Pakistan Oil and Gas Report Q2 2012

BMI View: It will not be possible for Pakistan to maintain gas self-sufficiency much longer – primarilydue to rising domestic consumption, which could climb higher as more power projects come online. Asgas import volumes rise, LNG is set to become part of the energy mix. In the meantime, Pakistan willagain attempt to privatise more of its various state-controlled energy companies and stimulate investmentin domestic oil and gas production.

The main trends and developments we highlight for Pakistan’s Oil and Gas sector are:

.. Oil and natural gas liquids (NGL) volumes in 2011 will have been an estimated 67,200 barrelsper day (b/d), with limited scope for expansion over the medium term. The recent upturn inexploration and development activity may be sufficient to boost near-term production tonearly 69,000b/d in 2012.

.. The government has a deal with Eni to cooperate on oil and gas development projects. TheItalian company will provide expertise and technology exclusively to its Pakistani state partnersin return for access to fields that have been under national control. Eni said the agreement wouldhelp it double its production in Pakistan over the next five to six years.

.. Oil demand is currently running at an estimated 420,000b/d, with 2011 imports thought to havebeen 353,000b/d. With oil consumption expected to reach almost 462,000b/d by 2016, andmodest growth in domestic liquids production, we see oil imports reaching about 409,000b/dby 2016.

.. Pakistan produces around 40bn cubic metres (bcm) of gas per year, all of which is consumeddomestically. Demand is expected to rise substantially over the next few years, according to thecountry’s oil and gas ministry. Pakistan also plans to promote the use of gas in future powergeneration projects, which does mean there will be rising dependency on the fuel. Thegovernment has decided to import 500mn cubic feet of LNG per day (5.2bcm per annum)from Qatar to cope with an energy crisis.

.. Development of new natural gas fields is proceeding, with the government expecting recentlydiscovered fields to add about 10bcm to Pakistan’s annual gas production. A number ofdiscoveries point to reasonable medium-term growth potential. Our forecasts see gas productionreaching 42bcm by 2014/15, then continuing to rise steadily beyond this point. If demand risesin line with our projections, gas imports of almost 5bcm will be necessary by 2016.

.. Crude oil import costs in 2011 are estimated to have been US$13.86bn, rising to possibleUS$13.91bn by 2016. By the end of the forecast period, Pakistan could also be importing4.7bcm of gas at a cost of US$2.20bn, but might be exporting refined products if refineryexpansion plans are realised.

At the time of writing we assume an OPEC basket oil price for 2012 of US$99.38/bbl, falling toUS$97.23/bbl in 2013. Global GDP in 2012 is forecast at 3.2%, up from an assumed 3.1% in 2011,reflecting a faltering recovery in the US and an uncertain eurozone debt situation. For 2013, growth isestimated at 3.7%.