PAKISTAN HEADING TOWARDS ENERGY CRISIS

KANWAL SALEEM
May 12 - 18, 2008

LAHORE: Pakistan is heading towards energy crisis in natural gas, power and oil in the next few years that could choke the economic growth, experts suggest.

They told Pakistan and Gulf Economist (PAGE) that Pakistan's total energy requirement would increase by about 50-80 million tons of oil equivalent (MTOE) in 2010 from about 54 MTOE, but major initiatives of meeting this gap are far from turning into reality. They claimed that major shortfall is expected in the natural gas supplies.

According to energy demand forecast, the demand for natural gas, having about 50 per cent share in the country's energy consumption, would increase in times to come. Partly contributed by gas shortfalls, the power shortage is also expected to be over 6000 MW by 2010, they said, adding that the oil demand would also increase by over 23 per cent to about 21 million tons in 2010 from the current demand of 16.8 million tons. This would leave a total deficit of about nine million tons of diesel and furnace oil imports.

Since the gas shortfalls were expected to be much higher, the country would need to enhance its dependence on imported oil, thus increasing pressure on foreign exchange situation.

Sources in WAPDA said the government had planned to add an overall power generation capacity of about 7,880MW by 2010. Of this, about 4,860MW is to be based on natural gas, accounting for 61 per cent of capacity expansion. However, the gas-based power expansion of about 4,860MW would remain in doubt since these estimates were based on gas import options for completion in 2010, 2015 and 2020, the sources added.

On the other hand, sources in SNGPL told this scribe that the government had planned five major initiatives to meet the energy requirements. These are three gas import pipelines, Gwadar port as energy hub and LNG import. However, out of these measures, including the three import pipeline projects, show no signs of progress for various reasons while concentration on energy facilities in Gwadar would chiefly depend on security situation, besides oil and gas import pipelines. The fifth initiative of LNG import was on schedule and would start delivering about 0.3 billion cubic feet of gas (BCFD) by 2009 and another 0.5 BCFD by 2015, said the sources.

According to World Bank estimates, a demand gap (supply shortage) of about four per cent of the total demand is expected in 2010. Even though this gap would be met by LNG imports, it would again increase to 20 per cent of the total demand. The bank said the indigenous gas supply would fall from 32.6 MTOE in 2010 to 20.7 MTOE in 2025 while the "gas supply-demand gap" would rapidly increase as demand is expected to grow continuously, quadrupling in 2025. As per the World Bank estimates, the gas imports will represent almost 67 per cent of natural gas supply in 2025. One can, therefore, gauge the quantum of shortage in case import pipelines are not materialised.

Sources in SNGPL said Pakistan's gas reserves are 32.8 TCF at present, with reserve-production ratio in the order of 27 years, considering that domestic production does not grow substantially. Power sector demand represents 41 per cent of total gas consumption, general industries 24 per cent, fertiliser 7.8 per cent and domestic-commercial 22.8 per cent, cement 1.5 per cent and CNG 2.8 per cent. Demand growth has been up to 10-12 per cent in recent years and is expected to be seven per cent with power industries and domestic consumption accounting for 82 per cent. Gas demand already displays seasonal pattern with national demand growing in winter beyond transmission capacity. Therefore, supplies to large users mainly industries and power plants are curtailed during winter months to ensure supplies to domestic, commercial and small industries. Annual production at present is about 1.16 TCF, they added.

Positive development on Iran-Pakistan-India (IPI) gas pipeline project was that during recent visit of Iranian President Mahmoud Ahmadinejad to Pakistan, Islamabad and Tehran resolved all issues regarding the US $7.5 billion dollars gas pipeline project, paving way for inking an agreement soon at a mutually agreed date in Tehran.

The Iranian President, who made a brief "official stopover" at Pakistan while on his way to Sri Lanka, led a high-level delegation including its Foreign and Commerce Ministers, besides its Minister for Petroleum and head of EXIM Bank of Iran.

Both Presidents of Pakistan and Iran held an exclusive meeting, which were later joined by their respective delegations. "The two leaders said the IPI project will promote peace and friendship." The foreign ministers of Iran and Pakistan have been tasked to agree on a mutually convenient date for signing the IPI agreement.

Iran also gave a positive response about the Pakistani proposal for allowing a gas pipeline through its territory to provide gas to China, along the historic Karakoram Highway, to help it meet its growing industrial needs a foreign office spokesman said.

President Musharraf and President Nejad reviewed their economic relations and said that they need to be further upgraded to bring these at par with their political and diplomatic ties.

It may be mentioned that Iran and Pakistan already have a Preferential Trade Agreement and a Joint Investment Company.