Saadia Saadat
I am convinced that our government forte is cosmetic surgery of our economy even, the rivals agree. The most peculiar thing with our economy right now is the increasing foreign reserves but constant currency devaluation, which is against the economic norms.
As with increased foreign reserves the currency gets stronger not what we are witnessing right now.
This is no secret that Pakistan owes more money now than in past. According to Pakistan’s premier Imran khan if in past each person owed Rs. 115,000, so now it’s RS.275, 000.
Pakistan government biggest mistake is bad governance and mismanagement of some the important challenges which have further added to the misery, recently Pakistan has inked the costliest LNG contracts and this was purely due to mismanagement and lack of proper planning. Present government used to criticises the previous government for pricey long term contracts.
While in fact, this Government have failed miserably on numerous accounts e.g one contract for January 2021, Despite timely receiving of demand From SNGPL , the management failed to issue tenders in time hence reducing the delivery window and ended up paying higher price which resulted in Rs1.3 billion of loss in another.
In couple of other instances, our government has ordered fewer amounts which were not enough to cover the demand, and got spot cargoes at higher prices costing Rs7.7 billion loss.
There were times, when LNG was available for $4 per mmBTU (million british thermal unit) but Pakistan had paid $15 mmBTU for not signing contracts and opting for spot cargoes.
Adjoining country Bangladesh, for their August Consignment has ditched spot cargoes at US$13.069 per mmBTU which is around 50 per cent higher than the LNG prices, over term deal which is around US$8.5 per mmBTU.
Traditionally LNG contracting model was built on long term, destination specific oil-indexed contracts between producers and suppliers. But now a surplus gas from current suppliers is boosting the negotiations of LNG buyers.
Now buyers can have reduced contract length e.g. in 2008 the average contract length was 15-18 years but now over time this has reduced to less than 8 years and now buyers can negotiate on lesser contract term.
Also, now with addition of numerous intermediary companies like Glencore, Guvnor, Vitol etc. there is more price flexibility with shorter term contracts, due to abundant gas supply conditions.
So Pakistan should have gone for term deals on Take and pay basis right now which could have been beneficial for Pakistan in order to restrain Capacity payment charges.
According to PIP (petroleum institute of Pakistan) recent report our energy demand over the next 15 years is expected to grow at a rate between 4.4%-6.1% per annum considering the economic growth as, in our country the economic growth has direct effect on energy demand. Our three main source of energy are Gas, Oil and then Coal.
Due to our increasing gas deficit we have to depend heavily on gas imports in the form of LNG and unfortunately our reliance on coal based energy will also reach up to 11 per cent in 2022.
So government should take steps to curb the coal based energy rather than facilitating it as the world is now becoming aware of climate change and clean energy is the new standard.
With increase in Coal based source of energy we also increase CO2 emissions. Pakistan has augmented the coal based plants to bring down power prices, energy imports bill but what we have observed are; high prices and more CO2 emissions.
Pakistan Plans to take move away from coal based plant but in reality what we see is that Government is starting to explore possibility of Coal to liquid (CLT) and coal to Gas (CTG) to migrate away from coal-based generation.
Although according to Duke University study 2009, carbon foot prints are more when coal is turned into liquid or gas than actually burning coal and it’s not cost effective and their operations are not efficient either.
Last year Bangladesh, to cut their reliance on coal based plants their ministry of power has approved to convert 10 coal power projects to LNG based plants while five new LNG based projects have commenced and are able to cut their carbon emissions to 2.9%. So why are we not exploring that avenue?
So after stating the above mentioned facts, I have come to the conclusion that our Government is doing a wonderful job in painting a rosy picture but the reality is far different. Since, all is just the cosmetic surgery and no real operation.
—The Writer is a freelance, London based columnist.
