Self created petroleum woes and IPI project in Pakistan

M S HASAN

ARTICLE (January 25 2009): The management, or more appropriately, mismanagement of petroleum related matters, never cease to amaze me! As a petroleum professional of sorts and considerable association with this industry, I learnt of Dr Asim Hussain, for the first time when the national media, some time back, had reported the return of an "advisor" on petroleum to the prime minister, from Iran who announced that the government of Iran had agreed to supply 50,000 barrels of crude per day, to a cash strapped Pakistan on deferred payment basis.

The petroleum advisor was identified as Dr Asim Hussain. It was seemingly a good news, with the assumption that finally a petroleum professional was put at the helm of petroleum affairs, thinking perhaps, naively, that the individual was probably, a Ph.D., from a top rate European or American university either in Petroleum Engineering or Geophysics or Geology or in Economic Engineering or a doctor of jurisprudence, (JD), specialising in petroleum related subjects such as law, inter-state negotiations, petroleum concessions, crude, gas pricing agreements, or transmission tariffs or refining economics.

To my utter surprise, contrary to my daft assumption, I later discovered that Asim Hussain is a doctor of medical sciences and not a Ph.D. in any of the petroleum related disciplines or physical sciences, as I had thought!

This the perennial and chronic ailment the Ministry of Petroleum, its affiliated departments and public sector organisations are afflicted with, ie; assignment of individuals to key and critical position who have no clue or work experience of the subject, issues confronting the organisation they head, woefully lacking in skills, expertise and above all, requisite proficiency and competence.

During my interface with the petroleum ministry and its affiliated public sector organisations, I have had to deal with and patiently listen to individuals in key positions who had no clue of the complexities of the petroleum industry and who could not even tell the difference between a BTU, (British Thermal Unit), and ICU, (Intensive Care Unit)!

At least, Dr Hussain may not know what a BTU or MSCF or MMSCF/D, are, (like the honourable Minister for Power, Raja Pervez Ashraf) he would most certainly know an ICU, because it is where the domestic petroleum industry, both of its up and downstream segments, are currently lying in a deep coma, supported by ventilators as its resuscitation has become extremely difficult.

Managers of petroleum affairs in Pakistan government, just love to bask in the bliss of lethargy, inaction, inertia and thrive in a state of status quo, period. Now reverting to the ongoing fossil fuel crises, particularly the fast depleting domestic gas reserves, dwindling exploration and production activities, energy crises, the swinging crude prices and the huge difference between supply vs. the demand, compounded by cash crunch and massive erosion in the value of the rupee, Pakistan is faced with a horrendous situation and unfolding of an emerging energy crises of unimaginable magnitude.

Crude prices are currently down but how long this honeymoon would last, is anybody's guess. The smart ones, however, will look to creating a comfort zone for the short to medium term fuel securities while working diligently for achieving a long term and sustainable energy security for the future needs.

Between July 30 and December 31, 2005, as far back as over 3 years ago, 4 of the writer's letters on the impending energy crises, now a reality, were posted in the print media, with suggestions to address these difficult issues. Pakistan's energy related problems, though, self-inflicted, are not insurmountable.

These can be solved, not quickly, but in due course of time, in the next 3-5 years time frame, to secure fossil fuel security to some degree of comfort, provided the petroleum affairs at the federal and ministerial levels are handled with competence, commitment, ingeniously engineered concepts, by making a paradigm shift in policies, thinking, management process, skills and vision for energy security.

The country's entire petroleum set up, including the ministry, its directorates, Oil and Gas Regulatory Authority, (OGRA), public sector organisations like the Oil and Gas Development Company Ltd; (OGDCL), etc, which are currently suffering from incompetence, overstaffing with dead wood, under utilised manpower resources, lack of direction, absence of astute leadership, need for complete overhauling and imaginative re-engineering to enhance, manifold, their efficiency, productivity and placement of doable, tangible and cost effective action plans with a view to creating pockets of sustainable and adequate fossil fuel security segments through hedging, inventory management, farming - in the prospective overseas acreage, making joint ventures outside of Pakistan, accelerating domestic exploration activities and resolving the Kohlu Block quagmire in the Marri-Bugti prospective area on priority basis.

Besides the off-shore option, this is the only prospective acreage left in the country for primary production. In one of my letters, Iran-Pakistan-India gas pipeline, fraught with problems, was discussed and unfortunately the conclusions made in 2005, turned out to be, largely, in line with what was written at that time.

Pakistan's natural gas supply/demand problems are not like the gastric problems and neither are the pipeline issues and configuration similar to intestinal gastric related ailments, as the medical doctor-cum-petroleum advisor must have discovered by now. They are much more complex, especially if the participants in the gas pipeline project suffer from crises of confidence, lack of good faith and unwarranted greed and arm twisting, driving the supplier to make unjustifiable demands on the potential buyers.

Iran's conduct in gas pricing negotiations has been less than acceptable and credible. First it was the insistence to include India, which was initially, not a bad idea, then the free, gratis gas transmission to the Indian tail end and finally the demand for a USD 10-11 per MMBTU price, are truly a preposterous task.

This could put the entire future prospects of supplies from Iran, should the project go forward, in doubt as Iran can be a difficult vendor like the Gazprom of Russia, which stops gas supplies to its Eastern European and European customers at the drop of a hat! In this context, Pakistan urgently needs to explore other avenues and options including LNG.

Suffice to say that problems are many, very complex in nature and the way forward is extremely arduous, but thank God, the bestowed ingenuity, creativity and the passion to achieve, can ease the crises to a bearable level. The saving grace is that Pakistan has the people, expertise and skills to achieve this objective.

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