IPI THE BLUNDER

SHAMSUL GHANI (shams_ghani@hotmail.com)
Jan 11 - 17, 20
10

The never-ending power crisis has its roots in a number of technical and administrative failures of the troika of political, economic, and technical bigwigs. These failures have not only impacted the energy sector but have also put pressure on country's import bill.

Nowadays, the public sector corporation OGDCL is criticized for its underperformance. From miserably failing to achieve its drilling targets to the looming collapse of Qadirpur gas field, everything seems to pile up reasons for rapping the public sector corporation responsible for 61 percent of country's oil output and 25 percent of the gas output as it controls 45 percent of country's oil reserves and 35 percent of natural gas reserves.

Reportedly, the country's third largest gas producing field is currently on the brink of collapse due to the inordinate delay in the installation of 16 compression plants. The OGDCL is grilled for not observing the Public Procurement Rules while awarding the contract to install compression facilities. The appointment of consultants who overestimated the project cost is also questioned.

As an excuse of not achieving the drilling targets, OGDCL comes up with the alibi of unfavorable law and order situation but the insiders are of the view that the transfer of highly technical professionals and filling of their positions with nonprofessional political appointees is to be blamed instead of security situation.

The country is already under the pressure of low energy production and constantly increasing consumption. During Jul-Mar 2009, Pakistan produced an average 3.988 billion cubic feet per day (BCFD) of gas, which is now slightly increased to 4.20 BCFD. An estimated current gas demand-supply gap is one BCFD. Soon we will need a per day gas supply of five billion cubic feet. Pakistan has proven gas reserves of 29.7 trillion cubic feet. At an average estimated demand of 5 BCFD, gas reserves are going to last for just another 16 years.

According to Pakistan Economic Survey 2008-09, presently 26 private and public sector companies are carrying out oil and gas exploration and production activities. During Jul-Mar 2009, altogether 60 wells were drilled in comparison to 45 wells during the same period last year. This shows a positive growth of 33 percent. But further analysis shows that the growth was on development side only, while the exploration side recorded a substantial drop. What does that mean?

The country is simply consuming explored oil and gas reserves, placing little importance on new explorations, which are vital for the survival. Country's energy development policy has serious shortcomings.

All-out efforts are not made to develop indigenous resources of coal, gas, and water, but new ideas of imports of LNG and LPG are being circulated, and way is to implement a highly risky project of IPI (Iran-Pakistan-India) gas pipeline.

IPI, besides being a doubtful starter, entails huge economic and political costs to the country. This project will benefit the seller-Iran and the buyer-India mainly.

Although Pakistan will also be able to purchase 750 million to one billion cubic feet per day of gas, it will provide another push-button to political adversary India to trigger terrorism in the country to gain political mileage.

The Iranian request obviously made on India's behest for a guarantee by Pakistan to ensure uninterrupted gas supply to India is a trap to undermine Pakistan's interest. This should not be allowed to happen. Given the conditions we are living in, it has become difficult to safeguard even our own installations, how we can save IPI gas line from the India-centric segment of terrorists.

COMPOSITION OF ENERGY SUPPLIES

Year Crude Oil Gas Petro-products Coal Electricity
Mn Barre Change % Bn Cf Change % Mn Tonnes Change % Mn Tonnes Change % 000, Gwh Change
%
1998-99 52.6 - 744.9 - 17.2 - 4.4 - 65.4 -
1999-00 53.3 1.3 818.3 9.9 18.5 7.6 4.1 -6.8 65.7 0.5
2000-01 73.6 38.1 857.4 4.8 18.9 2.2 4.0 -2.4 68.1 3.7
2001-02 75.1 2.0 923.8 7.7 18.7 -1.1 4.4 10.0 72.4 6.3
2002-03 76.0 1.2 992.6 7.4 18.0 -3.7 4.9 11.4 75.7 4.6
2003-04 80.3 5.7 1202.7 21.2 15.4 -14.4 6.0 22.4 80.9 6.9
2004-05 85.3 6.2 1344.9 11.8 16.8 9.1 7.9 31.7 85.7 5.9
2005-06 87.5 2.6 1400.0 4.1 17.0 1.2 7.7 -2.5 93.8 9.5
2006-07 85.3 -2.5 1413.6 1.0 18.6 9.7 7.9 2.5 98.4 4.9
2007-08 90.5 6.1 1454.2 2.9 19.8 6.1 10.1 28.1 95.9 -2.6
Avg. 10 Years . 7.2 . 9.5 . 1.5 . 13.0 . 4.7
Jul-Mar
2007-08 66.0 . 1090.6 . 14.6 . 6.6 e . 74.0 .
2008-09 62.4 -5.5 1092.3 0.2 14.2 -2.8 4.8 e -26.5 60.8 p -17.9
E = Estimated; P = Provisional (Source: Hydrocarbon Development Institute of Pakistan)

Pakistan's energy consumption pattern is more followed by compulsions rather than any actual interplay of demand and supply forces. A long drawn battle continues between the economic managers and energy sector operators, both local and foreign. Sometimes the operators and the government economic managers collude at the expense of end consumers. Prices are manipulated to shift focus from one source of energy to another. International oil prices also influence the domestic energy consumption pattern.

During 2003-04, the country witnessed an abrupt increase of 21.2 percent in gas supply and 20.5 percent in gas consumption. This was the era when easy and cheap consumer credit had become a catalyst auto sector's boom. The following shift from petrol to gas consumption changed graph of gas demand-supply.

Domestic, transport, and industrial sectors are the main consumers that cumulatively consume more than 90 percent of the available energy supply. Frequent price hikes manage resource limitation factor. This increases cost of doing business for the industry on one hand, and squeezes household's disposable incomes on the other as gas price hikes are passed on to consumers.

What is required is steadfast exploration and developments of Pakistan's fast depleting gas resources. This can be achieved by attracting local and foreign investments in this sector of huge potential.