Supply and demand

Oil & gas, one of the vibrant sectors, achieved very high level of growth in a few years.
Strategically located at the foot of Central Asia, Pakistan offers great opportunity for them and
has an estimated resource potential of 200 trillion cubic feet of natural gas and over40 million
barrels of oil. Pakistan's potential as a big business opportunity is highlighted by the fact that
over 25 oil companies, of which 21 are multinational, are presently exploiting reserves in the
country.

The Government of Pakistan has issued over 100 licences for exploration of around 28,000
square kilometres. However, to date Pakistan has only discovered 15% of its total oil reserves
and in turn has become major importer of oil and petroleum products.

Pakistan's demand for energy is currently about 44.5 million tonnes of oil while production is
about 66,000 barrels per day and that of gas is about 2.7 billion cubic feet. Oil demand in
Pakistan is expected to grow from 19 million tonnes per year in 2000 to about 27 million tonnes
per year in 2010 and in the absence of significant discoveries, most of it will be imported.
Imported crude and products place a heavy burden on balance of payments position and

Pakistan Oil and Gas Industry

Pakistan oil and gas industry is going through a process of transition as IT is

experiencing a new wave of privatization. Government of Pakistan has announced its
intention of privatizing 37% of its 75% stake in Qadirpur gas field and also transferring
management responsibility to private companies. Aware of rich oil and gas reserves, oil
and gas industry of Pakistan is putting in steady efforts to make best utilization of
resources and build a strong production base.

Petroleum Policy of oil and gas industry in Pakistan is designed with a focus on
promoting private sector investment in oil and gas sector. Instance of gas and
condensate discovery by Oil and Gas Development Company Limited (OGDCL) in
Exploratory Pakhro Well No. 01 is a major achievement of this sector. Austria's OMV is
credited with discovery of gas in Taijal 1 exploration well. OMV has also pointed out
medium-term growth potential in Pakistan's reserves.

Reports of oil and gas industry of Pakistan reveals this country’s current average daily
oil production is about 3,800 net barrels and natural gas of 73 net million cubic feet.
Despite such huge potential, Petroleum Ministry of Pakistan reported high trade deficit
due to major gap between import and export value. Oil import of Pakistan is expected to
reach $6.5 billion in 2009 and government aims at formulating policies to reduce import
dependence and promote self-reliance by triggering exploitation.

BP, one of world's largest energy companies entered Pakistan oil and gas industry by
acquiring all of Oxy's remaining reserve in Pakistan of approximately 68 billion cubic
feet of natural gas and 3 million barrels of oil. Iran has also consented to sign gas
supply deal with Pakistan oil and gas industry and it will work to construct proposed
Iran-Pakistan-India gas pipeline although India has not expressed its decision on this
regard.

POGEE or Pakistan Oil, Gas & Energy Exhibition & Conference to be held between
18th and 21st May, 2009 will discuss several imperative issues concerning oil and gas
industry at Pakistan including increasing demand for products and services in this
sector. This is an important event for Pakistan oil and gas industry as leaders of this
sector get a decent scope of displaying latest technology pertaining to energy industry.
Focal point of this conference will be to highlight contemporary developments in
Pakistan’s oil and gas sector

Energy (Oil & Gas)

Overview
Pakistan’s produces about 60,000 barrels of oil per day which only meets approximately one
sixth of the country’s current oil requirement. The balance amount is imported at a staggering
cost of US$2.5 Billion. In view of the increasing demand and the current decline in production
this cost is going to increase substantially over the next couple of years.
The demand for natural gas is exceeding supply due to increased usage in the domestic,
industrial and power generation sectors. Apart from this, Pakistan does not have the necessary
infrastructure to cope with the increasing volumes of imported oil and requires substantial
investment to support this infrastructure. The Privatisation of the units in the oil and gas sector
will not only increase the operational efficiency of these units but also contribute towards new
injection of investment.
Policy
The Petroleum Policy of 1994 assisted in the development of the upstream sector. The Policy,
however, could not arouse sufficient interest to attract interest in the downstream sectors, off
shore areas and the Baluchistan Basin.

The 1997 Petroleum Policy is based on a review of the 1994 Policy and offers major incentives
in the upstream and downstream petroleum sector,, including a package based on production
sharing arrangements for offshore areas. The Policy focuses on mobilization of greater
resources and promotion of private sector investment in the oil and gas sector.

Efforts are being make to exploit the existing energy resources to build a strong indigenous
exploration and production base. These efforts are directed at achieving cost effectiveness,
reduction in import dependence, promotion of self-reliance through accelerated exploitation of
energy resources and minimum environmental degradation.

In addition, a number of far-reaching measures have been taken which include attracting
private foreign investment, creating a qualitatively improved infrastructure in oil and gas
industry, development of an efficient and transparent management, deregulation of downstream
petroleum marketing sector and rationalization of prices and LPG allocation.

A new package for offshore exploration has been prepared for attracting exploration
investment in off-shore areas which has so far remained relatively limited. A separate Holding
Company, Gas Regulatory Authority and Petroleum Regulatory Board are planned to be
established for privatization. The privatization of SNGPL and SSGCL is under process. The
import of LPG has been liberalized to promote investment in import of LPG, storage and
infrastructure on the basis of commercial opportunities and risk. This would facilitate those
areas of the country, which are not yet connected with pipeline network.
Statistics
The major sources of commercial energy supplies in the country include oil, gas, coal, liquefied
petroleum gas (LPG), hydel power, thermal power and nuclear power. The quantum of energy
supplies from these sources during July-March 1996-97 stood at 124.97 million barrels of
oil/petroleum products, 522,768 Mcf of gas, 43,605 kWh of electricity and 2,366 thousand
tones of coal. Out of the total commercial energy supplies in the country during July-March
1996-97, oil accounted for 42.70 percent followed by gas (37.68%), hydel power (14.14%),
coal (5.30%) and nuclear power (0.18%).

Oil is the largest source of energy supply accounting for 42.70 percent of total supply during
July-March 1996-97. Oil by and large is an important source of energy. However, an increasing
proportion of oil requirement is being met from domestic production.

Next to oil, natural gas is a major source of energy accounting for 37.68 percent of the total
energy supply. Apart from being a cheap source of energy for domestic consumers, it is a feed
stock for chemical fertilizers and a major source of energy for thermal power and cement
plants.

The country has recoverable gas reserves of 20.814 trillion cubic feet. The average production
of gas during July-March, 1996-97 was 1,909 million cubic feet per day against 1,806 million
cubic feet per day during July-March 1995-96. Main companies currently engaged in
exploratory and development activities are LASMO, MGCL, OGDC, OXY, POL, PPL and
UTP.

The country has recoverable oil reserves of 209 million barrels. The average oil production
during July-March 1996-97 was 58,784 barrels per day of which 22,154 barrels per day was
produced in the northern region and 36,630 barrels per day in the southern region. The oil
production in the northern region declined due to natural depletion of oil fields.
Oil has been produced in what is now the republic of Pakistan from the early 1920's.
According to Oil and Gas Journal (OGJ), Pakistan had proven oil reserves of 300 million
barrels in January 2006. A number of fields were discovered in the upper Indus basin in
the 1930's and 1940's. Since around 1980 a large number of hydrocarbon discoveries
have been made in the central and southern parts of the country. In 1999 there were at
least 70 oil and condensate fields in production, although none of them was of any great
size. Total output has fluctuated within a range of about 55 000-65 000 b/d since 1989.
In 2006, Pakistan produced an average of 58,000 bbl/d of crude oil, but has ambitious
plans to increase its current output to 100,000 bbl/d by 2010. According to the 2008 BP
Statistical Energy Survey, Pakistan consumed an average of 362.38 thousand barrels a
day of oil in 2007.

The country’s oil sector is regulated by the Ministry of Petroleum and Natural
Resources. The Ministry grants oil concessions by open tender and by private
negotiation. BP is currently the largest oil producer in Pakistan.

Although the level of proved reserves reported by the Pakistan WEC Member
Committee has tended to drift downwards in recent years, natural gas remains a major
energy asset for Pakistan. According to the 2008 BP Statistical Energy Survey, Pakistan
had 2007 proved natural gas reserves of 0.85 trillion cubic metres, with the major gas-
producing fields being Sui in Balochistan and Mari in Sindh. According to the 2008 BP
Statistical Energy Survey, Pakistan had 2007 natural gas production of 30.8 billion cubic
metres and consumption of 30.8 billion cubic metres.

Pakistan’s government has plans to build a pipeline from Iran’s massive natural gas
reserves to Indian markets across Pakistani territory.