MOUNTING GAS SCARCITY

KANWAL SALEEM
Nov 02 - 08, 2009

South Asia is important to world energy markets because it contains around 1.4 billion people and is experiencing rapid energy demand growth. After India, Pakistan and Bangladesh are the next largest South Asian consumers of energy.

Economic and population growth in South Asia have resulted in rapid increases in energy consumption in recent years. The major energy issues facing South Asian nations today are to meet rapidly rising energy demand.

Energy has become an important prerequisite for the economic development of a country. On one hand, it is used for the industrial and agricultural purposes and it is required for domestic use of the citizens on the other.

Natural gas is the fastest growing primary energy source. Global consumption of natural gas is projected to increase by nearly 70 percent by 2025, with the most vigorous growth in demand expected from the emerging economies.

Pakistan's largest energy source is natural gas. The country will experience a gas shortfall of 730 million cubic feet a day in November and 976 mcfd in December. The shortage could reach 1 billion cubic feet a day in January, 881 mcfd in February, and 69 mcfd in March, official sources told Pakistan and Gulf Economist (Page).

According to statistics, as of January 1, 2005, Pakistan had 26.83 trillion cubic feet (Tcf) of proven natural gas reserves. Pakistan is planning to meet its increasing consumption through importing gas from Iran and Turkmenistan. Currently, Pakistan ranks third in the world for use of natural gas as a motor fuel, after Brazil and Argentina. In addition, Pakistan hopes to make gas the fuel of choice for future electric power generation projects.

According to energy experts, Pakistan is most likely to face a major crisis of natural gas in future that may hit the economy hard. "Pakistan's total energy requirement would increase by about 50 percent, but major initiatives of meeting this gap are far from turning into reality as still there are lots to be done to reduce demand-supply gap," they said.

Textile sector of the country that employs 2.4 million people and generates 9.6 billion dollars export revenue cried for help as natural gas supply to hundreds of textile units was disconnected in the month of October. Gas load shedding for textile industry was started in December. Last month, gas supply has been stopped to a number of textile units, which is a matter of concern for textile industrialists.

Pakistan Industrial Traders Association Front (PIAF) Chairman Irfan Qaiser Sheikh has appealed to the government not to neglect the economy while fighting terrorism, as the economy simply needs prudent decisions and setting the priorities right. According to him, the industrial sector is facilitating the government in earning precious foreign exchange by cutting their margin drastically to attract foreign buyers.

Rates offered are so attractive that foreign buyers are forced to keep the flow of orders in Pakistan. The exporting industries only need maximum facilitation and assistance from the government in return.

He said textile having a share of around 60 percent in total exports was bearing the burden of high interest rates, high inflation and very high input costs but even then it was resisting decline in its exports through maintaining efficiency with offering competitive export prices. This industry, he added, was not in a position to absorb any shock or additional pressure further.

Unfortunately, he said, the closure of gas supplies since five months to the textile units had put unbearable pressure on the textile industry, which was likely to result in massive close downs. This would be unfortunate, he remarked.

According to Irfan Qaiser Sheikh, gas is a basic input of textile sector and industries already operating on sharp margins will go out of the business if gas supplies are cut for such a long period.

The government should consider the supreme national interest and restore the gas supplies to the industry.

He also presented a number of options that could be adopted for prudent gas management e.g. usage of gas room heaters should be banned. The CNG stations should be asked to operate at times when the gas consumption in the country is low. He said the fertilizer companies should be asked to close for one-month yearly for repair and maintenance. In addition, these mills should also be asked to share the gas shortage by observing shutdowns for additional 15 days.

He said all the Pepco-run thermal units running on gas should be run on furnace oil, as their generating efficiency was not more than 40 percent. They thus waste 60 per cent of the gas that is supplied to them. He said the private sector had more efficient gas units and the nation would gain economically if the gas was supplied to the industries.

A leading textile industrialist Mian Faraz Alam told this scribe that energy was a scarce source. Natural gas is must for survival of the textile industry, which must not suffer as textile sector was a major source of fetching precious foreign exchange.

He asked the government to rescue the textile sector, which was already overburdened due to high cost of production and global competitive environment.

According to him, the textile exports registered a decline of 11.4 percent during the first quarter (July-Sept) of the current fiscal year mostly in the value-added sector. Towel exports declined by 13.85 percent, bed wear by 15.42 percent, whereas export of cotton increased by 39.24 percent and yarn by 3.45 percent.

He was of the view that the slowdown in textile industry would have an adverse impact on a large number of downstream industries, including cardboard, button, zippers, bags, and packing etc.

The profits of the Sui Northern Gas Pipeline Limited (SNGPL) have dropped by 63 percent (from Rs4.55 per share last year to Rs1.69 this year), and the company would not be able to provide any dividend to its investors.

According to the company's financial report-2009, which is to be presented at its annual general meeting, the company posted an after tax profit of Rs2.49 billion last June, which dropped to Rs0.93 billion this year. This is despite the fact that the company drew Rs1 billion from its 'revenue reserves' to boost profit. If those Rs1 billion are deducted from this year profit, the company's net loss totals up to Rs70 million.

According to the report, the total SNGPL liabilities have increased by a whooping Rs26 billion in last one year - from Rs80.508 billion last year to Rs106 billion this year. Its assets, however, increased from Rs34 billion last year to Rs43 billion this year.

Analysts believe that decline in the profits of SNGPL reflect the downward trend country's gas sector is facing.