Politicising gas crisis in Pakistan
PAKISTAN is ranked 29th among the nations with the largest reserves of natural gas. But it has turned into a burgeoning Liquefied Natural Gas (LNG) import market since domestic supplies have decreased over the past few years.
Pakistan’s most significant export sector is suffering due to the country’s natural gas crisis, further straining an already fragile economy already dealing with rising inflation and a depreciating currency.
Nevertheless, the government needs to look into other energy options to protect the environment and decrease spending on LNG imports.
The results of a gas monitor report presented by Dr Amanullah Mahar, Director, Centre for Environmental Sciences, University of Sindh, Jamshoro, showed that daily gas output is just four billion cubic feet (BCFT), despite the total extractable potential being estimated to be over 24 TCFT.
With 124 gas fields, Sindh makes about 63% of the total. The Sui region of Balochistan contains the largest natural gas field, accounting for 6 percent of the total.
The nation possesses proven reserves that are equal to 12 times its yearly usage. As a result, it has around 12 years’ worth of gas left.
Musadik Malik, the Minister of State for Petroleum, anticipated that this fall’s natural gas shortage would be just as severe as it was last year.
He blamed Imran Khan’s government for having failed to secure the best deal on LNG at the time and for doing nothing to increase domestic gas production.
There are several factors due to which Pakistan is facing a gas crisis. They include: A disparity between demand and supply during the winter.
The government’s alleged failure to fully use the country’s gas production facilities. Industries’ dependency on gas given by the government rather than buying gas from outside owing to cost considerations exacerbates the scarcity.
Due to security issues and the current state of law and order, a significant portion of the territory is yet undiscovered.
For instance, the Pishin basin in Balochistan is regarded as a rich block. Similar to the well-head pricing policy, the blocks’ bidding structure, and the government’s involvement in state-run businesses discourage industries.
Investors are not encouraged by political instability or the ensuing uncertainty in the policy. In Pakistan, the government has direct or indirect control over all activity in the gas industry.
Companies are infringing on the system when they bid on blocks but do not begin construction.
Government has the right to punish or revoke blocks under the terms of the contract, although neither action has been exercised in decades.
The mindset of upstream corporations explains why the oil and gas industry has inadequate regulations.
Cross-subsidy and a general deficit in the gas industry are the results of government involvement in service providers’ operations.
Both the utilities SNGPL and SSGCL added to the above Rs 1.5 trillion circular debt in the gas industry.
Due to the disparity between consumer prices and established revenue needs, the gas sector deficit is growing.
Sectoral growth is being hampered by government anomalies in regulatory frameworks and poor policy formation which is also leading to supply chain inefficiencies.
Bottlenecks include monopolistic commercial practices and allocations controlled by politics. The Government of Pakistan needs to refine its policies to lessen the repercussions of the gas crisis in the country.
The points that need to be pondered include: The government need to give exploratory efforts top priority so that they can rely on LNG imports as little as possible, fix wellhead pricing, and reduce government involvement.
Exploration policies must be progressive and focused on the market. Rather than being reliant on political judgments, the distribution of gas to industries should be done with growth in mind.
All industries must adhere to severe energy efficiency regulations and laws. No government should interfere with the commercial operations of any gas company.
The government should confine its influence to formulating sound legislation and policies that promote market liberalization.
To purchase LNG for cheaper than the market prices, Pakistan engaged in negotiations with Qatar for a long-term deal and had to withdraw at least two tenders this year.
Pakistan is negotiating the import of gas with Iran as an alternative. Pakistan ought to have purchased gas from Russia in the interest of its own country.
However, the current coalition government is likewise experiencing instability and is more focused on maintaining its position as a leader and winning election.
All residents now find the tight political and economic environment to be concerning. The seriousness of these challenges has, however, gone unnoticed by many in positions of authority.
The agreements might get more difficult due to rising EU demand, and Pakistan’s winter conditions could worsen because the country cannot buy gas on the spot market.
Pakistan cannot avoid experiencing inflation. But we also need to prepare for the winter, when there is a greater demand for gas owing to higher heating needs in the US and the EU which drives up costs. We must make plans now for the upcoming winter and the subsequent five years.
—The writer is currently working as Research Associate at Institute of Peace and Contemporary Affairs, Islamabad.