As Pakistan faces serious economic difficulties: political instability, low economic growth (for a developing country) and difficulties in repaying its dollar debt… the authorities of Pakistan has announced the discovery of a huge oil and gas reserve (believed to be the fourth largest in the world) after years of investigation and exploration. This discovery could be like May water for this economy which struggles to maintain growth and military power comparable to those of its great enemy: India. According to the specialized media and the local press, The discovery was made in a major oil and natural gas field in its territorial watersIt is said to be of such magnitude that it could change the destiny of the country, according to local analysts.
The discovery, verified by a three-year study in collaboration with a friendly country, could potentially significantly alter Pakistan’s economic fortunes, a senior security official was quoted as saying by DawnNews television and CNBC.
The extensive geographic survey located the deposits and the relevant agencies informed the government of the news. The survey marks the beginning of what officials call an initiative to benefit from the “blue water economy,” which includes not only oil and gas but also other valuable ocean minerals.
Exploration and bidding proposals are under review, but actual extraction could take several years. The process of digging wells and extracting oil and gas could be an effort (and investment) in the long term, which requires more investment and infrastructure development, probably with the help of foreign companies with more experience in this field. Pakistan barely produces crude oil. According to official data, its oil production is about 60,000 barrels per day, while it has to import more than 700,000 barrels every day to meet domestic demand.
Specifically, in recent years, Pakistan has experienced major energy crises due to the need for importing large quantities of expensive fuelchronic shortages of natural gas and electricity and the use of inadequate transmission and distribution systems. According to the Asian Development Bank, prolonged energy shortages reduced GDP by 2 to 3 percent in 2013, for example, according to the U.S. Energy Information Administration.
Moreover, Pakistan has been struggling for some time with mounting debt and rising inflation and is heavily dependent on foreign aid, which often proves elusive. Worse still, political instability and the growing power of various terrorist groups in some provinces only aggravate the country’s difficult economic situation. Now, the discovery of large quantities of oil and gas could be something of a “game changer” for the Pakistani economy. Time will tell whether this change is for the better or for the worse, given the experience of other developing countries, where the discovery of oil has been a curse that has exacerbated corruption and conflict.
Oil and gas as hope
The news of the discovery of oil and gas reserves offers obvious hope to Pakistan, but these hopes are still buried at the bottom of the sea. Even if the illusion helps to better cope with the problems, these billions of barrels of oil cannot help Pakistan overcome the current economic crisis, but they can pave the way for the future.
A former member of Pakistan’s oil and gas regulator has claimed DawnNewsTV that, even if the country must remain optimistic, There is never 100% certainty that reserves will be discovered as expectedWhen asked whether these reserves are sufficient to meet the country’s energy needs, the expert stressed that the discovery is very encouraging because of the amount of crude oil and gas it is expected to contain, but that everything will depend on the recovery rate, that is, it is not about the amount of oil available, but the amount that can be recovered profitably. “If it is a reserve with more gas, it can replace LNG imports and if it is oil reserves, we can replace imported oil.”
From cotton and textiles to oil?
Pakistan’s economy is “poor” in relative terms and somewhat obsolete. The agricultural sector has always been the backbone of the country, employing a large portion of the population, although its share of GDP has declined over the years. ANDWheat, rice and cotton are the most important crops, and Pakistan is one of the world’s largest producers of cotton.. Livestock and fishing also have a significant weight. The production of oil and gas would mean that the country would move to a productive stage of a good with higher added value than cotton, which would generate a higher income per unit sold.
Industry has gained ground, particularly in textiles, chemicals, cement and steel. The textile sector, in particular, constitutes a key pillar of the country’s exports, representing almost 60% of its export revenues.Growth is also seen in light manufacturing and the automotive industry, although the latter still faces challenges related to infrastructure and political instability.
As for the services sector, its weight in GDP has increased considerably, driven by areas such as telecommunications, finance and information technology, the latter having experienced accelerated growth in recent years, which has made the country an attractive destination for outsourcing services. However, this sector is still in the development phase.
It is true that Pakistan occupies an important place in Asia, being the continent’s fifth largest economy in terms of population and one of the largest in purchasing power parity in South Asia. However, it faces significant challenges, including high levels of external debt, a large trade deficit, and structural problems such as low tax revenues and inefficient management of public resources. The economy is at a crossroads and structural reforms are needed to realize its economic potential in the future. Oil and gas could be this country’s future salvation…or its ultimate downfall.
