The Economic Coordination Committee (ECC) of the Cabinet approved a $400 million venture to tap into an opportunity for oil exploration in Abu Dhabi, UAE. A consortium of the country’s leading oil exploration and development companies was created in a bid to increase revenue and supply streams. However, the risks that come with such an international operation may be the one thing that the government has overlooked. Immediate reassessment is necessary if we are to spend our finances productively and responsibly.
The Oil and Gas Development Company Ltd (OGDCL), Pakistan Petroleum Ltd (PPL, Mari Petroleum Company Ltd (MPCL) and the Government Holdings Pvt Ltd (GHPL) have partnered up with the Abu Dhabi National Oil Company (Adnoc) to pursue the exploration of hidden gas reserves in the UAE. In theory, this sounds like a golden opportunity that Pakistan would be foolish to miss out on. However, the realities of overseas oil ventures are much more uncertain and unfavourable than the government would like.
More often than not, oil exploration demands for high and irreversible investments in return for promising only a degree of probability that a large enough reserve will be unearthed and the available resource would be utilised effectively. The longevity of the project exponentially amplifies risk factors like wastage of funding, uncertain political environment, rapidly changing economic conditions and environmental hazards. This is keeping aside the very real possibilities of finding dry holes instead of oil reserves, or at least non-commercial quantities of oil. Costs of drilling even may increase over time through the need to update machinery, maintenance, correcting equipment blowouts, accident prevention strategies along with any shortages or delays in the provision of necessary heavy-duty industrial machinery.
Clearly, the government would need an excellent strategy for risk management and a team of experts for risk identification so that informed real-time decisions that increase the chances of the venture being a success are made. Furthermore, it may also have to pay extra attention to domestic enterprises to make them more sustainable so that they are able to facilitate growth in the sector if the exploration yields positive results; storing, distribution and pricing should not be crippling issues to deal with later on.​
Source: Published in The Nation 20 August 2021