How a dry well dashed Pakistan’s hopes of economic recovery

Over the weekend, news came that the latest attempt to search for oil and gas reserves in Pakistan’s territorial waters was being called off. 

The drilling at the offshore Kekra-1 well should have been a routine affair. But for a country facing runaway inflation, slowing economic growth and high foreign debt, the project had assumed the role of saviour. 

From tweets to vlog, people have pondered over the prospect for days. Almost everyone appeared sure about a discovery from the well that was drilled 280 kilometers off the coast of Karachi. 

And none other than Prime Minister Imran Khan had fueled those hopes even though it was only an exploratory well and the consortium led by Italy’s ENI had days to go before confirming anything. 

“...if the indications we are getting from the companies are anything to go by, there’s a strong possibility that we may discover a very big reserve in our waters,” he told a group of journalists in March. 

In subsequent days, he and his ministers continued to talk about the well’s potential, adding to a social media frenzy. 

“It was very unwise on their part to make such statements,” says Masood Siddiqui, ex-CEO of OGDCL, Pakistan’s largest petroleum company which was part of the four-company consortium drilling Kekra-1. 

“It’s like playing a 5-day long test cricket match and announcing a winner on basis of the first inning,” he told TRT World. 

This was the 18th offshore well drilled in a region known as Indus delta, which is located in Pakistan’s territorial waters in the Arabian Sea. All previous attempts have so far failed to yield commercially viable reserves. 

“Oil wells turn up dry all the time. It’s not a big deal. But the matter was really politicised this time,” says Siddiqui. 

Since winning an election last August, Khan’s ruling Pakistan Tehreek Insaf has struggled to put economy back on track. A loan-deal with the International Monetary Fund (IMF) has led to further devaluation of rupee, which was already Asia’s worst performing currency. 

Pakistan also faces an energy crisis where shortage of gas and electricity often hits households and factories. 

Fighting a multitude of problems and little to show for its performance, the government had come to rely too much on what was essentially an exploration attempt, industry people say. 

Siddiqui says the drilling was for what is known as an exploratory well, in which rig bits descend below the ground to estimate size of the petroleum reservoir. 

“Even if they had found something, it would have taken at least seven years to monetise it. Then there was also the question about its commercial viability.”

The cost of building a subsea pipeline for the ultra-deep well could run into millions of dollars, he says. 

Better luck next time

But industry veterans say Indus delta remains underexplored and similar geological formations elsewhere have oil and gas reserves. 

“The prospects are very high when you analogue Indus delta with other deltas,” such as Egypt’s Nile and Niger of Nigeria, says Khalid Rahman, the ex-CEO of Pakistan Petroleum Limited (PPL), which is also a partner in Kekra-1 joint venture. 

“There have even been discoveries on Indian side of Indus delta,” he told TRT World. 

Rahman, who was the CEO when PPL and ENI had drilled the last offshore well in 2010, says Khan’s government was trying to attract attention to foreign investment that had gone into Kekra-1 but ended up needlessly talking about it. 

False hopes and disappointment has now led way to conspiracy theories about the $100 million project. 

Somebody has started a WhatsApp conversation about how ENI used a redundant rig to get money out of the government, says Rahman. 

“This goes on to show a general suspicion and lack of thought. How can it be expected that other partners in the joint venture could have kept their eyes closed to something like that?” 

Petroleum exploration especially offshore drilling is risky and success comes after multiple attempts, he says. 

“There’s no need to give hope on something which is not certain.”