Feb 11 - 17, 2008

Like electricity, there is a big gap between supply and demand of natural gas including compressed one known as CNG and Liquefied Petroleum Gas (LPG). In case of electricity the present gap ranges between 2500 to 3000 MW during this winter while supply of gas presently ranges in between 1850 to 1860 million cubic feet (MCF) against its present demand of over 2550 MCF. LPG total supply presently stands 1600 tones per day against its demand of 3000 tones as a day.

The gap between supply and demand is gradually rising for the last many years as the demand has been increasing by about 8 per cent while the supply has remained almost static. It is a sad reflection on the performance of the government that the authorities did practically nothing to augment the supply side of electricity and gas except tall claims and rhetoric. All their plans and announcements have so far remained on papers only.

As a result the household power consumers are facing load shedding for almost 4 hours a day an cities and 8 hours in sub-urban and rural areas. Industrial units are working on 2 shifts basis instead of normal 3 shifts badly hitting the economy. People faced worst CNG crises during the last week due to the closures of the gas station.

Justifying the closure of the CNG stations a spokesman of Sui Northern Gas Pipeline (SNGP) told newsman that gas station had to be closed in the best interest of domestic consumers who are our primary responsibility. He claimed that in their priority the domestic consumers come first then the industry and then gas station and their load management programme is prepared with these priorities in mind. He however had no answer when asked why they could not anticipate the likely shortage in view of static supply and rising demand. He asked the newsmen to refer to the government when asked what efforts were made to improve the supply position. About LPG he told that SNGP has nothing to do with it's as it was the responsibility of Sui Southern Gas company (SSGC).

The director general gas of the Ministry of petroleum and natural resources when contacted, explained that Liquefied Petroleum Gas was altogether different from natural gas used for domestic and industrial purposes or CNG. It is special kind of gas found in some parts of the country comparative deeper under the ground. LPG project is being handled by the private sector under the administrative control of Sui Southern Company. The reserves of this particular type of gas which can be converted into LPG are not many. The use of LPG is a recent phenomenon and no special efforts have been made so for to discover and develop this kind of gas which needs heavy investment. Being in the private sector, the investors make his own calculation of profit on his investment. Perhaps the demand for LPG has not risen to a stage which could justify it.

The option of import LPG from neighboring countries especially Qatar would be perhaps a better option for speedy result at a cooperatively much lower cost. Even for that substantial investment will have to make as its handling would need special kind of terminals and machinery. He confirmed that there was a gap of about 1500 tones per day between supply and demand as presently supply stands at 1600 tones against demand of 3100 tones a day. To encourage its import the government has allowed it free of tax he added.

The price fixation mechanism of LPG should however, be linked with the prices in the international market. Currently the price of LPG in international market range between $625 to 650 per tone. With fright charges the landed cost will be about $ 700 per tone. Importers will demand returns on their investment on constructing specialized terminal plus a reasonable rate of profits. But all this would happen when demand grow sufficiently enough to justify these investments. The demand for LPG is growing but at a slow speed. Experts, however, believe that the timer has come as Liquefied petroleum Gas (LPG) companies imported 41,000 tones of LPG in the calendar year 2007 accounting for 6.91 per cent of all LPG available in Pakistan.

LPGAP Spokesman Fasih Ahmed said imports grew by 0.34 percent under the now defunct LPG Producer Pricing Policy. "Imports totaled 39,000 tones in 2006 and 41,000 tones in 2007. He said that two cargoes of 2,500 tones each are being imported only this month. He said that according to figures from the Ministry of Petroleum and Natural Resources, the local LPG production averaged 1,625 tones per day and 41,000 tones were imported in the calendar year 2007. Imports, therefore, accounted for 6.91% of all the LPG available in Pakistan in the last calendar year.

On the investment front, Ahmed said deregulation of the LPG sector in 2000 had attracted an investment easily worth of $200 million. He said investments in the sector would continue to grow now as a result of the decision to continue with the deregulation policy. "The margins in LPG value chain remain strong enough to attract investment," he added.

He said the gross margins of all LPG marketing companies are known to OGRA, which are not more than $150 per tone and this covers transportation, operational expenses and taxes. "LPG marketing companies are responsible corporate citizens, operating under a strict regulatory regime and to allege otherwise is defamatory,"

Gas and oil Marketing Companies (OMCs) are planning to set up 300 to 400 Liquefied Petroleum Gas (LPG) auto stations during the next three years, sources in the industry told this correspondent.

Sources said after setting up the targeted LPG stations in the country, the domestic requirements of LPG for auto sector would be met by importing additional 600 tones per day. They further said the country might face 700 to 800 tones per day shortfall in next three years after the use of LPG in auto sector. According to the, during the next three year, the country would need around 1600 tones imported LPG per day to meet the requirements of all consumers including auto sectors as the current local production LPG stood at 1600 tones per day. In this way, the total requirement of the country after setting up LPG auto stations would reach around 3200 tones per day. LPG consumption increases in the winter to 22,000 metric tones per day as against 18,000 metric tones per day in summer