ARE WE CONSCIOUS OF THE ENERGY CRISIS?

SHAMSUL GHANI
(feedback@pgeconomist.com)
Sep 27 - Oct 3, 20
10

The recent two news items relating to the all important combustible commodity sector created some ripples in social and economic waters - the issuance and withdrawal of an executive order for the posting of a non-technical and under-qualified person as managing director of a highly strategic organisation, and the petrol crisis that enveloped a number of major cities of the country.

The first news betrays democrats' level of understanding of the importance of organisations like OGDCL - which is responsible for 61 percent of the country's oil output and 25 percent of gas output. The second news exposes the fragility of administrative systems and greed of oil marketing companies. Administration failed in making the OMCs, with the exception of PSO, Shell and Caltex, to abide by the licensing condition that requires them to have sufficient storage facilities, while the said OMCs caused an unnecessary crisis by under-investing in their operational network thereby putting extra pressure on the supply reserves of PSO, Shell and Caltex..

The flood-driven closure of Parco and its late resumption of petrol production was blamed for the crisis. Also to find a mention in the entire episode was a four-day gas supply suspension at Qadirpur Gas forcing the CNG users to shift to the alternate fuel, petrol. Flood related infrastructure damage and the resultant hampered logistics also contributed to the crisis. Circumstantial crises, like this, can best be met through better management techniques and proper regulation of market players. Honest market intervention is what the governments are supposed to ensure. How the OMCs with no or less-than-required storage facilities are being allowed to operate? The government, instead of issuing complimentary posting orders, should focus on such issues and keep a tight rein on OMCs refusing to abide by the licensing conditions. Supply and distribution crises will only multiply the problems of energy-starved economy.

Energy consumption by source, during the period 2003-09, has undergone some changes, particularly the one under which the country's transport sector switched over to low carbon emitting fuel - from oil to gas. This single major change has not only resulted in environment up-gradation but has also cut down the oil import bill. This change, on the other hand, has strained fast-depleting gas resources. Lack of fresh investment in the gas sector has put our energy future in jeopardy. As an alternate, huge coal resources can be developed. Ironically, the environment-unfriendly fuel is our future. China and India are the major producers of coal-based energy. There is a need to follow suit.

TABLE-1 ENERGY CONSUMPTION BY SOURCE (2003 TO 2009)

YEAR OIL GAS ELECTRICITY COAL LPG
2003-04 38.5% 34.7% 16.2% 9.3% 1.3%
2008-09 29.0% 43.7% 15.3% 10.4% 1.5%
Change (9.5%) 9.0% (0.9%) 1.1% 0.2%

Energy consumption by product is influenced by a number of factors - from resource management to optimal energy-mix policy design, from political ability to deal with the cartel powers to international lenders' pressure, and from international oil prices to policy dictates of multinational operators. Corruption factor comes into play with the collusion of government functionaries and cartel forces. Failure to acquire technology and develop expertise to make use of natural resources has made the country dependent on foreign experts.

The rising oil prices and depreciating rupee have spiked domestic resource development cost. Besides gas and coal, domestic oil production and exploration need to be boosted through public-private partnership.

According to Economic Survey 2009-10, Pakistan had unused known oil reserves of 303.63 million barrels as of January 2010. Currently, on an average the country is producing 65,000 barrels per day. Maintaining this extraction rate, we will consume these reserves within the next 13 years. The dimensions of looming energy crisis are huge. It is time policymakers should get serious about future energy requirement.

TABLE-2 COMMERCIAL ENERGY SUPPLIES

FISCAL YEAR

CRUDE OIL IMPORT
(000 BARRELS)

CRUDE OIL LOCAL EXTRACTION
(000 BARRELS)

PETROLEUM PRODUCTS IMPORTED
(000 TONS)

PETROLEUM PRODUCTS
PRODUCED
(000 TONS)

1991-92 30,018 22,469 5,275 5,961
1992-93 29,407 21,895 6,612 5,694
1993-94 30,770 20,675 7,910 5,841
1994-95 28.386 19,858 8,737 5,434
1995-96 31,044 21,063 10,137 5,874
1996-97 28,538 21,270 10,398 5,495
1997-98 29,826 20,543 11,064 5,858
1998-99 32,855 19,986 10,926 5,925
1999-00 32,938 20,395 11,878 6,115
2000-01 52,505 21,084 10,929 8,337
2001-02 51,982 23,195 9,023 9,028
2002-03 52,512 23,458 8,437 9,084
2003-04 57,699 22,625 5,170 9,740
2004-05 61,161 24,119 5,676 10,474
2005-06 63,546 23,938 6,009 10,498
2006-07 60,694 24,615 8,330 10,314
2007-08 64,912 25,603 9,025 10,754
2008-09 62,115 24,033 9,974 9,828
2009-10 Jul-Mar 38,840 17,877 8,619 7,685

The local crude production during the last 18 years has remained almost constant whereas the import component has kept rising. In 1991-92, Pakistan locally produced 43 per cent of total crude requirement of local market which percentage got down to just 28 in 2008-09. By jacking up the local extraction, consumption of reserves will be at faster rate. Obviously, Pakistan needs to make concerted exploratory efforts to improve its crude reserves position. To achieve this, fresh investment in oil fields shall have to be made for which both private and public sectors will have to join hands.

Before that happens, we need to do some soul searching. Are we conscious of the impending energy crisis? If yes, then what efforts worth the name are being made in this direction?