India-Russia Trade: Is Indian Rupee Worthless For Cross-Border Transactions?

What good is a currency in global trade if it can not be used to buy products and services from other nations that a country needs?  The answer to this question came when Russia said it has accumulated billions of rupees in Indian banks which it can not use. “This is a problem”,  Russian Foreign Minister Sergei Lavrov told reporters in India’s Western state of Goa on the sidelines of the Shanghai Cooperation Organization meeting.  “We need to use this money. But for this, these rupees must be transferred in another currency, and this is being discussed now”.  Russia has decided it won't take any more Indian rupees. Moscow has rejected New Delhi's proposal for the Kremlin to invest rupees from oil and military equipment payments back into Indian capital markets so the currency doesn't pile up.

Global Export Map 2023. Source: World Population Review

Only the currencies issued by the governments of the world's largest exporters are useful for buying products and services on the world markets. China, United States, Germany, Japan and the United Kingdom are the world's top 5 exporting nations as of 2020. This makes Chinese Yuan, US Dollar, European Euro, Japanese Yen and British Pound the most important international trade currencies. Of these currencies, only the Chinese Yuan is not impacted by the western sanctions on trade with Russia. Russia wants India to convert Indian Rupees to Chinese Yuan to pay for energy and military equipment imports from Russia. 

Yuan vs Dollar in Chinese Cross-Border Trade. Source: Bloomberg 

The share of the Chinese Yuan in international trade has been increasing since the US imposed sanctions on the use of the US dollar in trade with Russia. Earlier this year, the Chinese Yuan eclipsed the US dollar as the most used currency for Chinese cross-border transactions, according to Market Insider. The Yuan's use in cross-border payments and receipts rose to 48.4% at the end of March while the dollar's share slid to 46.7%, according to a Reuters calculation of data from China's State Administration of Foreign Exchange. The yuan's use in global trade finance remains low, though it has shown steady increases. Data from SWIFT showed that the Chinese yuan's share of global currency transactions for trade finance rose to 4.5% in March, while the US dollar accounted for 83.71%, according to Reuters. 

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India Emerges the Biggest Winner of the Ukraine War and Growing US-China Tensions

"It may be dangerous to be America's enemy, but to be America's friend is fatal" Henry Kissinger

India is emerging as the biggest beneficiary of the Ukraine War and the US efforts to check China's rise. Indian businesses are busting US sanctions to take advantage of the vacuum left in Russia by the exit of western businesses since the start of the Ukraine War.  At the same time, the US is rewarding India by promoting it as an alternative to China in the global supply chain.  Meanwhile, Beijing is warning New Delhi that India "will be the biggest victim" of America's "proxy war" against China. 

L to R: Modi, Putin, Xi and Biden

Soaring Russia-India Trade: 

Since the start of Russia's invasion of Ukraine, India has ramped up its imports of Russian oil by a whopping 33 times, according to the Christian Science Monitor.  Dr. Nivedita Kapoor, an Indian expert at the Higher School of Economics in Moscow, told the Monitor: “Right now the focus is on pharmaceuticals, electronics, machinery, chemical products, medical instruments, and agricultural products,” says Dr. Kapoor. “We have already been exporting these goods to Russia, and there is potential for major increases. ... It may be harder to expand the list due to the threat of secondary sanctions. In this environment, the Indian private sector looks at Russia as a risky market. But the immediate potential is very big.”   

“The best solution would be for Russia to make an early end to this war,” Kapoor said. “We can envisage a situation where Western companies have already exited the Russian market, and burned their bridges, while the Indian private sector no longer regards business with Russia as a risky proposition, carrying the threat of secondary sanctions. All that would go away for us, but we need to see an end to this war”, she added. 

India in Global Supply Chain: 

With growing Washington-Beijing tensions,  the United States is trying to decouple its economy from China's. The Wall Street Journal has reported that the Biden administration is turning to India for help as the U.S. works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilize global security.

The US Commerce Department is actively promoting India Inc to become an alternative to China in the West's global supply chain.  US Commerce Secretary Gina Raimondo recently told Jim Cramer on CNBC’s “Mad Money” that she will visit India in March with a handful of U.S. CEOs to discuss an alliance between the two nations on manufacturing semiconductor chips. “It’s a large population. (A) lot of workers, skilled workers, English speakers, a democratic country, rule of law,” she said.

China-India Border Conflict: 

India's unsettled land border with China will most likely continue to be a source of growing tension that could easily escalate into a broader, more intense war, as New Delhi is seen by Beijing as aligning itself with Washington. 

In a recent Op Ed in Global Times, considered a mouthpiece of the Beijing government, Professor Guo Bingyun  has warned New Delhi that India "will be the biggest victim" of the US proxy war against China. Below is a quote from it: 

"Inducing some countries to become US' proxies has been Washington's tactic to maintain its world hegemony since the end of WWII. It does not care about the gains and losses of these proxies. The Russia-Ukraine conflict is a proxy war instigated by the US. The US ignores Ukraine's ultimate fate, but by doing so, the US can realize the expansion of NATO, further control the EU, erode the strategic advantages of Western European countries in climate politics and safeguard the interests of US energy groups. It is killing four birds with one stone......If another armed conflict between China and India over the border issue breaks out, the US and its allies will be the biggest beneficiaries, while India will be the biggest victim. Since the Cold War, proxies have always been the biggest victims in the end". 

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Modi's India Busting Western Sanctions, Funding Russia's War On Ukraine

India, a western ally, is openly buying Russian coal, oil and weapons worth tens of billions of dollars at deep discounts. These actions amount to busting western sanctions and financing President Vladimir Putin's war on Ukraine. Many smaller developing countries, including Bangladesh and Pakistan, are abiding by these sanctions and suffering from the consequences in terms of high prices of fuel and food. Why these double standards? Do these policy contractions serve the broader US interests in the Asia region? 

India's Russian Imports Soaring Since the Start of Ukraine War. Source: Reuters

India's Russian coal imports are up 6-fold from May 27 to June 15, 2022, according to Reuters. Delhi's Russian oil buying has jumped 31-fold in this period.  Bulk shipments of Russian thermal coal to India began in the third week of May, 2022. 

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so.  Pakistan's Imran Khan sought to buy Russian oil and gas before he was removed from power in early April. Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in a recent interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi foreign minister AK Abdul Momen said, “Russia has offered to sell oil and wheat to us, but we can’t do it out of fears of sanctions. We asked [India] how they did it [import oil from Russia]. They [India] said they have found some tricks,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra Modi is openly funding the war in Ukraine by buying weapons and energy from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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Russia Sanctions: India Profiting From Russian Oil Trade by Exporting Refined Petroleum

India is defying western sanctions to buy millions of barrels of discounted Russian crude oil, hiding their origin and exporting refined petroleum products with a big markup to make a huge profit. China has yet to increase its oil imports from Russia, according to news reports. Meanwhile, India's neighbors Bangladesh and Pakistan are abiding by western sanctions and paying much higher market prices to buy oil for their domestic needs, and hurting their people. Such double standards are not going unnoticed. 

India's Refined Petroleum Exports.Source: MarketWatch

India is importing large amounts of deeply discounted Russian crude, running its refiners well above capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe, according to MarketWatch.  “As the EU weans from Russian refined products, we have a growing suspicion that India is becoming the de facto refining hub for Europe,” said Michael Tran, global energy strategist at RBC Capital Markets, in a Tuesday note. Here’s how the puzzle pieces fit together, according to Tran:

"India is buying record amounts of severely discounted Russian crude, running its refiners above nameplate capacity, and capturing the economic rent of sky-high crack spreads and exporting gasoline and diesel to Europe. In short, the EU policy of tightening the screws on Russia is a policy win, but the unintended consequence is that Europe is effectively importing inflation to its own citizens. This is not only an economic boon for India, but it also serves as an accelerator for India’s place in the new geopolitically rewritten oil trade map. What we mean is that the EU policy effectively makes India an increasingly vital energy source for Europe. This was historically never the case, and it is why Indian product exports have been clocking in at all-time-high levels over recent months". 

Bangladesh and Pakistan are afraid to buy Russian oil for fear of western sanctions while American ally India feels free to do so. As Pakistani Finance Minister Miftah Ismail told CNN's Becky Anderson in an interview, “It is very difficult for me to imagine buying Russian oil. At this point I think that it would not be possible for Pakistani banks to open LCs or arrange to buy Russian oil". Similarly, Bangladeshi Foreign Minister AK Abdul Momen told journalists: “You are seeing that they (western nations) keep bossing us and you (journalists) also encourage them. Every day, they come up with new issues. We used to call them development partners. They do not pay for the development but keep giving advice.” “We do not want to get into any problem. We want peace in the world,” Momen added. 

The West, particularly the United States, is turning a blind eye to India's actions when it comes to busting sanctions on Russia. Indian Prime Minister Narendra is openly funding the war in Ukraine by buying weapons and oil from Russia. At the same time, India's smaller neighbors feel intimidated by the threat of western sanctions if they follow Modi's example. Such double standards are not going unnoticed. 

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Double Digit Rise in Energy Consumption Confirms Pakistan's Economic Recovery in 2021

Oil consumption in Pakistan jumped 19% to 20.8 million tons in 2021, a strong indication of the country's economic recovery from the COVID-impacted 2020. In addition to oil, Pakistanis also consumed nearly 4 billion cubic foot of natural gas every day. Energy is fundamental to the functioning of any economy. 

Pakistan Oil Consumption. Source: Arif Habib

Pakistan's furnace oil consumption has been declining for several years as power producers continued to switch fuel to liquified natural gas (LNG) in recent years. However, the sudden jump in LNG prices forced them to use more furnace oil in year 2021 than in 2020. There was also a big jump in diesel (HSD) and petrol (MS) with a rise in number of vehicles on the nation's roads. 

Pakistan LNG Imports 2017-2021 in million tons 

 

Pakistan Natural Gas Consumption in Billion Cubic Feet Per Day

“Year 2021 proved to be remarkable for the automobile sector as there was a volumetric sales growth of 90% on a year-on-year basis to 210,048 units compared to 110,540 units in 2020,” said Arif Habib Limited analyst Arsalan Hanif.

Pakistan Auto Sales. Source: Arif Habib

Motorcycle sales in the first 9 months of CY 2-21 were 1.4 million units, up 37.5% vs the 2020 and 13.0% vs the 2019. Atlas Honda dominated the motorcycle market with sales up 52.2%.  Soaring cement consumption, rising auto sales and double digit increase in energy consumption in Pakistan in 2021 confirm that Pakistan's recovery from the COVID-induced slump is well underway.  

Barring any adverse impact of the Omicron variant of the COVID 19 virus, Pakistan's GDP is likely to grow at least 5% in the current fiscal year ending in June, 2022. The country's average economic growth of 5% a year has been faster than the global average since the 1960s. However, it has been slower than that of its peers in East Asia. It has essentially been constrained by Pakistan's recurring balance of payment (BOP) crises as explained by Thirlwall's Law. Pakistan has been forced to seek IMF bailouts 14 times in the last 70 years to deal with its BOP crises. This has happened in spite of the fact that remittances from overseas Pakistanis have grown 30X since 2000. Every time Pakistan has faced a balance of payments crisis, the result has been massive currency devaluation, high inflation and slower growth for a period of multiple years. This is exactly what Pakistan's current government led by Prime Minister Imran Khan is dealing with right now.  This pain is the result of years of flat exports, soaring imports and excessive debt taken on during former Prime Minister Nawaz Sharif's PMLN government from 2013 to 2018.  The best way for Pakistan to accelerate its growth beyond 5% is to boost its exports by investing in export-oriented industries, and by incentivizing higher savings and investments. 

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Why is America So Deeply Involved in the Middle East? Energy? Geography?

What is the importance of the Middle East for the West? Is it energy resources to fuel the industrialized West? Or the key trade and shipping routes passing through the Persian Gulf and the Suez Canal used by ships to sail from Asia to Europe and North America?

Map of Greater Middle East (Morocco to Pakistan)

Why is oil, the most traded commodity, priced and traded in US Dollars? Does oil trade help maintain the US Dollar as the international trade and reserve currency and solidify US control of the global financial system, giving the US a very powerful tool to control the world?

What is the history of West's involvement in the Middle East? Can it be traced back to the fall of the Ottoman Empire in early 20th century?

When did the United States take over where Britain and France left off? Cold War? Iranian leader Mosaddegh's overthrow by CIA? Suez Crisis?

Energy revolution is in full swing in Silicon Valley with widespread use of solar panels, electric vehicles and storage batteries. Like other technologies emerging from Silicon Valley, this energy revolution will spread to the rest of the United States and the world in the next decades. How will it change US policy and posture in the Middle East?

Does the US involvement in the Middle East pose a threat to Pakistan? Is Pakistan next after Iran? Will Pakistan's nuclear weapons help keep Pakistan secure? What economic and other powerful tools does the United States have to put pressure on Pakistan or any other country?

ALKS host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com).

https://youtu.be/DQIUue1tb4A





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PTI's New Economic Team Line-Up in Pakistan

Who are the members of Pakistan's top new economic leadership team? Who's Reza Baqir? Who's Shabbar Zaidi? Why were the changes necessary? Were the latest changes made to remove previous PMLN government's loyalists considered to be responsible for the current economic crisis? Did their policies and actions contribute to large twin deficits? Did the International Monetary Fund (IMF) force these changes as a condition for the country's bailout?

Pakistan's External Debt. Source: Wall Street Journal

Pakistan Current Account Deficit. Source: State Bank of Pakistan

As Pakistan awaits the news of the discovery of large offshore oil reserves, what lessons should Pakistan learn from the governance failures in Venezuela? Is Venezuela suffering because of its government's hostility toward the United States? Will large oil reserves be a panacea for Pakistan's economic problems?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Sabahat Ashraf (ifaqeer) and Riaz Haq (www.riazhaq.com)

https://youtu.be/1UucUo_eU90




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Massive Oil Discovery in Pakistan: Hype vs Reality

Prime Minister Imran Khan has recently raised Pakistanis' hopes of ExxonMobil and ENI being on the verge of a massive discovery of offshore oil and gas reserves in Pakistan. Is this real? Or mostly hype? What is the size of these reserves? Will it be more than sufficient to meet Pakistan's current needs of over 200 million barrels of oil per year? Will Pakistan become a net exporter of oil and gas like major OPEC nations?

Top 3 Offshore Drilling Sites in Asia-Pacific. Source: Bloomberg

Why is it taking so long to get confirmation from the companies involved? What are the technical issues in getting confirmation of these huge reserves? Why is there such a big concern about blow-out? Is it because the 1.5 billion barrels pre-drill estimate of Kekra-1 well in block G of the Indus basin off the Karachi coast? Could such a large reserve cause a major blow-out accident like the one British Petroleum had in Gulf of Mexico near Louisiana in the United States? How long will it take to fix the blow-out preventer (BOP) and complete drilling of the remaining 600-800 meters of the total depth of over 5,500 meters deep in the Arabian Sea?

Offshore Blowout Preventer Stack. Courtesy: British Petroleum

Azad Labon Kay Sath host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/02oKLNPmUdk





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Blowout Concerns Delay Confirmation of Pakistan Offshore Oil Discovery

Blowout concerns have stopped offshore drilling in Pakistan yet again. It was underway to confirm discovery of oil and gas in at Kekra-1 well in G-bloc with pre-drill estimate of over 1.5 billion barrels of oil. It was scheduled to restart on April 20, 2019 after pause of 12 days, according to Pakistani media reports. Now it is delayed until the blowout preventer equipment is fixed and ready to use again.

Offshore Blowout Preventer Stack. Courtesy: British Petroleum

Blowout Preventer Problem: 

The drilling was stopped on April 8 at the depth of 4,810 meters for cementing and casing process which took almost 12 days to complete. Now there are concerns about the proper functioning of the blowout preventer (BOP). Once the BOP repair is completed, Mobile Exxon and ENI as joint operators at Kekra-1 well will resume drilling of the remaining 650-800 meters.

Time required to drill the remaining 650-800 meters will depend on the rate of penetration (RoP).  Pakistan petroleum ministry officials were quoted by The News as saying that they "don’t yet have precedents to form a reliable estimate for the RoP for offshore Indus-G, where Kekra-01 is being drilled. An RoP of 10 meters per hour (generally considered low) would mean that it would take 80 hours or a little more than three days to reach the target depth.’’

Top 3 Offshore Drilling Sites in Asia-Pacific. Source: Bloomberg

Exxon-Mobil's Entry in Pakistan:

American energy giant Exxon-Mobil has joined the offshore oil and gas exploration efforts started by Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy giant ENI, according to media reports.

Each company will have 25% stake in the joint venture under an agreement signed at the Prime Minister’s Secretariat in May among ExxonMobil, Government Holdings Private Limited (GHPL), PPL, ENI and OGDC.

Exxon-Mobile's entry in Pakistan brings deep offshore drilling technology, its long experience and financial resources to the country. It is expected to accelerate exploration and more discoveries.

Pakistan Oil Basins:

A Pakistan Basin Study conducted in 2009 found that the country has six onshore and two offshore basins; offshore basins being the Indus basin and the Makran basin in the Arabian Sea.

The Indus offshore basin is a rift basin that geologists say developed after the separation of the Indian Plate from Africa in the late Jurassic period. It is believed to be the second largest submarine fan system in the world after the Bay of Bengal with high probability of hydrocarbon discoveries.

The Makran Offshore basin is separated from the Indus Offshore basin by Murray ridge, according to Syed Mustafa Amjad's report in Dawn. It is an oceanic and continental crust subduction zone with deepwater trenches and volcanic activity. The basin consists of oceanic crust and periodic emergence of temporary mud islands along the coast suggesting strong evidence of large hydrocarbon deposits.

Pakistan Hydrocarbon Potential:

The United States Energy Information Administration (EIA) estimates that Pakistan has 586 TCF (trillion cubic feet) of gas in Pakistan of which 105 TCF is technically recoverable.

In addition to gas deposits, US EIA estimates there are 227 billion barrels of oil in Pakistan with 9.1 billion barrels being technically recoverable.

Pakistan also has 185 billion tons of coal deposits in Thar desert which are just beginning to be extracted by Sindh Engro Coal Mining Corporation.

Oil and Gas exploration and production companies are currently planning to drill 90 wells in different parts of  the country. Under the plan, as many as 50 exploratory and 40 development wells would be drilled in a bid to make the country self-sufficient in the energy sector, according to media reports.

During the last five years, the sources said the exploration and production companies drilled 445 new wells, out of which 221 were exploratory, adding that the increased exploration activities resulted in 116 new oil and gas discoveries.

Current Account Deficits:

Energy imports make up a big chunk of Pakistan's total imports. Bulk of the annual 200 million barrels of oil demand has to be imported. Rising oil prices worsen the current account deficit and put pressure on Pakistan's reserves, forcing the country to seek periodic IMF bailouts.

Pakistan's trade deficit is nearly $40 billion a year and debt service costs are about $11 billion a year. How can Pakistan fund this balance of payments deficit of about $50 billion? Remittances of $21 billion in current FY2019 from Pakistani diaspora are expected to reduce it to $30 billion. PTI government has taken on billions of dollars in loans from Gulf Arabs and China. Given the low rates of foreign investments in the country, a big chunk of the remaining deficit will have to be met by borrowing even more funds which will further increase future debt service costs.

Pakistan's Current Account Deficit. Source: Trading Economics

As a result, Pakistan is now battling massive twin deficits, deteriorating foreign currency reserves, low exports, diminishing tax revenues, a weak currency, onerous external debt payments, and soaring sovereign debt. This crises has forced the country to seek IMF (International Monetary Fund) bailout, the 13th such request in Pakistan's 72 year history.

Summary:

Blowout concerns have stopped offshore drilling in Pakistan yet again. It was underway to confirm discovery of oil and gas in at Kekra-1 well in G-bloc with pre-drill estimate of over 1.5 billion barrels. Pakistan made 2 key oil and gas discoveries in 3rd quarter and another 3 discoveries in the 4th quarter of 2017. These discoveries appear to have prompted US-based Exxon-Mobil to join off-shore drilling efforts in Pakistan.  American energy giant's entry in Pakistan brings advanced ultra deep sea drilling technology, its long experience in offshore exploration and financial resources to the country. It is expected to accelerate exploration and lead to more discoveries.  US Energy Information Administration (EIA) estimates that Pakistan has technically recoverable deposits of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil. Reducing energy imports by increasing domestic production will likely ease Pakistan's current account deficits and reduce its need to seek repeated IMF bailouts.

Here's a discussion on the subject:

https://youtu.be/7o2MbUs2U38



Here's a video explaining offshore drilling for oil and gas:

https://youtu.be/anM9hZDA_cE





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Pakistan's Insatiable Appetite For Energy

Pakistan's consumption of oil and gas has rapidly grown over the last 5 years, an indication of the nation's accelerating economic growth. Pakistan is among the fastest growing LNG markets, according to Shell 2017 LNG report.

Pakistan Oil Consumption in Barrels Per Day. Source: CEIC.com

Oil consumption in Pakistan has shot up about 50% from 400,000 barrels per day in 2012 to nearly 600,000 barrels per day in 2017. During the same period, Pakistan's gas consumption has risen from 3.5 billion cubic feet per day to nearly 4 billion cubic feet per day, according to British Petroleum data.

Pakistan is among the fastest growing LNG markets, according to Shell 2017 LNG report.  The country has suffered a crippling energy shortage in recent years as demand has risen sharply to over 6 billion cubic feet per day,  far outstripping the domestic production of about 4 billion cubic feet per day. Recent LNG imports are beginning to make a dent in Pakistan's ongoing energy crisis and helping to boost economic growth. Current global oversupply and low LNG prices are helping customers get better terms on contracts.

Pakistan Gas Consumption in Billions of Cubic Feet Per Day. Source: CEIC.com

Since the middle of the 18th century, the Industrial Revolution has transformed the world. Energy has become the life-blood of modern economies. Energy-hungry machines are now doing more and more of the work at much higher levels of productivity than humans and animals who did it in pre-industrial era.

Every modern, industrial society in history has gone through a 20-year period where there were extremely large investments in the energy sector, and availability of ample electricity made the transition from a privilege of an urban elite to something every family would have. It seems that Pakistan is beginning to recognize it. If Pakistan wishes to join the industrialized world, it will have to continue to do this by having a comprehensive energy policy and making large investments in the power sector. Failure to do so would condemn Pakistanis to a life of poverty and backwardness.

Pakistan is heavily dependent on energy imports to drive its economy. These energy imports put severe strain on the country's balance of payments and forces it to repeatedly seek IMF bailouts.

Pakistan needs to develop export orientation for its economy and invest more in its export-oriented industries to earn the hard currencies it needs for essential imports including oil and gas. At the same time, Pakistan is stepping up its domestic oil and gas exploration efforts.  American energy giant Exxon-Mobil has joined the offshore oil and gas exploration efforts started by Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy giant ENI.

Related Links:

Haq's Musings

South Asia Investor Review

Pakistan Oil and Gas Exploration

US EIA Estimates of Oil and Gas in Pakistan

Pakistan Among Fastest Growing LNG Markets

Methane Hydrate Release After Balochistan Quake

Thar Coal Development

Why Blackouts and Bailouts in Energy-Rich Pakistan?

Riaz Haq's Youtube Channel

PakAlumni Social Network

Pakistan Among Top 5 Countries to Discover Oil and Gas in 2017

Pakistan made two key oil and gas discoveries in the third quarter and another three discoveries in the fourth quarter of 2017. These discoveries may have prompted the US-based Exxon-Mobil to join off-shore drilling efforts in Pakistan. American energy giant's entry in Pakistan brings advanced deep sea drilling technology, its long experience in offshore exploration and production and its deep pockets to the country. US Energy Information Administration (EIA) estimates that Pakistan has technically recoverable deposits of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil. Exxon-Mobil is expected to accelerate exploration and lead to more discoveries and increased domestic oil and gas production.

Top Countries Discovering Oil and Gas:

Russia led with 10 discoveries, followed by Australia with seven discoveries and Colombia with four discoveries. Pakistan and the UK each had three discoveries in the fourth quarter of 2017, according to Global Oil and Gas Discoveries Review.

Oil and Gas Discoveries 2H/17. Source: Offshore Technology

In fourth quarter of 2017, the Former Soviet Union leads with 12 discoveries, followed by Asia with eight discoveries, and Oceania with seven discoveries. Europe and South America had five discoveries each, followed by North America with two discoveries, while the Middle East and Africa had one discovery each in the quarter, according to Offshore Technology website.

Top 3 Offshore Drilling Sites in Asia-Pacific. Source: Bloomberg

Exxon-Mobil's Entry in Pakistan:

American energy giant Exxon-Mobil has joined the offshore oil and gas exploration efforts started by Oil and Gas Development Corporation (OGDC), Pakistan Petroleum Limited (PPL) and Italian energy giant ENI, according to media reports.

Each company will have 25% stake in the joint venture under an agreement signed at the Prime Minister’s Secretariat in May among ExxonMobil, Government Holdings Private Limited (GHPL), PPL, ENI and OGDC.

Exxon-Mobile's entry in Pakistan brings deep offshore drilling technology, its long experience and financial resources to the country. It is expected to accelerate exploration and more discoveries.

Pakistan Oil Basins:

A Pakistan Basin Study conducted in 2009 found that the country has six onshore and two offshore basins; offshore basins being the Indus basin and the Makran basin in the Arabian Sea.

The Indus offshore basin is a rift basin that geologists say developed after the separation of the Indian Plate from Africa in the late Jurassic period. It is believed to be the second largest submarine fan system in the world after the Bay of Bengal with high probability of hydrocarbon discoveries.

The Makran Offshore basin is separated from the Indus Offshore basin by Murray ridge, according to Syed Mustafa Amjad's report in Dawn. It is an oceanic and continental crust subduction zone with deepwater trenches and volcanic activity. The basin consists of oceanic crust and periodic emergence of temporary mud islands along the coast suggesting strong evidence of large hydrocarbon deposits.

Pakistan Hydrocarbon Potential:

The United States Energy Information Administration (EIA) estimates that Pakistan has 586 TCF (trillion cubic feet) of gas in Pakistan of which 105 TCF is technically recoverable.

In addition to gas deposits, US EIA estimates there are 227 billion barrels of oil in Pakistan with 9.1 billion barrels being technically recoverable.

Pakistan also has 185 billion tons of coal deposits in Thar desert which are just beginning to be extracted by Sindh Engro Coal Mining Corporation.

Oil and Gas exploration and production companies are currently planning to drill 90 wells in different parts of  the country. Under the plan, as many as 50 exploratory and 40 development wells would be drilled in a bid to make the country self-sufficient in the energy sector, according to media reports.

During the last five years, the sources said the exploration and production companies drilled 445 new wells, out of which 221 were exploratory, adding that the increased exploration activities resulted in 116 new oil and gas discoveries.

Current Account Deficits:

Energy imports make up a big chunk of Pakistan's total imports. Rising oil prices worsen the current account deficit and put pressure on Pakistan's reserves, forcing the country to seek periodic IMF bailouts.

Pakistan’s current account deficit has jumped by 50% to a record high of $14.03 billion in the first 10 months of the current fiscal year 2018, according to the State Bank of Pakistan.  The country imported $12 billion worth of energy in 2017. The bill is likely to grow with increasing demand and rising prices in 2018.

Reducing energy imports by increasing domestic production will likely ease Pakistan's current account deficits and reduce its chances of going back to the IMF again and again.

Summary:

Pakistan made 2 key oil and gas discoveries in 3rd quarter and another 3 discoveries in the 4th quarter of 2017. These discoveries appear to have prompted US-based Exxon-Mobil to join off-shore drilling efforts in Pakistan.  American energy giant's entry in Pakistan brings advanced deep sea drilling technology, its long experience in offshore exploration and financial resources to the country. It is expected to accelerate exploration and lead to more discoveries.  US Energy Information Administration (EIA) estimates that Pakistan has technically recoverable deposits of 105 trillion cubic feet (TCF) of gas and 9.1 billion barrels of oil. Reducing energy imports by increasing domestic production will likely ease Pakistan's current account deficits and reduce its need to seek repeated IMF bailouts.

Related Links:

Haq's Musings

South Asia Investor Review

US EIA Estimates of Oil and Gas in Pakistan

Methane Hydrate Release After Balochistan Quake

Thar Coal Development

Why Blackouts and Bailouts in Energy-Rich Pakistan?

Riaz Haq's Youtube Channel

PakAlumni Social Network

Pathankot Aftermath; CPEC Route Discord; Improving US-Iran Ties; Jakarta Terror

How are India and Pakistan handling the aftermath of Pathankot terror attack? Will India-Pakistan dialog be sustained to improve ties?

What is the China-Pakistan Economic Corridor (CPEC) controversy all about? Are there genuine issues that need to be addressed? Is Nawaz Sharif government handling the situation well? Are the leaders of the provinces ruled by the Opposition politicians sincere in resolving these issues?

Is the lifting of sanctions on Iran helping US-Iran ties? Will the process of Iranian engagement with the West continue? Or will hardliners on both sides succeed in derailing it?

How will US-Saudi ties be impacted by oil glut? Will Saudi Arabia face more internal instability with falling oil prices and inability to cater to its population's expectations?

What do the Jakarta terrorist attacks in Indonesia claimed by ISIS signify? Is this a major new expansion of ISIS footprint around the globe? How best can the world fight the growing ISIS threat? What needs to be done to counter ISIS propaganda and recruitment of young Muslims via social media?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with panelists Misbah Azam and Riaz Haq (www.riazhaq.com)

http://www.dailymotion.com/video/x3n0fcs_pathankot-aftermath-cpec-route-discord-improving-us-iran-ties-jakarta-terror_news


Pathankot Aftermath; CPEC Route Discord... by ViewpointFromOverseas


https://www.youtube.com/watch?v=8cbSwGmLkzA




https://vimeo.com/152112981


Pathankot Aftermath; CPEC Route Discord; Improving US-Iran Ties; Jakarta Terror from WBT Productions on Vimeo.


Related Links:

Haq's Musings

Shale Revolution Impact on Saudi Arabia

China-Pakistan Economic Corridor

Talk4Pak Think Tank

VPOS Youtube Channel

VPOS Vimeo Channel

VPOS Dailymotion Channel

Why Blackouts and Bailouts in Energy-Rich Pakistan?

Frequent IMF bailouts and power blackouts in energy-rich Pakistan are closely tied. One of the key reasons for recurring balance-of-payment crises is the country's rapidly rising oil import bill. The lack of sufficient fuel exacerbates load shedding, negatively impacts economy, reduces tax revenue growth and worsens current account and budget deficits. This requires repeated injections of IMF loans in US dollars to meet import requirements and deal with budget shortfalls.

Pakistan Energy Infrastructure (Source: PPEPCA)

Pakistan's Untapped Energy Riches:

1. Shale Oil:

A recent US EIA report released in June 2013 estimates Pakistan's total shale oil  reserves at 227 billion barrels of which 9.1 billion barrels are technically recoverable with today's technology. In fact, US EIA (Energy Information Administration) puts Pakistan among the top ten countries by recoverable shale oil reserves. These include Russia (75 billion barrels), United States (58 billion barrels), China (32 billion barrels), Argentina (27 billion barrels), Libya (26 billion barrels), Venezuela (13 billion barrels), Mexico (13 billion barrels), Pakistan (9.1 billion barrels), Canada (8.8 billion barrels) and Indonesia (7.9 billion barrels).

2. Shale Gas:

The latest US EIA report has raised estimates of Pakistan's recoverable shale gas reserves from 51 trillion cubic feet to 105 trillion cubic feet. It says Pakistan has 586 trillion cubic feet of shale gas of which 105 trillion cubic feet (up from 51 trillion cubic feet reported in 2011) is technically recoverable with current technology.

3. Tight Gas:

Rough estimates indicate the presence of at least 33 trillion cubic feet of unconventional gas reserves trapped in tight sands, according to an ENI Pakistan report. Another report by Shahab Alam, technical director of Pakistan Petroleum Concessions, puts the estimate at 40 trillion cubic feet of tight gas reserves in the country. These unconventional gas reserves are in addition to the remaining conventional proven gas reserves of over 30 trillion cubic feet.

4. Conventional Gas:

In addition to unconventional oil and gas resources, Pakistan also has about 30 trillion cubic feet of remaining conventional natural gas.

5. Thar Coal:

Pakistan's coal reserves in the Thar desert are estimated at 175 billion tons, according to  Geological Survey of Pakistan. It's low BTU content coal.  The carbon content of Thar lignite is around 60-80%; the rest is composed of water, air, hydrogen, and sulfur. It's hard to transport it but it can used to generate electricity in an integrated mining-generation facility.

6. Hydro:

Pakistan's hydroelectric potential is over 100,000 MW of electricity of which 59,000 MW can come from currently identified sites by the nation's Water and Power Development Authority (WAPDA).

7. Wind:

According to data published by Miriam Katz of Environmental Peace Review, Pakistan is fortunate to have something many other countries do not, which are high wind speeds near major centers. Near Islamabad, the wind speed is anywhere from 6.2 to 7.4 meters per second (between 13.8 and 16.5 miles per hour). Near Karachi, the range is between 6.2 and 6.9 (between 13.8 and 15.4 miles per hour). In only the Balochistan and Sindh provinces, sufficient wind exists to power every coastal village in the country. There also exists a corridor between Gharo and Keti Bandar that alone could produce between 40,000 and 50,000 megawatts of electricity, says Ms. Katz who has studied and written about alternative energy potential in South Asia.

8. Solar:

Pakistan is an exceptionally sunny country. If 0.25% of Balochistan was covered with solar panels with an efficiency of 20%, enough electricity would be generated to cover all of Pakistani demand. Solar energy makes much sense for Pakistan for several reasons: firstly, very large population lives in 50,000 villages that are very far away from the national grid, according to a report by the Solar Energy Research Center (SERC). Connecting these villages to the national grid would be very costly, thus giving each house a solar panel would be cost efficient and would empower people both economically and socially.

Summary:

Pakistan's frequent bailouts and blackouts are clearly related. The key to solving these interlinked crises is to put high priority on developing the country's vast but untapped domestic energy resources identified above. These include shale oil, shale gas, tight gas, Thar coal, hydro and renewables like solar and wind. Reducing Pakistan's dependence on energy imports is also the key to making the nation less vulnerable to recurring external shocks from energy prices which vary wildly with international political and economic events and crises.

Related Links:

Haq's Musings

US EIA Estimates Pakistan's Shale Oil Reserves at 9.1 Billion Barrels

Pakistan's Vast Shale Gas Reserves

Pakistan's Energy History

Cheap Coal Electricity

Potential Renewable Energy Resources in Pakistan

Hydroelectricity Potential in Pakistan

US EIA Shale Oil and Gas Report 2013