & GAS

 First exploration well 1866

 First oil discovery 1915

 Total exploratory wells drilled 716

 Total discoveries 213

 Success rate 1 : 3.4

 Sedimentary basin area 827,268 Sq. km.

SOURCE:MINISTRY OF PETROLEUM

63 Analysis of Pakistani Industry Sec A


REFINERIES

 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).

NEW PROJECTS:
Khalifa Coastal refinery (KCR) near the coastal area of balouchistan completed
in half quarter of 2011 have the capacity of producing 35 to 45 million barrels per
year of HSD.

64 Analysis of Pakistani Industry Sec A


MARKETING AND DISTIBUTION

 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.

65 Analysis of Pakistani Industry Sec A


PROVINCE WISE OIL COMPANIES SALES ENERGY
PRODUCT 2007 – 2008.

66 Analysis of Pakistani Industry Sec A


GAS TRANSMISSION AND DISTIBUTION

 SUI NORTHERN GAS PIPELINE LIMITED(SNGPL)

 SUI SOUTHERN GAS COMPANY LIMITED(SSGCL)

 PAK-ARAB PIPELINE CO. LTD.

67 Analysis of Pakistani Industry Sec A


Sui Northern Gas Pipelines Limited (SNGPL) is the largest integrated gas
company serving more than 3 million consumers in North Central Pakistan
through an extensive network in Punjab and NWFP. The Company has over 45
years of experience in operation and maintenance of high-pressure gas
transmission and distribution systems. It has also expanded its activities to
undertake the planning, designing and construction of pipelines, both for itself
and other organizations. SNGPL operates in a region of the nation that has a
rapidly growing demand for natural gas and power generation due to significant
industrial development.

SNGPL was incorporated as a private limited Company in 1963 and converted


into a public limited company in January 1964 under the Companies Act 1913,
now Companies Ordinance 1984, and is listed on all the three Stock Exchanges
of the Country.

SNGPL transmission system extends from Sui in Balochistan to Peshawar in


North West Frontier Province (NWFP) comprising over 7,016 KM (as on June
2008) of Transmission System (Main lines & Loop lines). The distribution
activities covering 1224 main towns along with adjoining villages in Punjab &
NWFP are organized through 8 regional offices. Distribution system consists of
59,951 KM (as on June 2008) of pipeline.

SNGPL has 3,190,181 consumers comprising Commercial, Domestic, General


Industry, Fertilizer, and Power & Cement Sectors. Sales to these consumers
were 598,270* MMCF worth Rs. 123,460* million during Jul 07 - Jun 08. Annual
gas sale for year 2006-2007 was 576,658 MMCF worth Rs. 112,577 million.

68 Analysis of Pakistani Industry Sec A


March 2007- July 2008 Extension of gas network:

• Rs.1552 million on transmission project.

• Rs.3357 million on distribution project.

• Rs.487 million on other projects.

• 2008-2009 is Rs.13,514 million investment on transmission ,distribution


and other project.

INDUSTRIAL CONSUMER = 5126

COMMERCIAL CONSUMER = 48,048

DOMESTIC CONSUMER = 3,068,068

TOTAL CONSUMER = 3,121,273

69 Analysis of Pakistani Industry Sec A


Sui Southern Gas Company (SSGC) is Pakistan's leading integrated gas
Company. The company is engaged in the business of transmission and
distribution of natural gas besides construction of high pressure transmission and
low pressure distribution systems.

SSGCL transmission system extends from Sui in Balochistan to Karachi in Sindh


comprising over 3,200 KM of high pressure pipeline ranging from 12 - 24" in
diameter. The distribution activities covering over 1200 towns in the Sindh and
Balochistan are organized through its regional offices. An average of about
357,129 million cubic feet (MMCFD) gas was sold in 2006-2007 to over 1.9
million industrial, commercial and domestic consumers in these regions through
a distribution network of over 29,832 Km. The company also owns and operates
the only gas meter manufacturing plant in the country, having an annual
production capacity of over 550,150 meters.

The Company has an authorized capital of Rs. 10 billion of which Rs 6.7 billion is
issued and fully paid up. The Government owns the majority of the shares which
is presently over 70%.

The Company is managed by an autonomous Board of Directors for policy


guidelines and overall control. Presently, SSGC's Board comprises of 14
members. The Managing Director/Chief Executive is nominee of GOP and has
been delegated with such powers by the Board of Directors as are necessary to
effective conduct the business of the company.

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March 2007- July 2008 Extension of gas network:

• Rs.435 million on transmission project.

• Rs.2,230 million on distribution project.

• Rs.25 million on other projects.

• 2008-2009 is Rs.7,500 million investment on transmission ,distribution and


other project.

INDUSTRIAL CONSUMER = 3,448

COMMERCIAL CONSUMER = 22,792

DOMESTIC CONSUMER = 1,985,466

TOTAL CONSUMER = 2,011,106

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GOVERNMENT SHARE HOLDING

GLOBAL OVERVIEW:
The Organization of the Petroleum Exporting Countries (OPEC)

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The Organization of the Petroleum Exporting Countries (OPEC) is a permanent,
intergovernmental Organization, created at the Baghdad Conference on
September 10–14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The
five Founding Members were later joined by nine other Members: Qatar (1961);
Indonesia (1962) – suspended its membership from January 2009; Socialist
People Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria
(1969); Nigeria (1971); Ecuador (1973) – suspended its membership from
December 1992-October 2007; Angola (2007) and Gabon (1975–1994). OPEC
had its headquarters in Geneva, Switzerland, in the first five years of its
existence. This was moved to Vienna, Austria, on September 1, 1965.

1st OPEC Conference, Baghdad, September 10–14, 1960

OPEC Board of Governors, Geneva, September 3, 1962

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The 1960s

These were OPEC’s formative years, with the Organization, which had started
life as a group of five oil-producing, developing countries, seeking to assert its
Member Countries’ legitimate rights in an international oil market dominated by
the ‘Seven Sisters’ multinational companies. Activities were generally of a low-
profile nature, as OPEC set out its objectives, established its Secretariat, which
moved from Geneva to Vienna in 1965, adopted resolutions and engaged in
negotiations with the companies. Membership grew to ten during the decade.

7th OPEC Conference, Jakarta, November 23–28, 1964

The 1970s

OPEC rose to international prominence during this decade, as its Member


Countries took control of their domestic petroleum industries and acquired a
major say in the pricing of crude oil on world markets. There were two oil pricing
crises, triggered by the

Arab oil embargo in 1973 and the outbreak of the Iranian Revolution in 1979, but
fed by fundamental imbalances in the market; both resulted in oil prices rising
steeply. The first Summit of OPEC Sovereigns and Heads of State was held in
Algiers in March 1975. OPEC acquired its 11th Member, Nigeria, in 1971.

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32nd (Extraordinary) OPEC Conference, Vienna, March 16–17, 1973

The 1980s

Prices peaked at the beginning of the decade, before beginning a dramatic


decline, which culminated in a collapse in 1986 — the third oil pricing crisis.
Prices rallied in the final years of the decade, without approaching the high levels
of the early-1980s, as awareness grew of the need for joint action among oil
producers if market stability with reasonable prices was to be achieved in the
future. Environmental issues began to appear on the international agenda.

Venezuelan President Luis Herrera Campaigns' visits OPEC Headquarters,


February 14, 1980

The 1990s

A fourth pricing crisis was averted at the beginning of the decade, on the
outbreak of hostilities in the Middle East, when a sudden steep rise in prices on
panic-stricken markets was moderated by output increases from OPEC
Members. Prices then remained relatively stable until 1998, when there was a
collapse, in the wake of the economic downturn in South-East Asia. Collective
action by OPEC and some leading non-OPEC producers brought about a
recovery. As the decade ended, there was a spate of mega-mergers among the
major international oil companies in an industry that was experiencing major

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technological advances. For most of the 1990s, the ongoing international climate
change negotiations threatened heavy decreases in future oil demand.

107th OPEC Conference, Vienna, March 23, 1999

OECD
ORIGINIZATION OF ECONOMIC CO- OPERATION AND DEVELOPMENT

The forerunner of OECD was the Organization for European Economic Co-
operation (OEEC). OEEC was formed in 1947 to administer American and
Canadian aid under the Marshall Plan for the reconstruction of Europe after
World War II. Its headquarters were established at the Château de la Muette in
Paris in 1949.

OECD took over from OEEC in 1961. Since then, its mission has been to help its
member countries to achieve sustainable economic growth and employment and
to raise the standard of living in member countries while maintaining financial
stability – all this in order to contribute to the development of the world economy.

Its founding Convention also calls on it to assist sound economic expansion in


other countries and to contribute to growth in world trade on a multilateral, non-
discriminatory basis.

OECD's 30 members

The 30 member countries of OECD are:


Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France,

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Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg,
Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States.

Twenty of these countries became members on 14 December 1960, when


the Convention establishing the organization was signed. The others have joined
over the years.

In a Supplementary Protocol to the OECD Convention, the signatory states


decided that the Commission of the European Community “shall participate in the
work” of the Organization. This participation goes well beyond that of a mere
observer, and in fact gives the Commission quasi-Member status.

In May 2007, OECD countries agreed to invite Chile, Estonia, Israel, Russia and
Slovenia to open discussions for membership of the Organization and offered
enhanced engagement, with a view to possible membership, to Brazil, China,
India, Indonesia and South Africa. The approval of so-called "road maps" in last
December marks the start of accession talks with Chile, Estonia, Israel, Russia
and Slovenia.

In contrast to many other international organizations, becoming a member of


OECD is not something that is automatically open to applicant countries. The
member countries of the Organization, meeting in its governing body (the
Council), decide whether a country should be invited to join OECD and on what
conditions. This decision is taken at the end of what might be called the accession
process.

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78 Analysis of Pakistani Industry Sec A
Cure facts

Beside of so many advantages by this very scare resource of the world is


impacting a lot ot the natural physic. Like som any chronologist think that the
uses of the oil and gas the emission of the gas and oil is destroying the oozing
layer as many magazines point out this fact…like THE ECONOMIST PRINT and
SCIENCETAGE.COM.

Oozing trouble

Oct 8th 2009


From The Economist print edition

Crude World: The Violent Twilight of Oil. By Peter Maass. Knopf; 288 pages; $27.
Allen Lane; £20. Buy from Amazon.com, Amazon.co.uk

THE story of oil has many villains: greedy oil-company executives, rapacious dictators,
shady middlemen and the like. And it has many victims: a warming atmosphere, sullied
soils and water, and fragile societies. It is tempting to draw a straight line from one to the
other—the bad guys cause the damage. It is a selling point of “Crude World”, a new book
by Peter Maass, an American journalist, that it avoids this easy connecting of the dots.

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It sometimes seems as if God played a cruel trick on humanity by putting so
much of a precious resource in such rough places. But it was the oil that
helped many of those places to become what they are by strengthening their
currencies and making the rest of their economies uncompetitive. Oil
weakens the bonds between governments and people by flooding public
coffers with money, removing the need for wise spending. And it rends
societies, making them vulnerable to civil war.

So the villain of the piece is neither oilman nor despot but oil itself. The stuff oozes out
of Mr Maass’s portraits of countries afflicted, never blessed, with the presence of oil. It
fills the streams in Ecuador where Chevron, an oil concessionaire, is accused of dumping
its wastewater during a long period of drilling. Natural gas flares give the sky a hellish
glow in Mr Maass’s dispatch from Nigeria, in which he canoes around with the “king” of
a band of Niger Delta locals fighting Shell, the biggest oil company in the region.

The recurring tragedy of oil is that it produces wealth but not what is needed most in poor
countries: jobs. Once wells or refineries are built, they take few men to run them. So the
money just pours out of the ground, much of it hauled off by foreign companies, and the
rest sucked up by greedy regimes. Equatorial Guinea’s tiny population and recent oil
discovery should make it one of the richer countries in the world. Its capital, Malabo, has
a direct flight to Houston. Yet most of its people remain miserably poor while its
cartoonish and bloodthirsty ruler gives himself a presidential Boeing 737 with gold-
plated bathroom fixtures.

Mr Maass’s strength is not economic analysis. In his opening chapter he uncritically


endorses “peak oil”, the notion that the world’s crude production will soon begin to
decline, lightly dismissing the view of the many experts who believe the peak to be a
long way off. But this does not detract from his main point: oil has damaged the countries
it comes from.

Oil companies are not particularly greedy; after all, as Mr Maass notes, Apple does not
exactly give away its iPods, but sells them at the highest price it can. He admires the
cunning and devotion of the oilmen he meets. But, from his perspective, few businesses
are as unrewarding, in the sense of providing jobs or useful infrastructure, as the oily one.

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The damage oil does: Oozing trouble
Thu, 10/08/2009 - 10:47 — sciencestaff

For many poor countries oil is the villainCrude World: The Violent Twilight of Oil. By
Peter Maass. Knopf; 288 pages; $27. Allen Lane; GBP20. Buy from Amazon.com,
Amazon.co.uk THE story of oil has many villains: greedy oil-company executives,
rapacious dictators, shady middlemen and the like. And it has many victims: a warming
atmosphere, sullied soils and water, and fragile societies. It is tempting to draw a straight
line from one to the other—the bad guys cause the damage. It is a selling point of “Crude
World”, a new book by Peter Maass, an American journalist, that it avoids this easy
connecting of the dots. ...

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NATURAL GAS

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

COMPOSITION OF NATURAL GAS:


 Methane 70-90 %

 Ethane - Propane 0-20 %

 Butane - carbon dioxide 0-8 %

 Oxygen 0.02 %

 Nitrogen 0-5 %

 Hydrogen sulphide 0-5 %

Uses:

o 60-90% less smoke - producing pollutants.

o Less expensive than gasoline .

o Power generation.

o Automobiles.

o Residential use.

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o Production of fertilizers .(urea)

o Uses in manufacturing of fabrics, glass, steel, plastics, paint etc.

CNG (Compressed Natural Gas)

 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.

 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.

LPG (Liquefied Petroleum Gas )

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

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 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.

LNG (Liquefied Natural Gas)

 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 decrease 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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PROVED RESERVED
PRODUCTION
CONSUMPTION
EXPORT

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IMPORT

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PROVINCE WISE ANNUAL GAS PRODUCTION SHARE

PROVINCE %

SINDH 70.7 %

PUNJAB 4.52 %

NWFP 1.84 %

BALOUCHISTAN 22.5 %

PAKISTAN 100 %

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ANNUAL ENERGY CONSUMPTION:

The consumption of petroleum products, gas, electricity and coal during the first
nine months (July-March 2007-08) of the current fiscal year increased by 10.1
percent, 2.8 percent, 5.7 percent and 11.9 percent, respectively over the
corresponding period of last year.

Petroleum Products

During the first nine months of the outgoing fiscal year 2007-08, the consumption
of petroleum products increased by 10.1 percent. The consumption of petroleum
products declined by 29.7 percent in industry, but registered an increase in
household, agriculture, transport, and power sector by 2.5 percent, 29.9 percent,
19 percent and 10.4 percent, respectively (See Table-15.2). Overall, the
consumption of petroleum products has been declining in the household sector

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for two decades, mainly due to accessibility of alternative. cheaper fuels such as
coal, natural gas and LPG as

well as surge in their prices. On the other hand ,consumption in the agriculture
sector shows a massive increase due to higher demand in this sector and less
availability of electricity in the last two years in particular. Similarly, consumption
in the power sector increased due to non-availability of alternative sources of
energy. The annual growth in the consumption of petroleum products by major
sectors and their relative shares during
1997-98 to 2007-08.

The transport sector is the largest user of petroleum products accounting for 51.1
percent of consumption, on average, followed by power sector (39.4 percent),
industry (6.5 percent), agriculture (0.7 percent) and household (0.6percent).

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Natural Gas:

Natural gas has been gaining immense substance around the world due to its
quality of being a cleaner fuel compared to coal and oil. Pakistan depends
heavily on its natural gas reserves for different sectors of the economy. Because
of its importance as an alternative and relatively cheaper fuel, the share of gas in
total energy is on the rise.
Table 15.4 depicts the annual change in the consumption of gas by various users
during 1997- 98 to 2007 08. During July-March 2007-08, the consumption of gas
in transport sector increased by 27.8 percent, while household consumption grew
by 11.6 percent followed by fertilizer (3.5 percent). However, the consumption of
gas declined in commercial sector (-7.1 percent), cement (-5.1 percent) and
power sectors (-1.2 percent).

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The relative share of gas consumption by end users during the last ten years is
documented in Table 15.5. At present, the power sector is the largest user of gas
accounting for 33.5 percent share followed by the industrial sector (23.8 percent),
household (18.1 percent), fertilizer (15.6 percent), transport (5.4 percent) and
cement (0.9 percent).

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SHARE OF CONSUMPTION OF ELECTRICITY BY END USER:

COMPOSITION OF ENERGY SUPPLIES:

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The supply of primary energy has increased by 49.5 percent in the last 10 years.
The primary commercial energy supplies increased by 4.3 percent during 2006-
07 to 60.4 million tones of oil equivalent (MTOE) from 57.9 MTOE in 2005-06.
The slower growth during 2006-07 can be attributed to (i) lower consumption of
oil. (HOBC, Kerosene, LDO and Furnace Oil) (ii) negative growth (-2 percent and
-21.3 percent) in the import of High Speed Diesel (HSD) and Low Sulphur
Furnace Oil, respectively, a marginal increase (0.7 percent) in the import of High
Sulphur Furnace Oil. The per capita availability of energy grew by 2.61 percent in
2006-07. The supply of energy however, grew strongly by 10.03 percent in the
first nine months (July-March) of the current fiscal year and consequently, the per
capita availability registered an increase of 7.7 percent -- the highest in the last
ten years. The annual trends of primary energy supplies and their per capita
availability; measured in TOE from 1997-98 to 2007-08.

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Crude Oil:

The balance recoverable reserves of crude oil in the country as on January 1st
2008 have been estimated at 339 million barrels. The average crude oil
production during July- March 2007-08 was 70,166 barrels per day as against
66,485 barrels per day during the corresponding period of last year, showing an
increase of 5.54 percent. During the period under review, 31,378 (44.72 percent)
barrels per day were produced in Northern region and 38,787 (55.28 percent)
barrels per day in Southern region, as against 28,507 (42.87 percent) barrels and
37,978 (57.12 percent) barrels produced per day, respectively in the same period
last year. During July-March 2007-08, production of crude oil has increased by
10.1 percent from Northern region whereas production increased in Southern
region by 2.1 percent, in comparison to the production in the same period of last
year, resulting in an increase of 5.54 percent oil production in the country. The
company wise details of production of crude oil during July- March 2007-08 and
corresponding period of the last fiscal year is given in Table 15.10.

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Drilling Activities

During July-March 2007-08, a total of 52 wells have been drilled, including 14


wells in the public sector and 38 in the private sector as against 45 in the same
period last year, registering an increase of 15.6 percent. Total investment of US$
836 million has been made in the outgoing fiscal year in the upstream sector.
Table 15.11 provide the details of drilling activities of the public and private
sector, engaged in the exploration and development of wells, with achievements
during July-March 2007-
08 and 2006-07.

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Natural Gas:
Natural gas is a clean, safe, efficient and environment-friendly fuel. The Energy
Security Action Plan of the Planning Commission estimated that Pakistan will be
facing a shortfall in gas supplies rising from 1.4 Billion Cubic Feet (BCF) per day
in 2012 to 2.7 BCF in 2015 and escalating to 10.3 BCF per day by the year 2025
(Figure15.6). This forecast is based on expected annual GDP growth rate of 6.5
percent and average annual gas price delivered to the consumers at US$ 4
Million British Thermal Units (MMBtu). In order to bridge the demand-supply gap,
the government is working on many fronts, which includes Iran- Pakistan-India
(IPI) gas pipeline project which has
reached at fairly advanced stage.

As on January 1st 2008, the balance recoverable natural gas reserves have
been estimated at 31.266 trillion cubic feet. Consumption of natural gas from July
2007- March 2008 is anticipated to increase from 3,352 million cubic feet per day

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(mmcfd) (2006-07) to 3,474 mmcfd, while the average production of natural gas
during July- March 2007-08 was 3,965.9 mmcfd as against 3,876.4 mmcfd during
the corresponding period of last year, showing an increase of 2.31 percent.
Natural gas is used in general industry to prepare consumer items, produce
cement, fertilizer and generate electricity. Additionally, it is used in the transport
sector in the form of CNG. Currently 27 private and public sector companies are
engaged in oil and gas exploration & production activities. The company wise
position reveals that the production of gas increased by 15.79 percent by BHP
followed by 9 percent increase by OGDCL(See Table 15.12).

Physical performance of SNGPL and SSGPL:

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NATURAL GAS SECTORAL CONSUMPTION DURING 2007 -2008

 POWER 33.5 %
 FERTILIZER 15.6 %
 CEMENT INDUSTRY 0.9 %
 GENERAL INDUSTRY 23.8 %
 DOMESTIC (HOUSE HOLDS) 18.1 %

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 COMMERCIAL 2.7 %
 TRANSPORT (CNG) 5.4 %

SOURCE:MINISTRY OF PETROLEUM AND NATURAL RESOURCES


HYDRO CARBON DEVELOPMENT INSTITUDE OF PAKISTAN

USES OF OIL AND GAS IN OUR LIFE:

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PRODUCTS AND LINKAGES:
 Motor oil

 Gasoline (petrol)

 Kerosene oil

 Jet fuel

 High speed diesel (HSD)

 Furnace oil (virgin)

 Naphtha for petrol

 Lubrications (Adhesives)

 Liquid petroleum gas (LPG)

 Liquefied natural gas (LNG)

 Compressed natural gas (CNG)

 Sulphur diesel

 Hi-octane

 Fertilizers

 Grease

 Turpentine

 Paraffin wax (candles)

 Mineral oil (Nylon,Rayon,PVC,Vinyl)

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 Chemical industry

 Ink industry

 Plastic industry

 Paint industry

 Automobile industry

 Tar (Raw material for making roads)

 Sprits (Perfumes,Body sprays)

 Gas welding (Oxyethyne torch uses for welding)

 Artificial ripening of green fruits (ethene)

IMPACT OF WORLD TRADE ORGANIZATION ON OIL AND GAS


INDUSTRY

• 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.

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• 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.

STRENGTH:
 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.

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 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.

WEAKNESS:
 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.

OPPORTUNITIES:
 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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THREATS:
 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.

RECOMMENDATION:

 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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