The United States’ top diplomat in Pakistan has conveyed that American companies are exhibiting “strong interest” in the nation’s oil and gas industry. This follows former President Donald Trump‘s surprising assertion last month regarding Pakistan’s “massive” oil reserves.

According to the Ministry, pakistan’s Petroleum Minister Ali Pervaiz Malik met with US Charge d’Affaires Natalie A. Baker in Islamabad recently to discuss enhancing collaboration in the energy sector. Malik noted that discussions with US firms concerning bidding rounds for exploration blocks are already in progress.

Baker stated, “There is a strong and growing interest from US companies in Pakistan’s oil, gas, and minerals sector, in line with the vision of President Trump.” she added that the embassy would “actively facilitate direct linkages” between American and Pakistani companies. The US embassy in Islamabad has not yet provided further details on these comments.

Trump’s July social media post, which claimed Pakistan possesses “massive oil reserves,” sparked considerable interest, though it surprised many industry experts. This statement contrasts with existing estimates and occurs amidst declining foreign investment in the region.

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The situation also occurs during a period of trade tensions between the US and India. While Trump highlighted Pakistan’s oil potential, he criticized New Delhi for purchasing crude oil from Russia, threatening economic consequences and straining diplomatic ties. Trump further suggested that Islamabad could perhaps sell oil to India “some day!”

“If Pakistan had massive oil reserves” then so many foreign companies wouldn’t have left.

Moin Raza Khan, an energy veteran and former chief executive officer of Pakistan Petroleum Ltd., described Trump’s statement as a “political statement.” He noted that the departure of numerous foreign companies suggests that Pakistan’s oil reserves are not as substantial as claimed. A White House spokesperson declined to comment beyond Trump’s post.

Pakistani officials often reference a 2013 estimate from the Energy Data Administration, which suggests 9.1 billion barrels of recoverable shale oil. Though, Iqbal Jawaid, an analyst at Karachi Arif Habib Ltd., believes the actual reserves are substantially lower, estimating them to be around 238 million barrels.

According to estimates from Rystad energy, this figure is modest compared to major oil producers like Saudi Arabia, Russia, and the US, which possess billions of recoverable barrels. Furthermore, Pakistan has not experienced any significant oil discoveries in over a decade.

Jawaid notes that the two most recent major finds, Makori East (discovered in 2011 by a group including Hungary’s MOL Group) and Nashpa (discovered in 2009 by a venture led by Oil & Gas Advancement Co.), are currently the nation’s two largest oil-producing fields.

Majors Exit

While MOL has been active in Pakistan as 1999, it is indeed part of a decreasing number of foreign companies. Kuwait Petroleum Corp. began its exit last year after more than four decades, and TotalEnergies SE sold its stake in a fuel business. Shell Plc also exited in 2023 after 75 years of operations in the country.

In 2019, Eni Spa and exxon Mobil Corp. explored Pakistan’s offshore potential in the Arabian Sea, drilling a well in partnership with Oil & Gas Development and othre companies, but the effort yielded no significant findings.

Pakistan aims to create more exploration opportunities, having announced a bidding round for forty offshore blocks, including those in the Indus Basin, earlier this year.Oil and Gas Development’s Chief Financial Officer,Anas Farook,mentioned at a recent conference that the company is in discussions with several US companies regarding the bidding process,though he did not provide further details. The company has not yet responded to requests for comments.

The deadline for bids for the offshore blocks is in October.

Any discovery that increases domestic oil production would greatly benefit the government, given its substantial energy import costs. According to data from the International Energy Administration, the nation’s oil output has been declining since its peak in 2018. Pakistan spends approximately $11 billion annually on oil imports, which accounts for nearly a fifth of the country’s total imports, according to central bank data.

Michael Kugelman,a non-resident Senior Fellow at Asia Pacific Foundation of Canada,noted that “There would be significant risks for those looking to unearth Pakistani reserves,given shortages of technology and infrastructure and entrenched security challenges.”

He added, “If these obstacles were easy to overcome, then we would have seen Pakistan tapping into these reserves rather of relying so heavily on oil imports, and we would have seen more external players getting involved.”