Pakistan seeks investment from Saudi, UAE for oil and gas exploration

A general view shows the Saudi Aramco oil facility in Dammam city, 450 kms east of the Saudi capital Riyadh on Nov. 23, 2007. (AFP/File)
Updated 21 September 2019

Pakistan seeks investment from Saudi, UAE for oil and gas exploration

  • Government plans to market ten new exploration blocks to Middle Eastern companies in November
  • The country’s demand for energy is increasing at the rate of eight percent per year, experts say

ISLAMABAD: Pakistan government is hoping to get investment from Saudi Arabia, the United Arab Emirates and other Gulf countries at an upcoming bidding process of new petroleum exploration licenses, said the ministry of energy’s petroleum division on Saturday, adding that the exercise will reduce the country’s energy import bill, boost its foreign exchange reserves and bolster the ailing economy.
“We will be attending ADIPEC [Abu Dhabi International Petroleum Exhibition and Conference] in November to market our ten new exploration blocks for Middle Eastern companies, especially Saudi Arabia and the UAE,” Sher Afgan Khan, additional-secretary (policy) at the ministry, told Arab News in an interview.
The country is planning to award ten new oil and gas exploration licenses out of 30 blocks in December this year to attract foreign investment amounting to about $150 million. “Our explored oil and gas reserves are depleting fast,” he added. “Therefore, we need new exploration urgently to cut our energy import bill.”
Pakistan meets about 80 percent of its energy requirements through international buying. Its energy demand has also been increasing by 8 percent a year while its oil imports constitute nearly a quarter of its total import bill, according to the Pakistan Bureau of Statistics.
The South Asian nation has indigenous gas production of four billion cubic feet per day, and its crude oil production stands at about 95,000 barrels per day which only meets about 15 percent of the country’s overall demand.
“In the last five years, we couldn’t award even a single exploration license to a foreign company due to security reasons,” Khan said. “But now there is no issue of law and order, and we are hopeful that the next bidding round for the award of new exploration licenses will attract the interest of new foreign players.”
He informed that his ministry had demarcated a total of 40 oil exploration blocks, out of which ten would be awarded by the end of the year and the remaining 30 would be auctioned in the next year and a half.
Pakistan was offering “the best prices” to the oil and gas exploration companies in the region, he said, adding that the country had total sedimentary deposits of 827,000 square kilometers while the area under exploration was 361,000 square kilometers.
Khan also maintained that about 1,100 exploratory wells had been drilled in the country to this day.
A delegation of the Ministry of Energy, led by Special Assistant to Prime Minister on Petroleum Nadeem Babar, is currently visiting the United States and Canada to market and promote the oil and gas exploration opportunities in Pakistan.
“During our interaction with US and Canadian companies, Pakistan’s perspective was shared and it was emphasized that Pakistan was liberalizing the gas sector and offering numerous tax incentives to attract foreign investment,” the secretary added.

Negative rates forever? Central bankers look for an exit

Updated 21 October 2019

Negative rates forever? Central bankers look for an exit

  • Negative interest rates are now a fact of life in Europe and Japan, and multiple other countries including the US are lowering their target policy rates
  • Negative interest rates may be hiding “deep underlying problems,” a “sign of sickness for developed economies,” says Iceland's Central Bank chief

WASHINGTON: The world’s most powerful policymakers are struggling to alleviate the pain of a slowing global economy with few levers left to pull and growing concern that one of them, negative interest rates, already is creating problems of its own.

In an ideal world, elected officials would pull more of the weight with fiscal programs and structural reforms that would improve growth and allow interest rates to rise.

But over three days of conversation here, the dilemma has become clear: Whether it is the US-China trade war, tightfisted spending in Germany, or the drawn-out Brexit, broader government policies are moving in the other direction — driving central bankers to mount further rescue efforts, and likely leading to even more negative yielding debt.

“We still have tools which could be used as necessary,” said Bank of Japan Governor Haruhiko Kuroda. “I don’t think the effect of monetary policy has declined significantly or materially.” Still, Kuroda said that a prolonged low interest rate situation could have “side effects on the financial system. You have to be careful.”

Negative interest rates are now a fact of life in Europe and Japan, and multiple other countries including the US are lowering their target policy rates.

“It is not really clear how we are going to get out of this,” Stanford University economics professor John Taylor said at a meeting of the Institute of International Finance.

He spoke at a central banking panel that showed just how much the landscape has shifted in the decade since the 2007 to 2009 financial crisis. Far from debate over whether unconventional policies are appropriate or not, the discussion is now about whether traditional central banking can even survive — or whether oddities like negative rates have become self-reinforcing, and whether central banks will need to begin overtly financing government programs to get the fiscal spending that may provide an exit from them.

“We have got to make it easier for politicians to run fiscal policy when monetary policy is essentially not operating well,” said former Federal Reserve vice chair Stanley Fischer, now a senior adviser with investment management firm BlackRock.

Conversation at the International Monetary Fund and World Bank meetings this week was dominated by two concerns — a global economic slowdown driven by “policy shocks” that might have been avoided, and the risks to pension funds, banks, and overall financial stability posed by the roughly $15 trillion, estimated by the IMF, in bonds that now pay a negative interest rate.

With easier monetary policy being used to dampen the impact of the trade war and other risks, some analysts worry about the moral hazard of central bankers underwriting the very policies they feel are slowing growth.

“There is a kind of benign view that central banks are just kind of doing their best to offset the damage done by one set of policymakers in one side of the government,” said Brian Coulton, chief economist at Fitch Ratings. “There is a real danger in misplaced faith in the capacity of central banks to fix all these growth challenges.”

Yet they may have no choice. IMF economists slashed their forecasts for global growth to the slowest pace since the 2008-2009 financial crisis, ahead of the conference, setting the tone for a somber mood.

In a communique issued on Saturday, the IMF’s steering committee said member countries should “employ all appropriate policy tools, individually and collectively, to mitigate risks.”

With interest rates close to or below zero, asset purchases are now the main policy tool for some central banks. The ECB, for example, has cut its key rate to a record low of minus 0.5 percent and launched an indefinite bond buying program that will likely keep it in the market for years to come.

“The risks surrounding the euro area growth outlook remain tilted to the downside,” outgoing ECB President Mario Draghi said at the IMF meeting on Friday. “The Governing Council continues to stand ready to adjust all of its instruments.”

Beyond the euro zone, the US and Japan, other nations are also easing rates. The Russian central bank, which has been cutting rates this year as economic growth slowed and inflation waned, will be ready to act “more decisively” when cutting interest rates, Governor Elvira Nabiullina said.

Ukraine central bank Deputy Governor Kateryna Rozhkova said the bank intends to cut the key policy rate gradually.

While lower rates support growth, the consequence of ultra-accomodative policy is that it can breed higher risk taking, as investors search for yield, said experts.

“We do worry about the side effect, which is that investors are reaching for yield,” said Tobias Adrian, financial counselor and director of the IMF’s monetary and capital markets department. “That is ultimately what is driving high yield bonds into negative territory in some parts of the world.”

Adrian pointed to leverage rising in the corporate sector and said the IMF saw stretched valuations in some equity markets, many corporate bond markets, and government bond markets around the world.

Negative interest rates may be hiding “deep underlying problems,” said Ásgeir Jónsson, governor of the Central Bank of Iceland. They’re a “sign of sickness for developed economies.”