Talking to the members of a visiting Chinese oil and gas conglomerate in Islamabad the other day, President Asif Ali Zardari noted that Pakistan faces a situation that can be characterised as an "energy emergency", and invited Chinese assistance for onshore and offshore drilling, as well as reactivation of abandoned oil and gas fields in different parts of the country.
Later, briefing the media presidential spokesman, Farhatullah Babar disclosed that some 16 gas fields abandoned by OGDC have been identified for the purpose, and that the President had already called for reactivation of all such resources using new technologies. The decision can only be welcomed at a time when the demand for natural gas is increasing fast and production is on the decline.
Overall gas production, reports say, has come down from 4 billion MMCF per day to 3.6 billion MMCF per day. Little wonder then that public protests, especially in the energy-starved Punjab province, against gas and petroleum shortages are becoming more and more frequent and aggressive. Meanwhile, in its 2010-11 budgetary proposals, the government has sought reduction in gas royalty by 2.4 billion rupees. That is likely to act as a disincentive for the gas companies to invest in the new technologies needed to regenerate the old gas wells.
New gas pipelines from Iran and Turkmenistan will take a while to come to fruition. Hence the need to explore all existing opportunities cannot be emphasised enough. One area that so far has remained neglected is that of 'tight gas' - so named because unlike in normal natural gas fields, the gas in this case is deposited in underground formations of sandstone, limestone or hard rock from where it is difficult to access. Its exploitation therefore requires extra resources in the form of technology and finances. That is where Pakistan can enter into mutually beneficial co-operation with Chinese energy companies. They have sufficient experience, finances, and the interest, too, to invest in this country.
Considering that tight gas extraction is a costly process, the royalty issue requires special attention. There are examples from other countries that offer sound solutions such as determining royalty on a sliding scale - gradual increases over a specified time period - tax credit, or other incentives. Unfortunately, we have examples, such as the Thar coal power generation project, where a lot of precious time has been wasted in bureaucratic wrangling between the Centre and the province over the pricing formula.
As a result, certain keen investors lost interest and that vital energy project ran into inordinate delay. The relevant decision-makers, therefore, must treat the present 'energy emergency' as a real emergency. All available resources, including tight gas reserves, must be exploited on an urgent basis so that the commercial as well as domestic consumers do not remain in a constant state of anxiety due to energy shortages.