The stability of Pakistan is at risk amid a worsening economic crisis, political turmoil and surging terrorism. However, the recent discovery of substantial oil and gas reserves in Pakistan’s territorial waters might change its destiny by transforming its economic fortunes.
Discovery of oil and gas reserves in Pakistan
Pakistan has made a significant discovery of petroleum and natural gas in its territorial waters. A comprehensive three-year survey was conducted by Pakistan through a friendly collaboration with an allied nation. This survey confirmed the existence of these vast oil and gas reserves, according to the report of DawnNewsTV.
Pakistan became able to know about the exact location of oil and gas reserves through the geographic survey. This discovery has acclaimed a crucial step in leveraging the “Blue Water Economy” for Pakistan. The “Blue Water Economy” not only includes oil and gas reserves but also includes other valuable oceanic minerals and elements.
As per some early estimates, these oil and gas reserves of Pakistan could be the fourth largest oil and gas reserves globally. If the discovery got verified then Pakistan might gain the position of global energy giants like Venezuela.
The largest amount of oil reserves is preserved by Venezuela. Saudi Arabia, Canada, Iran and Iraq also have significant oil reserves. Henceforth, the oil and gas market has a capital of $6.99 trillion as of 2022 and is expected to grow to $8.67 trillion by 2027.
Uncertainty of the discovery of gas and oil reserves
The former member of the Oil and Gas Regulatory Authority (OGRA), Muhammad Arif, stated in an interview with DawnNewsTV that they need to be cautious about the gas and oil reserves. He said, “If this is a gas reserve, it can replace LNG imports, and if these are oil reserves, we can substitute imported oil”.
Arif asserted that the discovery of the gas and oil reserves might turn into an unexpected result. The reserves might not end up as large as expected. Even if they do exist in a large quantity, the extraction process might go through several unforeseen challenges.
Although they tried to start the extraction process soon, it requires a heavy investment of around $5 billion. As a consequence, this might take up to four to five years to materialise. If the oil and gas reserves are confirmed, then they need to develop a robust infrastructure for fuel production and extraction, Arif added.
Pakistan has already imported 80% of their petroleum needs which costs around $15-$16 billion annually. The reason behind it of the financial and technical constraints of Pakistan to upgrade the refining capacity. Henceforth, extracting the newly discovered oil and gas reserves required robust infrastructure, technology and refinery upgrades.
235 trillion cubic feet of gas already reserved in Pakistan. However, exploring 10% of it will require an investment of $25-$30 billion to build infrastructure and replace it with energy imports.
Arif warned that it is still “wishful thinking” until a full analysis of the newly discovered reserves is completed and the extraction process begins. To achieve the positive consequences of these reserves, Pakistan will require time, expertise and financial resources.
Potential economic impact of newly discovered reserves
The energy import bill of Pakistan reached $17.5 billion in 2023, and it might double to $31 billion within 7 years. Pakistan is currently able to meet only 29% of its gas requirements, 85% of its oil requirements, 20% of its coal requirements, and 50% of its Liquefied Petroleum Gas (LNG) requirements.
The new discovery of oil and gas reserves might enhance the energy security of Pakistan. By tapping into the domestic petroleum and natural gas reserves, the country could minimise its dependency on imported energies.
Moreover, 74% of the urban population of Pakistan is struggling to meet monthly expenses. During the year 2021, the inflation rate of Pakistan was 9.50% and in the next year, it increased by 10.38% and became 19.87% in 2022.
The new discovery of gas and oil reserves might generate job creation for the urban people of Pakistan. The requirements of building infrastructure might create several jobs like drilling jobs, refining jobs, transportation and logistic jobs and more. Therefore, the demands of geologists, rig workers, drilling engineers, production engineers, logistics coordinators, environmental scientists, chemical engineers and more will increase.
When more jobs are created then the income and spending power of Pakistani consumers increased. A reduction in the unemployment rate in Pakistan will be found. When the economic stability starts to be enhanced, then more foreign investors will get attracted and start to invest in different sectors including the gas and oil industry.
For instance, the potential revenue generated from the oil and gas reserves of Pakistan could provide a significant boost to the national budget. When the tax revenues from the energy sector increase, the government can invest in other sectors like healthcare, education and more. This can end the economic crisis of Pakistan by ensuring long-term economic growth.
Top 5 countries for oil and gas reserves
The top 5 countries in the gas and oil market are Venezuela, Saudi Arabia, Iran, Iraq and UAE. If the discovery of oil and gas is confirmed in Pakistan, then it can take the fourth position by replacing Iraq, according to officials.
Venezuela
In the oil reserve, Venezuela leads the market. 303.221 billion barrels of oil are reserved in Venezuela. However, the Venezuelan government is still not able to fully utilise its oil wealth because of its ongoing economic crisis, mismanagement and sanctions from the US.
Saudi Arabia
Saudi Arabia has an oil reserve of 267.192 billion barrels leading to hold the second position in the global gas and oil market. 17% of world petroleum reserves are fulfilled by Saudi Arabia. Saudi Aramco managed the onshore oil field of Ghawar and the offshore oil field of Safaniah. In 2022, Saudi Aramco made an impressive revenue of $535.2 billion from oil and gas production.
Iran
Iran holds 208.6 billion barrels of oil reserves and it is among the top 3 oil producers in the world. The majority of oil reserves are concentrated in the southwestern Khuzestan province. However, 80% of the oil production originates from ageing fields creating pressure drops. Due to this the oil production capacity is facing a decline of 8%-10% annually.
Iraq
As of 2022, total oil reserves in Iraq were around 145.019 billion barrels. The oil field of Iraq is located onshore, and the majority of them are located in the southern Basra region, the northeastern Kirkuk region and the Diyala region east of Baghdad. The oil and gas market size of Iraq is estimated to grow at a CAGR rate of 2.35% and increase by $69.22 billion between 2023 to 2028.
UAE
Total oil reserves in the United Arab Emirates (UAE) are around 113 billion barrels as of 2022. The majority of oil reserves are located in the emirate of Abu Dhabi. 95% of the total oil of the country is located here, making the country one of the top oil producers in the world.
Although Venezuela reserves most of the oil and gas, while talking about the production of oil, the US take the lead position. The US produce 14,837.64 billion barrels of oil annually. This has become possible for the US because of its advanced extraction technologies and considerable investment in the oil and gas market.
The US has 48.3 billion barrels of reserve oil. However, the US increased its oil production because of hydraulic fracturing and horizontal drilling techniques. As a result, the US became an oil exporter from an oil importer.
If new discoveries of gas and reserves get verified in Pakistan, and if they are not able to develop their infrastructure through innovation, development and investment, they might lose the potential economic growth like the US. Instead of having the largest gas and oil reserves, Venezuela was not able to fully utilise them because of economic crisis and mismanagement. Pakistan is also suffering from the same phase, and a lack of strategic planning and execution might turn the destiny changer into a missed opportunity.
FAQ
Is oil found in Pakistan?
Yes. Pakistan has made a significant discovery of petroleum and natural gas in its territorial waters.
Will the discovery of oil and gas change Pakistan’s ‘destiny’?
As per some early estimates, these oil and gas reserves of Pakistan could be the fourth largest oil and gas reserves globally. According to some officials, it might change its destiny by transforming its economic fortunes.
What are the top 5 countries in the gas and oil market?
The top 5 countries in the gas and oil market are Venezuela, Saudi Arabia, Iran, Iraq and UAE.
Who is the top oil producer in the world?
The US produce 14,837.64 billion barrels of oil annually. This has become possible for the US because of its advanced extraction technologies and considerable investment in the oil and gas market.
Why is Venezuela not able to utilize its oil wealth?
In the oil and gas reserve, Venezuela leads the market. 303.221 billion barrels of oil are reserved in Venezuela. However, the Venezuelan government is still not able to fully utilise its oil wealth because of its ongoing economic crisis, mismanagement and sanctions from the US.
Is the discovery of gas and oil reserves in Pakistan make it the fourth largest reserves of oil?
As per some early estimates, these oil and gas reserves of Pakistan could be the fourth largest oil and gas reserves globally.
What challenges Pakistan might face regarding the extraction of oil and gas reserves?
Although they tried to start the extraction process soon, it requires a heavy investment of around $5 billion. As a consequence, this might take up to four to five years to materialise. If the oil and gas reserves are confirmed, then they need to develop a robust infrastructure for fuel production and extraction, Arif added.
