Pakistan's Balochistan province shares some similarities with the US state of Alaska. It is the largest of Pakistan's four provinces in terms of area (347,190 square kilometers) but the smallest in terms of population (6.6 million). With large reserves of copper, gold and natural gas, it is probably the richest of Pakistan's provinces in terms of its natural resources.
Most of the grievances of the people of Balochistan stem from a sense that they have not benefited from the resources under their land. Powerful tribal chieftains in the province have exploited this sense of deprivation to demand and receive significant funds for themselves while ordinary Balochis have remained among the poorest and most backward in Pakistan.
As Pakistan moves forward with vast new mineral discoveries such as Reko Diq in Balochistan, it's essential that there be a mechanism to equitably share with ordinary Balochis the billions of dollars in revenue expected to flow from these resources.
Balochistan Fund can be modeled on Alaska Permanent Fund. It is a constitutionally established and professionally managed fund which is run by a semi-independent corporation. Shortly after the oil from Alaska's North Slope began flowing to market through the Trans-Alaska Pipeline System, the Permanent Fund was created by an amendment to the constitution of the U.S. state of Alaska to be an investment for at least 25% of proceeds from some minerals [such as oil and gas] sale or royalties.
Similar funds should be established for other provinces as well. For example, energy-rich Sindh has large coal deposits and huge shale gas reserves which are worth at least hundreds of billions of dollars. Revenues from these resources should be shared equitably to benefit ordinary citizen of Sindh province.
Sharing of the wealth with the people in each province will give them a tangible stake in national development. It will help bring and maintain peace and stability necessary to attract badly needed investments for developing Pakistan's vast mineral resources.
Related Links:
Haq's Musings
Pakistan's Vast Shale Gas Reserves
Reko Diq Copper & Gold
Pakistan's Mineral Wealth
Thar Coal Deposits
USGS Minerals Overview For Pakistan
US Dept of Energy Report on Shale Gas
Pakistan's Twin Energy Crises
Pakistan's Electricity Crisis
Pakistan's Gas Pipeline and Distribution Network
Lure of Pakistan's Riches Calls
Israel in Alaska?
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Here's the latest from Dawn on Reko Diq license:
LONDON: Pakistan’s Balochistan province has rejected a mining lease application from Chilean copper producer Antofagasta and Canada’s Barrick Gold, raising questions over the future of their Reko Diq copper-gold project.
The two miners’ joint venture, Tethyan Copper, said last month it had filed a “notice of dispute” with the province over Reko Diq, after Balochistan government officials refused to meet the company’s executives or extend a deadline for a response to objections raised over the lease.
The mining lease application, for an area including the Reko Diq deposit, was submitted in February.
“Tethyan strongly believes that the Reko Diq project can contribute significantly to the development of a modern mining industry in Balochistan and will consider its options for further courses of action,” Antofagasta said in a statement on Wednesday.
Reko Diq – only the second significant project in the mineral-rich region and potentially a source of much needed inward investment for Pakistan – holds an estimated 5.9 billion tonnes of mineral resources, with an average copper grade of 0.41 per cent and an average gold grade of 0.22 grams a tonne.
The joint venture partners spent $200 million in 2006 buying the exploration licence from rival BHP Billiton.
Construction has been projected to cost some $3.3 billion, but that is expected to climb given rising costs faced by the mining industry, particularly in remote locations like Balochistan.
http://www.dawn.com/2011/11/16/pakistan-says-no-to-antofagasta-barrick-gold-mine.html
Here's a Reuters' report on Reko Diq status:
Pakistan's Reko Diq, an untapped copper and gold mine of fabulous potential, was meant to be the biggest foreign investment in the country's mining sector, but it's beginning to look more like fool's gold to the companies involved.
Set in one of the most godforsaken places on earth, in a Baluchistan desert at the foot of an extinct volcano, Reko Diq was expected to yield revenues of at least $60 billion over the 56-year life of the mine.
Tethyan Copper Company (TCC), a joint venture between Chile's Antofagasta and Canadian-based Barrick Gold, had sunk $220 million over the past five years into exploring the deposit in the ochre sand desert, where temperatures reach 130 degrees Fahrenheit in the summer. It was planning to invest a total of $3.3 billion when the provincial government abruptly refused to grant a mining license last year.
TCC says it never did get an explanation.
"It's been difficult to define what their actual issues were," Tim Livesey, CEO of TCC, told Reuters in an exclusive interview. "We went back to them for clarification, as many of their issues are not covered in the Baluchistan Mining Regulations."
A local government official, who requested anonymity, said TCC took too long to complete its feasibility study and that it was "cheating" Baluchistan by under-valuing the worth of the copper and gold.
"They are the monopoly," the official said angrily. "They are the monopolists of the gold! They don't want to disclose the worth of the gold in Baluchistan."
The case is now before the Pakistan Supreme Court, and TCC has filed for international arbitration. The Baluchistan government, meanwhile, has recently handed out exploration permits in the area around Reko Diq to new Pakistani and Chinese companies with no mining experience.
Pakistan is already viewed as a high risk investment due to chronic civil and sectarian conflict, terrorism, corruption, poor regulation and chronic power outages. Legal uncertainty would only add to that list.
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The Baluchis have staged five uprisings since the province was incorporated into Pakistan in 1948, each time demanding more control over their natural resources.
Because of this, some analysts speculate that the powerful Pakistani army sees Reko Diq as a strategic resource and hopes to keep the mineral wealth out of the hands of the Baluchistan government, in case separatist political parties win provincial elections.
The army, acknowledging Pakistan's inexperience in large-scale commercial mining, might also want to bring China into the picture. China is the world's largest consumer of copper, has experience in large-scale mining, and has a record of building infrastructure in exchange for resources in developing countries.
"Everywhere I look, there are indications of Chinese interest in developing this area, more than Barrick Gold could," said Shamila Chaudhary of Eurasia Group.
The Chinese government-owned Metallurgical Construction Corp (MCC) already runs the nearby Saindak Copper-Gold Project, and submitted a counter-proposal to develop the Reko Diq mine during a visit to Pakistan by Chinese Prime Minister Wen Jibbao in December 2010. Pakistan media say MCC's proposal was similar to TCC's, but was sweetened with a larger share of the royalties going to the government. This was after TCC had submitted its feasibility report. MCC has not commented on those reports.
TCC is still hoping for a negotiated settlement outside arbitration, but Chaudhary thinks its parent companies are looking to cut their losses.
"From what I hear on the Barrick Gold side ... they're looking to come to closure on this issue," she said.
http://www.reuters.com/article/2012/02/17/us-pakistan-goldmine-idUSTRE81G06E20120217
Here's an excerpt of a Huffington Post Op Ed on Baloch insurgents:
According to Peters, one of the most serious issues with the Baloch independence movement is "deeply troubling" infighting. In fact, he is emphatic in his condemnation of such bickering; going so far as to assert: "they are quickly becoming their own worse enemies."
In his view, individual Baloch simply don't understand that their personal feuding undermines the larger movement: "Certain Baloch fail to understand that their only hope in gaining independence is if they put their own egos and vanity aside and work together. This is the cold hard fact. They are already outgunned and outmanned. Pakistan will continue to to exploit their differences until they realize this."
So long as the Baloch continue to engage in "petty infighting," including "savaging each other in emails," (Ralph) Peters is pessimistic they can garner widespread support in the West. In fact, he warns that such infighting could eventually put off even their staunchest supporters.
As a result, he recommends that the Baloch leadership and activists set the example and halt their public bickering: "The Baloch leaders need to stop their severe personal attacks on each other and others. In the military, we say that you don't let an entire attack get bogged down by a single sniper. But, there are individuals out there who are causing divisions and attacking people. They tend to look at the debate as if you don't agree with me completely then you're my enemy. This undermines their cause."
Until these leaders and activists "support the big picture," Peters offers little hope that the broader Baloch nation will be able to "work together, put aside their deep divide, and unify." This troubles Peters as he confides: "At this point, do I believe they have a good chance of achieving independence? No. But, it would be much higher in the future if they just start working together. It's frustrating that the leaders can't unite."
Peters is also bothered by the Baloch tendancy to blame such infighting on covert operations by Pakistan's military and security services: "The region as a whole tends to blame conspiracy theories. But, I have come to believe that you never accept conspiracies when something can be explained by incompetence. There are probably a mix of things going on here. The Pakistani military and intelligence services probably have provocateurs working in Balochistan just like they do in Afghanistan. They live by the old rule of divide and conquer and they are good at that. But, the bigger issue is the Baloch's own egos. That's what needs addressed."
http://www.huffingtonpost.com/eddie-walsh/baloch-pakistan_b_1326421.html
Here's a Daily Times Op Ed on oil and gas reserves in Balochistan:
Khattan oil would be more valuable to the railway now than it was formerly. As fuel it was worth not more than 1½ times in weight to Khost coal and so could not possibly compete, but it was mainly as a possible substitute for pitch, the agglomerate used in fuel briquette manufacture, that it is to be now considered. Borings were also commenced in 1891 at Pir Koh near Spintangi, but were abandoned after they had reached a depth of 560 feet as no signs of petroleum were discovered. Gypsum occurs in considerable quantities near Khattan and Tung near Spintangi.
Another detailed, modern, scientific seismic survey was conducted in the mid-1990s, which proved the presence of tremendous gas and oil deposits across Balochistan, including the Marri Bugti areas, near the Quetta Zargoon belt. There are proven big gas fields, very good quality and at a large scale, explored near Barkhan at Jandran in the 1970s, and only require to be linked to the Dera Ghazi Khan pipeline. Oil also has been found at Kingari District Loralai and it needs to be pumped out. In Dera Bugti near Sui three more gas fields with very big deposits; all three estimated to hold about ten trillion cubic meters, have been explored very recently. According to reports, all proven explored gas is estimated to be about 20 trillion cubic meters, whereas Pakistan requires 700 million cubic feet and is clamouring to get it from Tajikistan, Turkmenistan, Iran or Qatar.
It is also reported that the cost of imported gas either from Central Asia, Iran or Qatar would be double of local available gas in Balochistan. The important point worthy of attention in any case is that if a pipeline is built to import gas from Central Asia, Iran or Qatar, it has to cross Balochistan. Now the question is, why is the local Balochistan oil and gas not extracted to meet Pakistan’s life and death energy crisis?
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The reports observe that this security assessment about shifting trends in the insurgency comes with the warning that the “unthinkable situation” may worsen, which could further aggravate if the political leadership does not wake up to the situation. One high security official in the briefing realises, “Balochistan is no longer a local issue. It has acquired the international limelight.” Now the main question is, whose is the policy failure in Balochistan, politicians or the use of force? If at all the political leadership wakes up to the situation today, what options are left to them? Recently, moderate pro-federation, former chief minister Sardar Ataullah Mengal said that the Baloch are pushed to a position of no return. In this background, the basic question under discussion is how to cope with the energy crisis. In any case, exploration of local Balochistan resources or the pipeline have to be laid across thousand of miles of the Baloch land.
http://www.dailytimes.com.pk/default.asp?page=2012\03\19\story_19-3-2012_pg3_4
Here's a Dawn report on the latest Reko Diq saga:
QUETTA: The federal government has agreed to declare Reko Diq gold and copper mining project area as export processing zone and the Balochistan government and the EPZ Authority will sign a memorandum of understanding soon.
Dr Samar Mubarakmand, vice chairman of board of governors of the Reko Diq Project, informed Chief Minister Nawab Raisani about the centre’s willingness during a briefing on the project here on Tuesday. The provincial government had requested the EPZ Authority to declare the project area as export processing zone.
The chief minister, who is chairman of the project’s board of governors, reiterated his government’s stance to run the project on its own.
“Whether we remain in power or not, we will give these great assets to Balochistan and the country as gift,” Mr Raisani said, adding that he and his government had faced immense pressure in efforts to make the stakeholders realise that the people of Balochistan were real owners of the project.
“We rejected all pressures and did not bow down to the forces who wanted to deprive the province of ownership of the Reko Diq project,” Mr Raisani said.
He alleged that some elements had tried to “sell the project at a throwaway price” with the connivance of some vested interests. “But my government has foiled all conspiracies.”
The chief minister said some “international forces” did not want Balochistan and Pakistan to benefit from the Reko Diq project.
Earlier, Mr Raisani approved a proposal for allocating Rs1.8 billion in the next budget for the project and revival of the recruitment committee.
The chief minister was informed that the Geological Survey of Pakistan had promised to extend all help and cooperation, including training facilities and making geographical survey drawing of the project.
Mr Mubarakmand said the authorities concerned were vetting applications for recruiting technical and other staff.
The chief minister said recruitment should be made on merit and local people be given priority.
http://dawn.com/2012/04/11/reko-diq-project-area-to-be-declared-epz/
Here's Daily Times on Reko Diq:
Reko Diq mining is once again topping the country’s legal discourse. At stake is one of the world’s largest gold and copper reserves worth tens of billions of dollars.
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It all started in the early nineties when BHP – a global mining giant — identified the mineral potential of Chaghai’s Tethyan belt in western Balochistan. This was inferred from the 1956-58 basic geophysical reports of the American Geological Survey complemented by satellite imagery of the earth’s crust over 13,000 square kilometres of Chaghai.
Having done the basic homework and waiting for the right opportunity, BHP signed the Chagai Hills Exploration Joint Venture Agreement ( CHEJVA) with the Balochistan Development Authority (BDA) when the caretaker government of Sardar Nasir Mengal took charge in July 1993 and World Bank executive Moeen Qureshi was Pakistan’s interim prime minister.
It was morally and politically incorrect for both the caretaker government and a global corporation like BHP to sign off Balochistan’s largest sub-surface asset to a single party without proper international bidding and through the BDA and not Balochistan’s Ministry of Minerals. At stake was over $ 500 billion worth of copper and gold extractable over the next century.
The reserves are shallow, only 21 metres deep and ideal for an open pit going down till 1,000 metres.
CHEJVA was in favour of BHP, Australia 75 percent to BDA’s 25 percent on a joint investment basis. Only 2 percent royalty was stipulated for the government of Balochistan against exploration rights over 3.3 million acres for a period of 56 years.
In comparison, the Afghan government gave a similar licence of gold mining at 26 percent plain royalty for 10 years at their Qara Zaghan Gold Project in 2011.
“Its not simple corruption but more a case of culpable national incompetence,” boils Raza Kazim.
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Over the next three years and as a result of basic shallow drilling samples, around 14 potential areas were identified by BHP, including the goldmine Reko Diq. The Balochistan government awarded 10 prospecting licences to BHP out of these. Then in 2000, BHP relinquished all those licences except one, i.e. PL-4, and this was then amalgamated with PL-14, i.e. Reko Diq.
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According to TCC’s feasibility, an ore extraction of some six billion tonnes is projected over the next five years with an output of 200,000 tonnes of extracted copper and around 250,000 ounces of gold every year. This capacity could double if needed.
The processing copper concentrate facility at Reko Diq will process 120,000 tonnes of copper ore every day.
Reko Diq project, which took over 20 years to reach this feasibility and national and international litigation levels is the second major copper/gold project of Balochistan, the first being Saindak.
In the Saindak project, the federal government spent over $ 200 million to develop a mine and processing facility for concentrate copper ore in the early nineties when Reko Diq just got started. Having worked and apparently failed at the project, the federal government handed the whole project to MCC China at only $ half a million per annum fee in 2001.
The Chinese have been extracting copper ore and shipping its concentrate to China over the last 12 years and giving the federal government around $ 60 million per annum as share of its 50 percent profits. The remaining 50 percent stays with the Chinese.
The government’s attitude towards strategic national assets can be gauged from the fact that the federal government has less than 10 employees to look after the whole of Saindak Copper Project in the Ministry of Petroleum while it employs over 90,000 persons for Pakistan Railways for the same amount of revenue.
http://www.dailytimes.com.pk/default.asp?page=2012\12\17\story_17-12-2012_pg7_16
Pakistan Supreme Court has voided Reko Diq lease with Tethyan, reports Globe & Mail:
Pakistan’s top court on Monday declared invalid a lease for one of the world’s richest deposits of gold and copper held by a Canadian-Chilean consortium that includes Vancouver-based giant Barrick Gold Corp.
Barrick, the world’s largest gold producer, and Chile’s Antofagasta Minerals, each own a 37.5-per-cent share, as the Tethyan Copper Company, in the largest Foreign Direct Investment mining project in Pakistan.
Their plan was to build and operate a copper and gold open-pit mine at Reko Diq in the Chagai district of the southwestern province Baluchistan, the most deprived part of Pakistan, rife with Taliban, sectarian and separatist violence.
Barrick and Antofagasta say the proposed plant could produce 600,000 tons of copper and 250,000 ounces of gold a year, but in 2011 work came to a standstill after the local government refused to renew the consortium’s mining lease.
The provincial government in Baluchistan is also the sleeping partner in the Reko Diq project with a 25-per-cent stake.
Reasons for the dispute are murky, but some analysts suggest that China, a close Pakistan ally, is also interested in the deposits.
Pakistan’s Supreme Court on Monday declared “not valid” the initial 1993 exploration agreement between the Baluchistan government and Australian mining group BHP, since BHP Billiton Ltd.
It said the agreement ran counter to Pakistan’s mineral development act and mining concession rules, and therefore to transfer it to the Canadian-Chilean consortium is also “illegal, void and non est”.
Experts say mining in Baluchistan is dominated by small companies focused primarily on marble and granite, which waste up to 80 per cent of mined minerals because of poor blasting techniques.
They also call for more transparent polices to allow business to flourish
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/pakistan-voids-gold-copper-lease-held-by-barrick-consortium/article6994959/
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