The geological conditions in certain parts of Pakistan are favorable for the formation and extraction of oil. Extensive areas are covered with marine sedimentary rocks, which are conducive to oil formation. Encouraged by this, the search for oil began in the 1860s and is still underway. In 1961, the Oil and Gas Development Corporation was setup up to organize and undertake the exploitation, development, production, refining and sale of oil.
In 1991, the first petroleum policy was framed by the government. The main objective of the policy was to give financial concessions to foreign firms to explore and develop oil in Pakistan. As a result, several foreign petroleum firms are now working in the country.
The production of Petroleum in Pakistan was small in the early years after the partition. Since then, oil production has increased about 28 times from 99000 tonnes in `949-50 to 2756000 tonnes in 1997-8. Despite this increase, Pakistan is still deficient in oil. In 1997-8, Pakistan consumed about `6.2 million tonnes of oil. Only 17 percent of this was met by domestic production.
Petroleum and petroleum products remain one of Pakistan's top import items. The bulk of oil is consumed by the transport and power sectors. In 1997-8, transport (aeroplanes, trucks, buses, automobiles,) Consumed 44 percent, and power 36 percent, of the total petroleum output. The remaining 20 percent was consumed largely by the industrial sector.