Pakistan is set to offer a dozen offshore blocks for oil and gas exploration in August 2024, aiming to attract international investors; boost the country’s energy sector; and reduce reliance on imported energy. The government plans to offer two dozen blocks in two phases, each dozen in 2024 and 2025. These blocks, located in the Arabian Sea, range in size from 1,000 to 3,000sq kilometers. The initiative is expected to significantly enhance domestic energy production and decrease dependence on imported energy resources. The offshore blocks are divided into several zones based on geological and geophysical characteristics. The Ministry of Energy highlighted the potential for significant hydrocarbon discoveries, citing recent technological advancements in deep-sea drilling. “We are offering competitive fiscal terms and a transparent bidding process to ensure that Pakistan becomes a prime destination for global oil and gas companies,” a top official said. The blocks will be offered with attractive fiscal and regulatory policies for petroleum investors. These include a sliding scale production sharing arrangement; protection under foreign investment laws; government guarantees for gas purchases; and the right to remit funds. Additional incentives feature payments in dollars; a 5.0 per cent tax on equipment; transferable work units; and the option to sell to third parties. Royalties are treated as tax expenses, and there are separate policies for tight gas, with rates up to $12.6/MMBTU. Pakistan’s offshore exploration success has been elusive, with the most recent high-profile effort being Eni’s 2019 Kekra ultra-deepwater wildcat, which targeted multi-trillion cubic feet of gas reserves but proved unsuccessful.
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Govt to offer offshore oil and gas exploration blocks in August
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Vitol Wins Tender from Government-Owned LPG Company in Pakistan
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Vitol Trading Company, the world’s largest energy trading enterprise, has secured a tender from Pakistan’s government-owned LPG company. This marks a significant shift from Pakistan’s historical reliance on LPG supplies from its sanctioned neighboring country. Vitol’s successful bid signals a move towards more legitimate and reliable LPG sources. This development is expected to alleviate the recurring energy crises, particularly during the winter months when LPG demand surges. Industry sources view Vitol’s involvement as a promising step towards enhancing energy security and ensuring a more transparent and competitive market in Pakistan. The tender could encourage increased participation from other reputable global suppliers, further strengthening Pakistan’s energy infrastructure and reducing vulnerability to external pressures.
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Oil and Gas Development Company Limited (OGDCL) – Pakistan’s largest oil and gas exploration firm – has partnered with a global technology firm to enhance the use of technology for better planning, exploration, and production of oil and gas deposits across Pakistan. SLB, a company listed on the New York Stock Exchange and operating in around 100 countries, will assist OGDCL in improving controls over carbon footprints and combating climate change by developing technologies that reduce emissions and enhance geothermal energy for a better future for people and the planet. In a statement, SLB said that as part of the collaboration, it will help OGDCL develop a plan to evaluate the geothermal potential of 25 fields in the North, South, and Central basins in Pakistan, which have been pre-selected by the state-owned domestic exploration firm. The international firm’s experts, together with the OGDCL team, will assess surface, subsurface, and well data for the fields to identify focus areas and estimate their geothermal potential using regional models and well productivity calculations. The initial OGDCL pilot project’s scope includes screening, evaluation, and selection of nine fields for detailed analysis, evaluation of geothermal potential, wellbore modelling, and determination of next steps. SLB stated on its website, “We create and deploy the technology and systems needed to simultaneously reduce emissions while meeting the world’s growing energy demands, ensuring progress for people and the planet, on the journey to net zero and beyond.”
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OGDCL to harness geothermal energy
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Chinese industries’ transfer to Pakistan: PM allows JV project
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Prime Minister Shehbaz Sharif has given approval to the joint venture project between Chinese and Pakistani companies regarding the transfer of Chinese industries to Pakistan. The approval was given by the prime minister while presiding over the important meeting on the matter pertaining to the Board of Investment (BoI). He said the promotion of internal and external investment in Pakistan is the first priority of the government and the government is taking all possible steps to provide a business friendly environment for traders and investors. The prime minister directed to submit a comprehensive report on the progress of MoUs between Pakistani and Chinese companies in Shenzhen during his visit to China. He also directed to revise the Special Economic Zones One Stop Shop Law in the context of developments after his visit to China. There is a great potential for relocation of China’s textile, leather, footwear and other industries in Pakistan, added the prime minister. While briefing the meeting, the BoI secretary stated that steps are being taken regarding relocation of Chinese industries to Pakistan.The meeting was told that Chinese experts are being hired for the establishment Business Facilitation Centre in Islamabad. A draft Ease of Doing Business Act will be sent to the Cabinet Committee on Legislative Affairs soon.
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Accepting the Senate recommendations, Finance Minister Muhammad Aurangzeb announced changes in the proposed federal budget 2024-25 exempting stationery from tax and personally hearing the non-filers before blocking their SIMs and preventing them from proceeding abroad. Winding up debate in the National Assembly on the Federal Budget 2024-25, he appreciated the recommendations submitted by the Senate and said the government had decided to include them in the budget keeping in view the public interest. He announced that the stationery items would remain exempt from tax while the current reduced rates for hybrid vehicles would also remain intact. He said under the Export Facilitation Scheme 2021 policy, zero rating for the local suppliers was not being abolished. The finance minister told the House that one of priorities of the government was reduction in the inflation rate and for that purpose, a number of measures had been taken. “As a result, the inflation rate has come down to 11.8 percent from 38 percent, while food inflation has been recorded at 2.2 percent in May,” he said, adding the government would continue its efforts for further reduction in the inflation rate. He said a committee had been constituted under him which would present recommendations in this regard including closing down the ministries or their merger and devolution to the provinces. The finance minister announced that the pension expenditures would be brought down through reforms in future.
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Tax exemption on hybrid vehicles to continue
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PIA bidding process to take place in first week of August
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The bidding process for the privatisation of Pakistan International Airlines (PIA) will be held in the first week of August as authorities in Islamabad seek avenues to grab funds for the cash-starved economy. The development came during a meeting of the Federal Cabinet chaired by Prime Minister Shehbaz Sharif in Islamabad. During the meeting, PM Shehbaz directed to expedite process of privatisation of PIA and give key importance to the element of transparency. Pakistan’s government has previously said it was putting on the block a stake of between 51% and 100% in the loss-making airline as part of reforms urged by the International Monetary Fund (IMF). The disposal of the flag carrier is a step that past elected governments have steered away from as it is likely to be highly unpopular, but progress on the privatisation will help cash-strapped Pakistan pursue further funding talks with the IMF. Earlier, the Ministry of Privatisation said six companies/consortiums including Air Blue, Arif Habib Corporation, Blue World City, Fly Jinnah, Pak Ethanol Consortium, and YB Holdings Consortium, have been pre-qualified in the process of PIA privatisation.
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According to notification sent to Pakistan Stock Exchange on June 21 - Hub Power Holdings Limited, a wholly-owned subsidiary of The Hub Power Company Limited, through its associated company, Mega Motor Company (Private) Limited, is entering into a new line of business in electric vehicles, with BYD Auto Industry Company Limited, in Pakistan. BYD is the world’s largest maker of electric vehicles. In 2023 BYD sold 1.57 million electric vehicles, an increase of 73 percent YoY, in addition to selling 1.44 million units of hybrid vehicles.
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Hubco subsidiary ventures into EVs with China’s BYD
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Record 763,000 tonnes of fuel oil exported in 11MFY24
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Pakistan exported a record 763,000 metric tonnes (MT) of furnace oil in the first eleven months of FY2024, according to data released by the oil sector. This trade volume is due to low consumption in the local market at a time when refineries produced huge quantities of oil. The country also exported a record 150,000MT of furnace oil in the month of May, performing better than the exports made in the previous months of the current financial year. Pakistan exported a total of 277,000MT of fuel oil in the last financial year. As refineries had to operate more for the production of diesel and petrol to meet the local demand, fuel oil was also produced in huge quantities. However, power plants did not uplift furnace oil, in this situation, refineries have no option but to export furnace oil.
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The export proceeds from Information and Communication Technology (ICT) services surged 40.7 per cent to $332 million in May from $236m recorded in the same month last year. Year-on-year, IT exports also rose 7pc in May. Meanwhile, the overall export proceeds grew 23.1pc to $2.92 billion during July-May 2023-24 compared to $2.371bn in the corresponding period last year.
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ICT export proceeds surge in May
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Refineries protest against move to allow diesel import
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All five oil refineries have formally lodged protests with the government and the Oil & Gas Regulatory Authority (Ogra) for allowing the import of high-speed diesel (HSD). The refiners said the move violated the decisions of the Product Review Meeting—a forum comprising the government, Ogra, and the oil industry—which required the procurement of products from local refineries before any imports. In a joint letter to the Ogra chairman, minister, and secretary of the Petroleum Division, the five refineries—Attock, Parco, National, Pakistan Refinery, and Cynergico—said they had formally expressed concern regarding challenges in product off-takes, directly resulting from the failure of oil marketing companies (OMCs) to uplift the committed quantities of HSD and petrol, especially during the past two months. They had also requested Ogra to direct OMCs to uplift the committed quantities of POL product from refineries, which are essential for smooth refineries’ operations, and only the actual deficit volumes to be imported.
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On the back of unprecedented increase in rice production to an all-time high of 9.9 million tons in FY24, exports of produce have jumped above expectation to US$3.6 billion during the financial year. According to the latest data, with export of 5.59 million tons of rice, the commodity also topped the food group in external trade category. Pakistan's rice exports were pegged at $3.5 billion in the current fiscal year in export advisory council meeting, held during the interim setup. If the momentum in export was sustained in the last month of present fiscal, rice export could reach the magic figure of four billion dollars against less than $2.5 billion in the previous financial year. In the first nine months of fiscal year 2023-24, rice exports already broke all the previous records by earning all-time high of $3 billion. Hike in rice exports have also partly been attributed to a ban imposed by India on rice exports. Overall, in July-March of FY24 period, the country earned $2.939 billion in the first nine months of this fiscal year, compared to $1.6 billion in the same period of the last fiscal year. Non-Basmati sector is taking the lead in export earning, as its credit goes to private sector for the excellent performance in hybrid seed research and development with Chinese support. Pakistan had announced an ambitious plan to increase annual rice exports to $10 billion by 2030, aiming for a fourfold rise from the $2.5 billion. The country is striving to broaden its export range and explore new markets.
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Rice exports exceed expectations, reach record $3.6bn
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Fitch forecasts significant debt reduction for Pakistan following FY25 budget
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Fitch Ratings, an American credit rating agency, has forecasted that Pakistan’s FY25 budget will significantly reduce government debt, predicting a decline to 68% of GDP by the end of FY24. This improvement is attributed largely to high inflation and deflator effects, which help offset the rising domestic interest costs. Fitch expects both inflation and interest costs to fall due to economic growth and primary surpluses. On June 10, the State Bank of Pakistan made a pivotal move by reducing policy rates by 150 basis points to 20.5%, marking the first cut in five years. This monetary easing is anticipated to further reduce inflation to 12% for FY25 and lower the policy rate to 16% by the end of FY25. on June 13, the federal government presented the FY25 budget, setting ambitious targets: a 5.9% GDP deficit and a 2.0% primary surplus, a significant improvement from FY24’s estimated 7.4% deficit and 0.4% primary surplus. The budget also aims for a 3.6% growth rate in FY25, up from 2.4% in FY24, driven by extensive tax increases and significant fiscal efforts at the provincial level. Fitch has revised its fiscal forecasts, predicting a primary surplus of 0.8%, taking into account potential revenue shortfalls and higher current spending, partially offset by lower-than-expected development spending.
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