A prolonged exploration effort has reportedly revealed vast oil reserves in Pakistan's territorial waters, a discovery so significant it could potentially change the country's economic trajectory. Despite the promise of these reserves, no major oil company is rushing to drill. Experts caution against premature action, noting that it could take years before Pakistan can exploit its newfound resources. Former Ogra member Muhammad Arif highlighted that exploration alone requires a hefty investment of around $5 billion and four to five years to extract oil and gas from an offshore location.
Pakistan currently imports 29% of its gas, 85% of its oil, 50% of its liquefied petroleum gas (LPG), and 20% of its coal, according to the Economic Times. The country's total energy import bill in 2023 was $17.5 billion, a figure projected to rise to $31 billion in seven years, as per an Express Tribune report. This new discovery could provide significant relief to Pakistan's struggling economy, which has been hit hard by mounting debt and skyrocketing inflation, nearly reaching 30%. The economy grew only 2.4% in 2023, falling short of its 3.5% target, forcing the country to rely heavily on elusive foreign aid.
Pakistan's Energy Minister Mohammad Ali stated that the country has 235 trillion cubic feet (tcf) of gas reserves. An investment of $25 billion to $30 billion could allow Pakistan to extract 10% of those reserves over the next decade, reversing the current decline in gas production and reducing energy imports. Columnist Khurram Husain has warned that persistently high inflation could push Pakistan to the brink.
Although the size of Pakistan's reserves has yet to be fully quantified, some estimates suggest that this discovery could be the fourth-largest oil and gas reserves in the world, potentially reshaping energy flows in the region. In July, S&P Global Commodity Insights reported that four largely unexplored sedimentary basins in India could contain up to 22 billion barrels of oil, more than the already productive Permian Basin.
Despite the potential, there is hesitation among international companies. Shell announced it was selling its Pakistan business stake to Saudi Aramco in June last year, and an auction for oil blocks got a muted response from international bidders. According to The Nation, no international company bid on 15 of the blocks. In July, Pakistan's Petroleum Minister Musadik Malik told a parliamentary committee that no international companies were interested in offshore exploration in Pakistan due to security concerns and high-risk factors. The cost of security is a major deal-breaker because companies need to spend significantly to protect their employees and assets, and Pakistan has failed to provide adequate security.
In March, five Chinese engineers were killed in a suicide attack in Pakistan’s northwest, leading to temporary shutdowns across other projects. Insurgents also attacked Chinese assets in Pakistan’s southwest, targeting the Gwadar Port Authority complex run by China. These incidents underline the high-security risks, deterring international oil companies. This scenario suggests that Pakistan might have to rely on Chinese state-owned or state-controlled explorers, who have a higher risk tolerance.
Discussions are reportedly underway with Chinese companies, and without more enthusiasm from Aramco, these reserves are unlikely to be exploited soon. Meanwhile, Iran is believed to be smuggling oil into Pakistan annually, further complicating the nation's oil and gas crisis.
