Directionless vision

Directionless vision

Cabinet Committee on Energy has decided to lift ban on import of furnace oil to meet the demand of thermal power plants which were either running below the installed capacity or have to be shut down due dearth of fuel. Seven oil companies have been asked to make arrangement for early import of the commodity. The non-availability of required quantity of furnace oil for power sector necessitated shifting of burden of electricity generation to RLNG run power plants. This has caused extremely low pressure in the gas pipelines for exports oriented textile and leather goods industries. All Pakistan Textiles Mills Association (APTIMA) had sent a letter to Secretary Petroleum Division, complaining therein that gloomy picture of gas availability had made the industry unable to meet export orders and make it run on the path of recovery.

The ban on import of furnace oil was imposed in January as over the years Petroleum Division did not budge an inch to expand the onshore storage for facilities for crude oil and refined petroleum products. Even now there seems no possibility of working out a plan to expand the onshore storage facilities, modernize the outmoded oil refineries and build new ones. It amply explains the reason of not fully utilizing the deferred payment facility given by the Saudi Arabia for the import of crude oil. Pakistan could import crude oil worth $768 million under this facility in the outgone fiscal year against the sanctioned annual limit of $3.2 billion. This bitter reality came to limelight in a publication of economic affairs ministry. It is pertinent to mention that Prime Minister Imran Khan visited Saudi Arabia twice to clinch the deal for oil import on deferred payment.

When oil prices crashed in the global market, feelers were released to print media that a proposal of importing crude oil is under consideration and forward contracts are going to be made soon. However, it later turned out merely a public relation exercise because there was no space for accommodating additional imports in existing onshore storages. Hence country was deprived of the benefit of low oil price.

The previous PML-N government used to talk about the game-changer impact of CPEC, but at the same time deliberately neglected formulating long term plan and implementing short term strategies to build oil storages in view of the expected rise in demand for petroleum products in the second phase of industrialisation by way of relocation of Chinese industries to the proposed nine special economic zones. Likewise, neither process of giving licenses to foreign oil companies was streamlined in the newly identified oil and gas blocks, nor efforts were made to increase production from the already operational oil fields. The same directionless vision is all pervading in the decision making in the present government as well, although it is keen to fast track the wheel of industrialisation in CPEC phase-II.

Council of Common Interest (CCI) had already approved very attractive incentive package for oil and gas exploration and production companies in the high risk zones of Baluchistan and tribal districts of Khyber Pukhtunkhwa. Over 21 trillion cubic feet (TCF) gas reserves have been estimated in these areas in addition to big oil reserves. It may be recalled that in March Prime Minister Imran Khan had given an approval in principle which included offering better prices to oil and gas exploration companies in the risky areas of two small provinces.  Currently, Pakistan spends $ 5 billion on oil imports. Continuation of policy that entirely focuses on import of petroleum products, which accounted 30 percent of current account deficit of in the past, will perpetuate balance of payment crisis. It remains to be seen that as to whether myopia of the previous government prevails in energy policy or bold decision are made to dislodge the vested interest group that openly manipulate the decision making process in this regard. Hopefully, oil and gas exploration activities will gain momentum in addition to increasing their production from the operational fields.

Posted in