Petroleum Policy 2012 – Handling of Current Energy Crisis

In the backdrop that the government was seeking suggestions for draft Petroleum Policy 2012, IPS on March 27, 2012 organized a seminar titled ‘Petroleum Policy 2012 – Handling of Current Energy Crisis’.

In the backdrop that the government was seeking suggestions for draft Petroleum Policy 2012, IPS on March 27, 2012 organized a seminar titled ‘Petroleum Policy 2012 – Handling of Current Energy Crisis’. The event was chaired by Mirza Hamid Hassan, former Secretary, Ministry of Water & Power and Chairman, Steering Committee IPS Energy Program. Muhammad Arif, president, Energy Lawyers’ Association of Pakistan, was the lead presenter while Ameena Sohail, head of IPS Energy Program moderated the session and Khalid Rahman, Director General IPS made the opening remarks. Masood Dahir, policy analyst and former federal secretary, Fasihuddin, former Chief Economist, GoP and Member IPS National Academic Council, Amanullah Khan, former president of RCCI, A. Rahim Khan, senior energy sector expert and Muhammad Khalid Javed, founding Managing Director of PPRA were amongst the prominent participants of the seminar discussions, which was attended by a select gathering of academics, researchers, economists, policy analysts, retired and serving bureaucrats, lawyers, industrialists and members of the civil society.

In his presentation to the seminar participants, Muhammad Arif gave a detailed overview of the current energy mix in Pakistan and sources of electricity generation and also highlighted the post-18thamendment issues that have been severely affecting the energy sector.
He said that Pakistan had issued seven petroleum policies during past two decades but none of them had taken into consideration the impact of the previous. “While need was felt every second or third year for a new policy, the objectives and the recommendations have fundamentally remained the same.
To further aggravate the situation none of these policies was actually
implemented”, he lamented.”Successive governments in Pakistan have been introducing national petroleum policies very frequently over past decades but they were mainly aimed at gaining political mileage and not at making a real difference. The draft petroleum policy 2012 too is not different from previous policies except providing a pricing mechanism for gas, which is bound to increase gas prices manifold”, he stated.
He was of the view that the 18th constitutional amendment has proved to be a major blow on exploration and production activities of natural resources as the amendment in Article 172(3) when read with Article 161 had created confusion of jurisdiction between the central and provincial governments with effect that E&P activities are at a halt since June 2010. “No new exploration block has been notified since then while previously new exploration blocks were notified twice a year on average”, he highlighted.
He stressed that this contradiction between constitutional provisions needsto be removed as soon as possible.

Reviewing energy production and consumption in the country, Muhammad Arif said that despite the fact that Pakistan had large reserves of coal, it was not being used to mitigate energy crisis. Pakistan relied mainly on oil and gas for energy generation and produced more than 62 percent energy through these resources. The use of coal for energy generation was merely 0.15 percent. While there were two major opinions in the country, of which one seems to over-estimate and other under-estimate the quality and quantity of the coal reserves in Pakistan. “In view of current energy crisis, we cannot afford to abandon the Thar coal”, he emphasized. He said that even if the actual worth of Thar coal was barely 10% of exaggerated claims, it would meet our energy and fuel needs for at least 50 years.
He also revealed that the oil and gas prices being offered in the 2012 policy were quite high compared to those of other regional countries including neighbouring India.
Summing up the discussion, Mirza Hamid Hassan deplored that the country has had too many petroleum policies in the past. He said that for the first time the 1991 policy referred to the pricing issue for consumers. He stressed the regulators’ responsibility for ensuring affordable energy pricing for the consumers.
Hassan criticized the regulators for what he termed as their failure to
protect the interests of the common consumers and local industry referring to the aggregate per unit price of electricity in Pakistan, which has now reached more than Rs20 per unit. He said that the draft policy of 2012 fails to address the concerns of the consumers and does not touch the pricing issue. He was of the view that the draft policy was only an oil exploration and development policy.
He said that in 1960s and 70s, hydel power was the bulk of national energy however the shift to thermal energy created crisis after crisis as first it was based on oil and when it increasingly became expensive it was decided to convert it from oil to gas based power generation without bringing into account how long the gas reserves would last, and suddenly it was being realized that there was no gas in the country!
He also urged the need for resolving the confusions being created regarding the energy sector between the federation and the provinces on an urgent basis.
He warned the government against upward revision of gas prices to bring them at par with the oil prices calling it a ‘recipe for disaster’ and maintained that foreign investment cannot be attracted merely through fiscal incentives. He was also of the view that the inconsistency in petroleum policies and their frequent changes will keep the international investors away from Pakistan. “Better working environment, security of lives, property
and capital, efficient energy supply, bureaucratic support, continuity of
policy, predictability and other related factors too need to be taken care of if the policy makers really want to lure the foreign investors into Pakistan”, he said.
He commended the IPS Energy Program Steering Committee on organizing a highly informative and lively session on the issue and hoped that the recommendations being prepared by the Committee would create a positive impact on the finalization of the forthcoming petroleum policy.
Khalid Rahman, Director General, IPS thanked the speakers and participants of the seminar in his vote of thanks in the end and reiterated IPS’ commitment to organize such debates and dialogue forums on critical national and international issues to help policymakers and legislators in informed decision making.