When oil and water mix?

Exploration licences in the sea hold future promise, not present relief

Pakistan has returned to the sea, and is exploring for oil, though it has not found any yet. However, with the signing of 21 production and sales agreements on Wednesday, 23 agreements now cover 54,200sq km of sea, where the companies have committed $82 million to explore for oil by seismic and sea-based means. If oil is found, then drilling rigs will be set up, with an investment of $1 billion expected. This prospect conjures up a vision of the North Sea oil boom, which peaked at 173 oil rigs, and which has transformed the economies of Scotland and Scandinavia. That is still a distant prospect, but exploration is being embarked on in a way that should yield results.

It is very premature to predict self-sufficiency, which would require production of about 500,000 barrels a day of crude oil, which would in turn require a major increase in refining capacity. However, even a partial shift would be transformative. For a start, it would mean that the current almost daily struggle to keep going, the sight of the country living from one crude oil cargo to the next, and the national electric grid moving into a loadshedding blackout every time an RLNG cargo is missed, can be averted. It must be mentioned that, going by experience, it is not just crude oil that will be found, but gas, and the presence of Mari Gas Ltd among the exploring companies itself illustrates this. Though some of the income from oil will go abroad as repatriated profit, not only will much remain here, but there will be reduction in the import bill. However, these are future prospects. Not only is it not certain that oil will be found, there is a multi-year lead time to full production. However, there is no doubt that the current crisis provided a fillip to the granting of licences.

The real high-production prospects are opened up by shale oil, for which the process of exploration has not opened up, there are shale oil deposits. Pakistan’s deposits are estimated at possible 200 billion barrels (but only nine billion recoverable), but being located inland, over the Indus Basin, are not being exploited, mainly because they are cost ineffective. However, if the current crisis drags out, accessing them might become commercially viable. Meanwhile, the project of offshore oil seems a likelier prospect.