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Wednesday, May 22, 2024

Pakistan ready to open new areas for oil and gas exploration

Pakistan is opening new areas for oil and gas exploration through competitive bidding, which will push massive exploration activities in the country, announced Federal Minister for Energy Hammad Azhar on Monday.

During a meeting with the Japanese envoy, Federal Minister for Energy Hammad Azhar said “Pakistan has significant oil and gas reserves and opening of new blocks will not only increase the local oil and gas production but will also help save a lot of foreign exchange now used for its imports.”

Ambassador of Japan Kuninori Matsuda lauded the government’s policies in the energy sector and invited the minister for the Asia Green Partnership Ministerial Meeting (AGPM) to be held in October 2021 in Japan.

During the meeting, Matsuda informed the energy minister that Japan has announced Asia Energy Transition Initiative (AETI), which is offering $10 billion financial support for renewable energy, energy efficiency, LNG and other projects.

The initiative is aimed at decarbonisation projects in Asia, such as renewable energy, energy saving and conversion to gas-fired power generation from coal-fired power to help with energy transition.

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Accepting the invitation to participate in AGPM, Azhar said that international companies including Japanese firms should participate in the competitive bidding of oil and gas exploration blocks.

The minister also informed the Japanese ambassador of the measures taken by the present government to substantially reduce the growth of circular debt from Rs538 billion in FY20 to Rs177 billion in FY21 which has restored investor confidence.

2020 had been a tough financial year for the oil and gas exploration sector as the economic activities around the globe came to a halt owing to the lockdowns. Due to oversupply and low demand, the companies were forced to trade in the red. Overall, in FY20, the production of oil declined by 14% year-on-year while gas production fell by 8% year-on-year.

In Pakistan, the exploration costs declined during the year due to the Pakistan Petroleum Limited being uninvolved in the exploratory activities as the company faced a cash crisis. Owing to the uncertainties, the prices also remained volatile throughout. The currency devaluation in 1QFY21 also contributed to the low profitability of the sector.  Moreover, the companies faced a financial crunch because of circular debts which affected the drilling activities in the country. These circular debts kept adding to the receivables which ultimately led to a decrease in the dividend paying capacity of these firms.

The current demand for imported coal, oil and RLNG is also exceeding domestic production. Thus, the country is being forced to import energy resources by spending foreign capital. However, the government is now hopeful that opening of new areas for oil and gas exploration through competitive bidding would help save a lot of foreign exchange and would help meet domestic r