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Foreign investment in energy sector dips

The deteriorating security situation in the entire country, particularly in Khyber Pakhtunkhwa (KP) and Balochistan has led to a significant decline in foreign investment in the energy sector, experts observed.

The net foreign inflows in oil and gas development and exploration declined by 11 percent to $560 million in the fiscal year ending on June 30, compared to $629 million in the previous fiscal year, official data suggests.

“The oil and gas sector contributed 39 percent to FDI during FY13 as compared to 77 percent last year, mainly due to the worsening law and order situation in Balochistan and Khyber Pakhtunkhwa (KP), where exploration activities witnessed contraction,” said Abdul Azeem at InvestCap Research.

Zahid Hussain, former OGDCL CEO, said that there was no exploration and development activity in Balochistan and KP due to security concerns while Sindh had reached its saturation level.

However, he added, Sindh was the only province where exploration activities had improved due to better security measures.

“With the security situation expected to improve in the worst affected provinces, Balochistan and KP, increased investment in oil and gas sector is expected going forward,” said an official.

The major event in the outgoing fiscal year was the auction of 60 exploration blocks, which unfortunately proved to be a failure of sorts as the auction remained concentrated between government-owned companies, while private and foreign companies stayed away.

The ministry received 66 applications for 50 blocks out of 58 blocks offered for bidding through an open and transparent competitive bid. Overall, 42 blocks were auctioned with 29 won by the Oil & Gas Development Company (OGDCL), 11 by the Pakistan Petroleum Limited (PPL), one by Petroleum Exploration Limited (PEL) and one block by another exploration company. As senior PPL official said political uncertainty and lack of security in the country kept private sector and foreign investors away. However, analysts said clarity on the political front and an improved security situation in the country is expected to attract foreign investment in the country.

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