Home / This Week / Cover Stories / Review of oil and gas, power and renewable energy sector of Pakistan

Review of oil and gas, power and renewable energy sector of Pakistan

Economic role of natural gas

Pakistan’s primary energy supply mix clearly shows natural gas as playing major role in country’s economic development by accounting for nearly 50 percent of its total primary energy supply mix. Pakistan’s natural gas production has remained stagnant at nearly 4,000 mmcfd during the last decade. Over last few decades, Pakistan has developed a formidable gas sector. Its economy has so far survived due to abundant initial gas discoveries. The natural gas market of Pakistan is among the biggest in Asia and is somewhat comparable with the size to France and The Netherlands. Pakistan was gas sufficient till 2005, however. after that gas production didn’t keep up with the gas demand. The constrained demand of natural gas is 6,000 mmcfd whereas the unconstrained demand is 8,000 mmcfd (8 BCFD) or even potentially higher than this during winters when the domestic gas demand surges exponentially.

The peculiar energy mix of the country created space for oil as a major fuel source for power generation which resulted in piling up of circular debt. The gas dependent sectors are suffering with the number of power plants shut down on account of uneconomical fuel use (HSD), rationing of gas. This resulted in enhanced imports of urea. The largest use of natural gas is in power sector followed by domestic, fertilizer, industrial and transport sectors. Major gas reserves including Sui Field of Balochistan, Qadirpur and Zamzama gas fields of Sindh are depleting rapidly, the supply-demand gap in the country is broadening and the country needs alternative sources of fuel to ensure the smooth functioning of local industries. Pakistan is an agricultural economy and fertilizer sector plays an essential role in enhancing agricultural output to meet local requirements as well as exports but as a result of serious gas shortage the fertilizer industry suffered a lot but now with the arrival of LNG the situation is improving. LNG import is a major milestone for Pakistan’s gas sector. LNG development will serve as an impetus for growth not only in gas sector but also in gas consuming sectors including fertilizer and power sector.

Rising oil refining capacity

Global refining capacity is expected to reach 115 million bpd by 2020 despite low crude oil prices and consequently the gloomy scenario for the oil and gas sector. It is, however, speculated that the global trend of declining oil prices would be arrested in the near future. Interestingly, most recent oil refining capacity additions have taken place in the Asia-Pacific region. Pakistan should therefore be no exception as future energy consumption poses a serious challenge for the nation and refining margins are high. Energy is the largest import commodity and erosion in the currency exchange rate would push up energy prices which had already started increasing in the international market.


Long term power solution

The power sector in Pakistan is a mix of hydel and thermal units dominated by two vertically integrated public-sector utilities that are Water and Power Development Authority (WAPDA) for all of Pakistan except Karachi, and the K-Electric (formerly KESC) for the city of Karachi and its surrounding areas. There are a number of independent power producers that contributes significantly in electricity generation in Pakistan.

For years, the matter of balancing Pakistan’s supply against the demand for electricity has remained a largely unresolved matter. Pakistan faces a significant challenge in revamping its network responsible for the supply of electricity. Due to an unrealistic power tariff, high inefficiencies, low payment recovery and the inability of the government to manage its subsidies mechanism that lead to a serious ‘circular debt’ issue which is becoming a barrier for future energy sector investment.

The economy is badly affected by electricity crisis with loss of huge capital. The solution to the current crisis lies in energy conservation at all levels in the country. The use of alternate energy such as wind and solar power could be utilized to immediately reduce the shortages, while electricity projects from coal and large dams could provide a long-term solution to the electricity shortage.

Renewable energy

The International Energy Agency (IEA) has forecasted that demand for primary energy will increase by 40 percent between now and 2030. The mounting energy demand in Pakistan is a huge challenge for development and stability. Alternative/renewable energy is the only panacea for all concerns of intensifying global energy demand, of vanishing fossil fuels and exhausted natural resources. Usage of renewable energy sources and other environmental-friendly technologies can only assist in sustainable socio-economic growth over the globe. To curtail the country’s energy issues Pakistan has to divert its policies and consequent actions for alternate/renewable energy.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

Check Also

Intricacies of the national budget

Intricacies of the national budget

Whether budgetary conditionalities of the International Monetary Fund (IMF), directives of the State Bank of …

Leave a Reply