PAKISTAN LACKING ENERGY

ENERGY CRISIS IS EXPECTED TO WORSEN WITH GAS SHORTFALL SWELLING TO 2.7 BILLION CUBIC FEET DAY BY 2015.

KANWAL SALEEM
(feedback@pgeconomist.com)

Apr
18 - 24, 2011

Pakistan is an energy-deficit country, meeting nearly 90-percent of its oil requirements through imports while entire domestic natural gas production is used for approximately meeting 50-percent of our total energy requirements.

On one side, industry particularly textile industry is suffering a lot due to gas shortage while on the other hand, gas load shedding is continuing for CNG gas stations and strike for indefinite period has been announced by CNG gas stations owners association. "Our decision makers had caused much harm to the industry by allowing setting up gas stations across the country ignoring the genuine gas needs of industry," experts believe.

Initially gas was not used in the process of energy production and this work was being done through the water resources but oil price hike compelled to divert attention towards gas for obtaining desired results.

According to them, gas in also used for electricity generation, which is leading to fast depletion of gas resources. Despite several gas discoveries, the growth in energy demand is more than the supply from domestic sources. The country is already experiencing load management measures being taken by the gas distribution companies to balance the current supply and demand situation.

Although the share of natural gas as one of the primary energy sources had increased from 40-percent in 1999 to 60-percent in 2010, a worsening energy crisis is expected with gas shortfall swelling to 2.7 billion cubic feet day (bcfd) by 2015. Currently, the average shortfall is in the range of 500 to 900 mmcfd on constrained basis which may increase to 2700 mmcfd in the year 2015.

According to an official document, total gas production rose during the last three years from 3.97 mmcfd to 4.04 mmcfd. However, local gas supply continued to lag behind soaring domestic demand.

Experts told Page that the government apart from starting early implementation of agreements for gas import from Iran and Turkmenistan should consider different options including import of gas from Qatar and LNG imports.

They maintained that the government must move fast to start importing natural gas via LNG and regional pipelines to offset the growing gas deficit in the country.

An increasing energy import bill is adversely affecting the trade deficit on the one hand while on the other hand it is difficult to pass on the full impact of the increase in the international oil prices to the people, they said, adding that development of local energy sources, including hydel projects and the Thar coal field are necessary.

Experts appreciated Prime Minister Syed Yousuf Raza Gilani's announcement to form a Government-Industry Energy Council (GIEC) to prepare recommendations to address the energy crisis in the country. "Energy was an essential driver of the country's economy, hence, due attention needs to be paid to meet energy requirements with clear future vision," they said, adding that in order to achieve accelerated GDP growth, the economy needs reliable, uninterrupted, and affordable supply of energy. But, Pakistan today is facing the overwhelming task of bridging its energy demand and supply gap which is likely to double in the next 15 years, they added.

In order to exploit tight gas reserves by applying latest and advanced technology and methods, petroleum ministry has framed a new tight gas (Exploration & Production) Policy, 2011, approved by the Council of Common Interests (CCI) in principle on January 02, subject to further consultations with the provinces and suitable modifications/ improvements, if required. The matter has been taken up with the provinces for their approval. The policy will accordingly be submitted to CCI for approval.

Renowned economic expert, Dr Ashfaq Hasan said that the current energy issues need to be handled by the government and private sectors simultaneously. Terming constitution of government-industry energy council by the Prime Minister as a positive step, he advised the newly established committee to highlight the problem areas in energy sector and explore the ways to utilize 12,500 megawatt energy by the year 2015. He also stressed the need for handling the issue of energy both at private and government platforms. "Our economic requirements are increasing day by day due to alarming population and our economic activities also being doubled accordingly," he said. He said all the political parties should also concentrate towards resolving all the energy issues jointly.

Pakistan Industrial and Traders Associations Front (PIAF) Chairman Engineer Sohail Lashari says though the formation of Government-Industry Energy Council (GIEC) by the Prime Minister is a step in right direction but the need of the hour is to initiate work on doable power generation projects as energy is an essential driver of the economy and things are fast getting out of hand with every passing day.

The PIAF Chairman said that manufacturing sector was in deep troubles and its growth could exceed 2.3 per cent despite best efforts by the private sector. Had little attention was paid towards the construction of water reservoirs in the country, the situation today would have been quite different, he said.

He said the government should also immediately make efforts for developing consensus for the early construction of Kalabagh Dam, as it is one of the best solutions to the acute shortage of energy.

He said that cheaper electricity was not only essential for the industrial sector but it was also necessary for the agriculture. He said that besides the industrial sector, the agriculture sector would also suffer badly because the produce would be costlier when the tube wells would be running on diesel instead of electricity.

The PIAF Chairman said that the energy shortage is the single most critical factor that is responsible for poor domestic output. This, in turn, is compromising the government's ability to raise its collections from taxes levied in the value added mode, inclusive of sales tax and excise duty. High-energy cost, passed on to the consumers, is fuelling inflationary pressures. Without ensuring uninterrupted energy supply to the industry, the government cannot possibly hope to increase the Gross Domestic Product growth rate or indeed facilitate competition of Pakistani exports with those of our competitors, he added.

He suggested to the government to give priority to the development of local energy sources including hydel and Thar coalfield. He also urged the Prime Minister to announce a special package of incentives in forthcoming budget for the revival of business activities and to give boost to exports so that the country could be able to undo the negative affects caused by global financial crisis and acute shortage of electricity.

The Chairman PIAF said that the private sector had both the ability and potential to cope with fast increasing unemployment and poverty but to ensure the contribution of the private sector, the government would have to provide it with uninterrupted supply of electricity.