In recent years, the combination of rising oil consumption and flat oil production in Pakistan has led to rising oil imports from Middle East exporters. In addition, the lack of refining capacity leaves Pakistan heavily dependent on petroleum product imports. Natural gas accounts for the largest share of Pakistan's energy use, amounting to about 50 percent of total energy consumption. Pakistan currently consumes all of its domestic natural gas production, but without higher production Pakistan will need to become a natural gas importer. As a result, Pakistan is exploring several pipeline and LNG import options to meet the expected growth in natural gas demand. Pakistan's electricity demand is rising rapidly. According to Pakistani government estimates, generating capacity needs to grow by 50 percent by 2010 in order to meet expected demand. Pakistan had proven oil reserves of 300 million barrels as of January 2006. The majority of produced oil comes from proven reserves located in the southern half of the country, with the three largest oil-producing fields located in the Southern Indus Basin. Additional producing fields are located in the Middle and Upper Indus Basins. Since the late 1980s, Pakistan has not experienced many new oil fields coming online. As a result, oil production has remained fairly flat, at around 60,000 barrels per day (bbl/d). During the first eleven months of 2006, Pakistan produced an average of 58,000 bbl/d of crude oil. However, Pakistan has ambitious plans to increase its current output to 100,000 bbl/d by 2010. Due to Pakistan's modest oil production, the country is dependent on oil imports to satisfy domestic oil demand. As of November 2006, Pakistan had consumed approximately 350 thousand barrels of oil and various petroleum products, of which, more than 80 percent was imported. The majority of oil imports come from the Middle East, with Saudi Arabia as the lead importer. Pakistan's Ministry of Petroleum and Natural Resources regulates the country's oil sector. The Ministry grants oil concessions by open tender and by private negotiation. To encourage oil sector investment, the Ministry has offered various tax and royalty payment incentives to oil companies. Pakistan's three largest national oil companies (NOCs), include the Oil and Gas Development Corporation Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Pakistan State Oil (PSO). All three operate under joint ventures and partnerships with various international oil companies (IOCs) and other domestic firms. Major IOCs operating in Pakistan include BP (UK), Eni (Italy), OMV (Austria), Orient Petroleum Inc. (OPI, Canada), Petronas (Malaysia) and Tullow (Ireland). In response to conditions laid down by lenders, such as the IMF and the World Bank, Pakistan continues to strive for privatization of its state-owned companies. For instance, the government has on offer a 51 percent stake in PPL, as well as a 54 percent stake in PSO. PPL owns the Sui fields in Balochistan, as well as exploration interests in 22 blocks, while PSO holds a majority share in the domestic diesel fuel market with more than 3,800 retail outlets. In November 2006, Pakistan plans to have a share issue from OGDCL for the equivalent of 15 percent of the NOCs capitalization. Five percent of the company was previously divested in November 2003 in an initial public offering (IPO). Pakistan hopes to reap significant revenues from these privatizations over the next several years. Pakistan's net oil imports are projected to rise substantially in coming years as demand growth outpaces increases in production. Demand for refined petroleum products also exceeds domestic oil refining capacity, so nearly half of Pakistani oil imports are refined products. Pakistan's largest port is located at Karachi, which serves as the principle point of entry for oil imports. PSO leads Pakistan's fuel distribution market, with its main storage facilities located at Port Mohammed Bin Qasim. BP is the largest oil producer in Pakistan, with production averaging approximately 30,000 bbl/d. The oil major operates 43 fields and more than 100 wells throughout the country. OGCDL is Pakistan's second-largest oil producer, with average production at 25,000 bbl/d. While there is no prospect for Pakistan to reach self-sufficiency in oil, the government has encouraged private (including foreign) firms to develop domestic production capacity. In 2005, NOCs and IOCs drilled a total of 29 onshore development wells in Pakistan. BP led the development by drilling ten wells in its Lower Indus Basin acreage, while ODCGL drilled nine wells, with the majority being on its acreage in the Middle Indus Basin. PPL expanded its interests in 2005, by drilling offshore at the Pasni X2 shallow water field. It was the first time a Pakistani oil company had explored offshore. SAUDI ARABIA Saudi Arabia maintains the world's largest crude oil production capacity, estimated to be around 10.5-11.0 million bbl/d. In 2005, Saudi Arabia's Ministry of Petroleum announced the details of an $18-billion plan to increase capacity to 12 million bbl/d by 2009. Saudi Arabia contains about 260 billion barrels of proven oil reserves (including 2.5 billion barrels in the Saudi-Kuwaiti Divided, or "Neutral" Zone), or around one-fifth of proven, conventional world oil reserves. Around two-thirds of Saudi reserves are considered "light" or "extra light" grades of oil, with the rest either "medium" or "heavy." Although Saudi Arabia has over 100 oil and gas fields (and more than 1,500 wells), over half of its oil reserves are contained in only eight fields, including the giant 1260-sq mile Ghawar (the world's largest oil field, with estimated remaining reserves of 70 billion barrels) and Safaniya, including Khafji and Hout (the world's largest offshore oilfield, with estimated reserves of 25-35 billion barrels). Ghawar's main producing structures are, from north to south: Ain Dar, Shedgum, Uthmaniyah, Hawiya, and Haradh. Ghawar alone accounts for about half of Saudi Arabia's total oil production capacity. Saudi Arabia produces a range of crude oils, from heavy to super light. Of Saudi Arabia's total oil production capacity, about 65-70 percent is considered light gravity, with the rest either medium or heavy; the country is moving to reduce the share of the latter two grades. Lighter grades generally are produced onshore, while medium and heavy grades come mainly from offshore fields. Saudi Arabia has announced an ambitious $70-billion energy investment plan, $18 billion of which will be directed toward increasing upstream petroleum capacity to an estimated 12 million bbl/d by 2009. One challenge for the Saudis in achieving their strategic vision to add production capacity is that their existing fields sustain, on average, 6 to 8 percent annual "decline rates" (as reported by PlattsOilgram) in existing fields, meaning that the country needs around 700,000 bbl/d in additional capacity each year just to compensate for natural decline. Saudi Arabia's long-term goal is to further develop its lighter crude reserves including the Shaybah field, located in the remote Empty Quarter (Rub al-Khali) area bordering the United Arab Emirates. (In June 2005, the UAE said it wanted to amend a 1974 border pact which gave the Saudis rights to Shaybah, which lies 80 percent in Saudi territory and 20 percent in UAE). Saudi Arabia has seven functioning refineries, with combined crude throughput capacity of around 2.1 million bbl/d, plus around 1.75 million bbl/d of refining capacity overseas, making it the sixth largest oil refiner in the world. The Saudi Aramco development plan calls for a $20-billion investment, increasing domestic refining capacity to 3 million bbl/d and international holdings by at least 1-2 million bbl/d by 2011, particularly in an effort to meet requirements of the fast-growing Asian market. IRAN Iran is OPEC's second-largest producer after Saudi Arabia. In 2006, Iran produced an estimated 4.2 million barrels per day (bbl/d) of total liquids, of which 3.8 million bbl/d was crude oil, equal to 5 percent of global production. According to Oil and Gas Journal, Iran has 136 billion barrels of proven oil reserves, or roughly 10 percent of the world's total proven petroleum reserves as of January 1, 2007. Iran has 40 producing fields, 27 onshore and 13 offshore, with the majority of crude oil reserves located in the southwestern Khuzestan region near the Iraqi border. Iran's crude oil is generally medium in sulfur content and in the 28-35 API range. Iran produced 6 million bbl/d of crude oil in 1974, but has been unable to produce at that level since the 1979 revolution due to a combination of war, limited investment, sanctions, and a high rate of natural decline in Iran's mature oil fields. Iran's oil fields need structural upgrades including enhanced oil recovery (EOR) efforts such as natural gas injection. Iran's fields have a natural annual decline rate estimated at 8 percent onshore and 10 percent offshore, while current Iranian recovery rates are 24-27 percent, 10 percent less than the world average. It is estimated that 400,000-500,000 bbl/d of crude production is lost annually due to reservoir damage and decreases in existing oil deposits. Iran plans to increase oil production to over 5 million bbl/d by 2010, but it will need foreign help. According to Global Insight, an estimated $25-35 billion is required to meet the government's 5.8-million bbl/d target by 2015. Investment in Iran's energy sector has been tempered due to the election of the conservative government of President Mahmoud Ahmadinejad in 2005, the international controversy surrounding the Iranian uranium enrichment and nuclear program, and economic sanctions. According to the IEA 2007 Medium-Term Oil Market Report, Iran will not be able to increase its net expansion capacity through 2012. Iran's total refinery capacity is 1.5 million bbl/d from nine refineries operated by the National Iranian Oil Refining and Distribution Company (NIORDC), a NIOC subsidiary. Iranian refineries are unable to keep pace with domestic demand, and face major infrastructure problems. The country plans to add around 985,000 bbl/d of refining capacity by 2012, mostly through expansions and upgrades for gasoline yields at the Bandar Abbas, Bushehr, and the 90-year-old Abadan refineries. Large expansion projects at Bandar Abbas, including new catalytic reformers, distillation units, and condensate splitters will help supply the domestic demand, but it will probably not eliminate all gasoline imports. Iran has also discussed joint ventures in Asia, including China, Indonesia, Malaysia, and Singapore to expand refining activity. CANADA Canada's total oil production (including all liquids) was 3.3 million bbl/d in 2006. The country's oil production has steadily increased as new oil sands and offshore projects have come on-stream to replace aging fields in the western provinces: from 1996-2006, Canada's oil sands production has increased from 445,000 bbl/d to 1.2 million bbl/d. Overall, EIA predicts that oil sands production will increase even further in coming years and more than offset the decline in Canada's conventional crude oil production. Canada consumed an estimated 2.2 million bbl/d of oil in 2006. The country sends over 99 percent of its oil exports to the U.S., and it is consistently one of the top three sources of U.S. oil imports. Canada had a reported 179.2 billion barrels of proven oil reserves as of January 2007, second only to Saudi Arabia. The bulk of these reserves (over 95%) are oil sands deposits in Alberta, which are much more difficult to extract and process than conventional crude oil. The Canadian government formed Petro-Canada in 1975 in an effort to reduce the dominance of U.S. companies in Canada's oil industry. The company received considerable initial resources from the Canadian government in its early years, though critics accused Petro-Canada of inefficiently deploying those resources and interfering with the operations of private companies. In 1991, the Canadian government began to privatize Petro-Canada, and in late 2004, the government sold its remaining 20 percent stake in the company. Canada has extensive oil pipeline connections with the United States. Enbridge maintains connections between major Canadian cities and Chicago, integrating the Canadian and U.S. components of its network. Enbridge also operates Spearhead, a 650-mile pipeline with a capacity of 125,000-bbl/d that links Chicago with Cushing, Oklahoma; originally carrying oil from Cushing to Chicago, Enbridge received regulatory approval in late 2004 to reverse the flow of the pipeline, allowing it to export oil from Canada deep into the U.S. market. In 2006, Canada exported 2.3 million bbl/d of crude oil and refined products to the U.S., the single-largest source of U.S. oil imports. The largest share of U.S.-bound Canadian oil exports go to the Midwest. The bulk of Canadian exports to the U.S. have traditionally gone to PAD Districts II, because this area is well connected to Alberta by oil pipelines and not well served by coastal import terminals in the U.S. Even though Canada is a net oil exporter, it imports sizable quantities of crude oil and refined products. According to the International Energy Agency (IEA), Canada imported around 1.2 million bbl/d of crude oil and refined products in 2006. Canada's major population centers in the eastern part of the country are not well connected to its principle production facilities in the western interior, meaning that it is often easier to import oil along the coastlines rather than transport it domestically. Most oil imports come from Algeria (crude oil), Norway (crude oil) and the U.S. (refined products).