1. (SBU) SUMMARY. Pakistan's oil reserves of 353.4 million barrels are
inadequate to meet the country's growing energy requirements.
Pakistan depends on expensive imports of crude oil, furnace oil and
diesel to meet its energy needs, costing the country over 30 percent of
its export earnings. A proposed energy corridor with China could
expand production at Gwadar port. END SUMMARY. 2. (U) This is the
third in a series of cables on Pakistan's energy sector and provides
background on oil resources in Pakistan. --------- Overview --------- 3. (U)
As of June 2007, Pakistan has recoverable oil reserves of only 353.4
million barrels compared to original recoverable reserves of 883.47
million barrels, according to the Hydrocarbon Development Institute of
Pakistan. Pakistan is a small oil producer; in comparison, Saudi Arabia
has proven oil reserves of over 260 billion barrels. At the present rate
of production (24.6 million barrels per year), this oil will deplete in 14
years unless new discoveries are made. The majority of oil production
comes from proven reserves located in the southern half of the
country, with the three largest oil-producing fields located in the
Southern Indus Basin and additional fields in the Middle and Upper
Indus Basins. Pakistan has not added new oil fields since the late
1980s. As a result, oil production has remained fairly flat, at around
60,000 barrels per day (bbl/d). During the Pakistan fiscal year ending
June 2007, Pakistan produced 65,577 bbl/d, however, Pakistan has
ambitious plans to increase its current output to 100,000 bbl/d by
2010. At this increased production rate, oil reserves will deplete in 10
years. 4. (U) Due to Pakistan's modest oil reserves, domestic
production is also modest and the country is increasingly dependent on
oil imports to satisfy domestic oil demand. As of November 2006,
Pakistan had consumed approximately 350 thousand barrels of oil and
various petroleum products, of which more than 80 percent were
imported. The majority of oil imports come from the Middle East,
principally from Saudi Arabia. Primary Energy Supplies by source 5. (U)
At present, Pakistan meets about 75 percent of its total energy
requirement from domestic sources. In the Pakistan fiscal year 20062007, approximately 48.5 percent of its energy needs were met by
indigenous natural gas, 30 percent by domestic and imported oil, and
12.6 percent by hydro electricity. In addition, coal contributes 7.3
percent, nuclear electricity 0.9 percent, liquefied petroleum gas 0.5
percent and imported electricity 0.1 percent. The increasing gap
between energy supply and demand remains a challenge for Pakistan,
but also provides investment opportunities for local and international
investors. ------------------------------------- Sector Organization and
Privatization ------------------------------------- 6. (U) Pakistan's Ministry of
Petroleum and Natural Resources regulates the country's oil sector. The
Ministry grants oil concessions by open tender and by private

PK SUBJECT: PAKISTAN OIL RESOURCES: ENERGY CORRIDOR WANTED negotiation. ECON. While there is no prospect for oil self-sufficiency. has conducted private negotiations for acreage between individual companies and the Ministry of Petroleum and Natural Resources.000 bbl/d. OGCDL is Pakistan's second-largest oil producer. The licenses cover the Tegani. Chevron/ CalTex (USA) and Tullow (Ireland). the GOP has encouraged private (including foreign) firms to develop domestic production capacity. In 2005. include the Oil and Gas Development Corporation Limited (OGDCL). In July 2006. Major IOCs operating in Pakistan include BP (UK). PPL owns the Sui fields in Balochistan. (U) Historically. OMV (Austria). and W) in the . BP led the development by drilling ten wells in its Lower Indus Basin acreage. 12958: N/A TAGS: ENGY. Pakistan Petroleum Limited (PPL) and Pakistan State Oil (PSO). Pakistan's three largest national oil companies (NOCs). BP operates 43 fields and more than 100 wells throughout the country. EINV. (U) British Petroleum (BP) is the largest oil producer in Pakistan.UNCLAS SECTION 01 OF 03 ISLAMABAD 000921 SIPDIS SENSITIVE SIPDIS E. with the majority being on its acreage in the Middle Indus Basin. Pakistan continues to strive for privatization of its state-owned companies. with production averaging approximately 30. by drilling offshore at the Pasni X2 shallow water field. Pakistan awarded BP three blocks (U. In June 2006.000 bbl/d. To encourage oil sector investment. Pakistan ISLAMABAD 00000921 002 OF 003 hopes to reap significant revenues from these privatizations over the next several years. Thal and Than Beg Blocks and OGDCL has committed to conducting geological surveys and to drilling four exploration wells on the blocks.800 retail outlets. Five percent of the company was previously divested in November 2003 in an initial public offering. with average production of 25. as well as exploration interests in 22 blocks. All three operate under joint ventures and partnerships with various international oil companies (IOCs) and other domestic firms. (U) In response to conditions laid down by lenders. while PSO holds a majority share in the domestic diesel fuel market with more than 3. EFIN.8. PPL expanded its interests in 2005. Orient Petroleum Inc.9. Petronas (Malaysia).O. From the blocks offered. Pakistan has held few large licensing rounds. Pakistan plans to have a share issue from OGDCL for the equivalent of 15 percent of the NOCs capitalization.(Canada). such as the International Monetary Fund and the World Bank. NOCs and IOCs drilled a total of 29 onshore development wells in Pakistan. the Pakistani government awarded OGDCL three exploration licenses in the southern Sindh and Baluchistan provinces. Eni (Italy). V. the government awarded POL an exploration license for the Kirthar Block in southern Pakistan. Pakistan opened a rare licensing round offering nine onshore and offshore blocks. In February 2006. and instead. 7. ---------------Licensing Rounds ---------------. while ODCGL drilled nine wells. PREL. -------------------------Exploration and Production -------------------------. the Ministry has offered various tax and royalty payment incentives to oil companies. It was the first time a Pakistani oil company had explored offshore.

EFIN.15. with its main storage facilities located at Karachi's Port Qasim. 12958: N/A TAGS: ENGY. a "petrochemical city" will be set up with an initial investment of USD 12. 13.10. PREL. China and Pakistan have optimistically agreed in principle to build a trans-Karakoram oil pipeline along the Karakoram Highway connecting the Middle East with the north-western China. PSO leads Pakistan's fuel distribution market. (U) Pakistan's net oil imports are projected to rise substantially in coming years as demand outpaces increases in production.630 bbl/d in seven to nine years. The government is working on an ambitious plan to establish an 'oil city' with investment of USD 40 billion at Gwadar Port.315 bbl/d of ISLAMABAD 00000921 003 OF 003 oil annually.5 billion. ---------. In phase-1. a five year tax holiday and an increase in initial depreciation allowance from 50 percent to 100 percent. so nearly half of Pakistani oil imports are refined products. PK SUBJECT: PAKISTAN OIL RESOURCES: ENERGY CORRIDOR WANTED offshore Indus Delta region. oil logistics and storage facilities. Demand for refined petroleum products also exceeds domestic oil refining capacity.285. (SBU) Pakistan is looking for opportunities to address its energy crisis and is keen to explore all options. the GOP is resolved to explore all options.5 billion investment for the project. and petrochemical. ECON. the transKarakoram oil-gas pipeline will enable Caspian oil to reach the world oil market.Downstream ---------. (U) Board of Investment (BOI) Director General. Pakistan and China signed a bilateral memorandum of understanding for energy cooperation. potentially making it the biggest crude and refined oil storage base in the region.500 acres of land in Gwadar to be leased at nominal rates to companies interested in setting up refineries or making investment in oil logistics and storage facilities. (U) The "oil city" project would be completed in two phases. The GOP expects the Chinese Petroleum Chamber to come up with USD 12. If developed. (U) During President Musharraf's February 2006 visit to China. 12. -------Comment -------. Muhammad Muslim. and largely funded by the Chinese government.O. the GOP suggested establishing a trade and energy corridor. allowing Chinese access to Central Asian energy measures.UNCLAS SECTION 01 OF 03 ISLAMABAD 000921 SIPDIS SENSITIVE SIPDIS E. 14. In the first three years. (U) In addition. In April 2006. EINV. Pakistan's largest port is located in Karachi. told ECONOffs that the GOP has allocated 12. While most of the energy cooperation plans seem overly optimistic. but must make the necessary regulatory changes to promote greater interest by foreign investors in .11. with some Chinese private sector financing. including a large refinery. The capacity of this refinery will be increased up to 428. the "oil city" refinery capacity will be enhanced to 1. the refinery will be able to refine 214. which serves as the principle point of entry for oil imports. Muslim said that the BOI is developing a package of incentives that include a proposed zero custom duties on plant and equipment. particularly the rapidly growing Asian economies. Under the second phase of the plan.890 bbl/d in fifteen years. --------------Energy Corridor --------------.

ECON.UNCLAS SECTION 01 OF 03 ISLAMABAD 000921 SIPDIS SENSITIVE SIPDIS E. PATTERSON .O. EFIN. EINV. PK SUBJECT: PAKISTAN OIL RESOURCES: ENERGY CORRIDOR WANTED Pakistan's energy sector. PREL. 12958: N/A TAGS: ENGY. Pakistan now realizes that it can ensure its energy security only through regional cooperation.