Is Pakistan the new kid on the global energy map? If recent reports are to be believed, this could be the case.

Over the last few weeks, local and international media have reported a “massive” oil and gas find in the offshore territory of Pakistan. According to some estimates, the find could be the “fourth largest” oil and gas reserve in the world. That would be a game-changer in more than one way.

Today, Venezuela has the largest amount of oil reserves, with over 300 billion barrels of crude oil, followed by Saudi Arabia, Iran, Canada, and Iraq. The United States is believed to have the most untapped shale oil reserves. Several other countries, including Pakistan, as reported by the US Energy Information Agency several years ago, also have a considerable amount of untapped shale oil and gas resources, mostly in Balochistan.

But, for Pakistan to extract them, particularly given the investment required to unearth the asset and the prevailing security situation in the province, seems difficult, if not impossible.

Pakistan’s primary challenge is not a lack of oil assets but rather how to bring them out from underground

The result of the recent find was made public after a three-year, extensive geological survey conducted in partnership with an “allied nation”. Who that ally is has not been revealed officially and is a matter of speculation. However, there are some indications that it could be Saudi Aramco.

The survey results confirmed the presence of massive resources in Pakistani territory, reports said, quoting a senior official. The survey reportedly also pinpointed the exact location of the deposits.

What is interesting to note here is that in March 2019, Imran Khan, the then-prime minister, announced a possible massive find in the offshore territory of Pakistan. The possible find was even tipped by some as “Asia’s largest oil and gas reserve”.

However, the announcement did not turn into a reality, and Mr Khan had to chew his words. Hours after former prime minister Imran Khan announced that there was a chance of discovering “massive reserves at the site by next week”, the Petroleum Division denied it, saying the drill did not yield the desired results.

“ExxonMobil, ENI, PPL [Pakistan Petroleum Limited], and OGDC [Oil & Gas Development Company Limited] were conducting the drill at Kekra-1. More than 5,500-metre-deep drilling was conducted, but oil and gas reserves were not found. The drilling work has now been abandoned,” an official then told DawnNewsTV.

In hindsight, it seems the announcement was made in haste, apparently for political reasons. Now, it appears that not all hopes were dashed then. In 2021, while Imran Khan’s government was still at the helm in Islamabad, a renewed effort was initiated to pinpoint the presence of the asset in the territorial waters of Pakistan, with the help of an “allied nation”.

The earlier effort seems to be bearing fruit after three years of extensive surveys. A senior, unnamed Pakistani official was quoted in media as saying that the find was an opportunity to capitalise on the “blue water economy”, adding that proposals for bidding and exploration are under consideration, which could lead to the commencement of exploration activities soon. But would Pakistan be able to capitalise on this opportunity? Analysts, quoted in media, are of the view that it would take years before the country could be able to exploit the newfound assets, adding that exploration alone required a hefty investment of around $5bn and that it might take four to five years to extract reserves from the offshore location.

And then despite the news, oil majors do not seem to be rushing over to obtain a piece of the cake, Alex Kimani said in his recent piece in Oilrpice.com. In recent years, oil majors — Total, Shell, and Eni — have exited Pakistan on one pretext or the other. Security remains a major concern.

In July, Petroleum Minister Musadik Malik told a parliamentary committee that oil majors were not very interested in offshore oil and gas exploration in Pakistan. It comes down to security and risk versus reward, Mr Malik told the committee, emphasising that the cost of security is a major deal-breaker because “in areas where companies search for oil and gas, they have to spend a significant amount to maintain security for their employees and assets”. And the security that is provided by Pakistan has not been up to the task.

The number of attacks on Chinese engineers and other personnel involved in projects in Pakistan is enough to indicate the intensity of the security issue. The recent attack on the convoy of diplomats returning from the Swat district, killing at least one police officer and injuring several others, is another reminder of the prevailing security situation in parts of Pakistan.

How Pakistan handles the situation remains to be seen. Given the situation on the ground, the task is formidable. Again, the issue is not a lack of assets beneath the surface but rather how to bring out the assets from beneath the ground.

Oil pundits have long been divided on the issue. Some, like the late Matthew Simmons, have been insisting for decades now that oil is a finite product and that the world would run out of it sooner rather than later.

Others, like this correspondent, have been convinced for decades that there is no lack of resources beneath the surface. The real issues are above the surface. Geopolitics and conditions above the ground are largely hindering the process of bringing out this prized asset from under the ground.

Over the last couple of decades, new oil frontiers have emerged on the global energy map. Many insist that Iraq’s crude potential has not been exploited to capacity. The UAE crude asset base has also gone up considerably over the last several years. Angola, a comparatively new find, is now showcasing its comparatively large asset base, and Pakistan seems to be the new addition to the global energy map.

The United States and the development of the shale industry in the country have turned the geopolitical tide in many ways. Today, the US, not Saudi Arabia or Russia, is the world’s largest oil producer. On the geopolitical chess board, the Organisation of Petroleum Exporting Countries is no longer the sole arbiter of the global energy dynamics. The energy world has undergone a true metamorphosis.

Published in Dawn, The Business and Finance Weekly, September 30th, 2024