NEED OF REGIONAL ENERGY COOPERATION

KANWAL SALEEM
(feedback@pgeconomist.com)

Feb 6 - 12, 20
12

One of the major problems posed to the country as well as fellow citizens is the energy crisis, which is intense, sobering, and multi-dimensional.

The infuriating electricity and gas disruptions and soaring fuel prices in turn pushing the cost of living have made life difficult for people.

Energy shortage, massive load-shedding and lowest strategic oil reserves are emerging as major risk to the economy. Combined with multi-layered risks including current account deficit, the critical shortage of energy - an ingredient that fuels the economic growth - has the potential to choke economic growth.

The shortfall in electricity generation did not emerge suddenly but was developing over the years as the development of cheap and indigenous energy sources was discouraged for lack of any vision.

The recent revelation of the country's strategic oil reserves at a precarious level clearly exposed the government's lack of vigilance and failure of energy companies to meet their contractual obligations.

The strategic oil reserves for defense had also been consumed to meet shortage and thus the country's security has been exposed to great risks.

Under the fuel supply and power purchase agreements, the oil marketing firms and power generation companies - whether in the public or in the private sector - are required to maintain a minimum of 21 days of their fuel requirements.

Non-compliance of such contractual obligations is subject to heavy penalties under the law. The government, too, is required under the standard operating procedures defined in the official Blue Book to ensure that it has oil stocks for at least 21 days of consumption to meet any eventuality, either a natural calamity or war or any such event.

The economy is run at almost 40 per cent energy shortage, which could worsen if oil supplies continue to remain short or the current disruption of oil transportation prolongs.

Energy shortage is severe and widespread in almost all areas, while different sectors contribute to each other's problems.

"Natural gas, power, and oil shortages were all posing risks to the economic growth in medium to long-term period," sources said.

Energy has become an important prerequisite for the economic development of a country. On one hand, it is used for the industrial and agricultural purposes and on the other it is required for domestic use of the citizens.

Natural gas is the fastest growing primary energy source. Consumption of natural gas worldwide increases, in a forecast, by an average of 2.3 percent annually from 2002 to 2025, compared with projected annual growth rates of 1.9 percent for oil consumption and two percent for coal consumption. The electric power sector accounts for almost one-half of the total incremental growth in worldwide natural gas demand over the forecast period.

South Asia is important to world energy markets because it contains 1.3 billion people and is experiencing rapid energy demand growth. After India, Pakistan and Bangladesh are the next largest South Asian countries in these categories.

Economic and population growth in South Asia have resulted in rapid increases in energy consumption in recent years. The major energy issues facing South Asian nations today are keeping up with rapidly rising energy demand. Pakistan's largest energy source is natural gas, with demand and imports growing rapidly.

Currently, the country ranks third in the world for use of natural gas as a motor fuel, behind Brazil and Argentina.

In addition, it hopes to make gas the fuel of choice for future electric power generation projects. The country ambitiously seeks to increase oil production through new alliances with foreign companies.

Net oil imports are projected to rise substantially in coming years as demand growth outpaces increases in production.

It will see power shortages unless actions are taken to increase generation, clear circular debt and reduce transmission losses.

The country has 18 gigawatts (GW) of electric generating capacity. Thermal plants using oil, natural gas, and coal account for about 70 percent of this capacity, with hydroelectricity (hydro) making up 28 percent and nuclear 2.5 percent. Total power generating capacity has increased rapidly in recent years, largely due to foreign investment, ultimately leading to a partial alleviation of the power shortages.

The country often faces load shedding in peak seasons.

Transmission losses are about 30 percent, due to poor quality infrastructure and a significant amount of power theft. Periodic droughts affect the availability of hydropower.

The government is understandably engaged in a vigorous effort to expand the nation's power generation capacity through building of dams and inviting foreign investors for establishing thermal units in the country.

Energy cooperation is the key to regional development. The government needs to use all options to overcome energy shortages.