GAS SHORTFALL: MYTH & REALITY
SHABBIR H. KAZMI
Feb 6 - 12, 2012
The stated gas shortfall hovers around two billion cubic feet. However, many sector experts do not agree to the numbers as well as the stated reasons for the shortfall. They term it 'management crises' because of the massive theft and disregard to good governance.
Non-payment of bills like ballooning receivables of gas marketing companies, which make them unable to revamp transmission and distribution (T&D) networks, is another reason.
Deteriorating T&D networks result in higher leakage/loss of revenue and the fallout is mandatory closure of fertilizer plants and curtailment of supply to manufacturing units.
Experts are of the view that while the successive governments failed in providing conducive working environment to companies for exploration and production (E&P), it exploited gas-marketing companies to achieve political mileage by forcing them to increase number of domestic consumers. On top of this, favorites have been rewarded through granting permissions to establish CNG filling stations in violation of the policies. However, experts term massive theft as the biggest reason for the poor cash flow of gas marketing companies.
To substantiate their viewpoint, they refer to massive theft by SNGPL consumers estimated around 300mmcfd. This is a little less than the total consumption of fertilizer units getting gas from SNGPL. Instead on containing gas theft, SNGPL has been resorting to closure of fertilizer plants for period ranging from 60 to 90 days.
SNGPL has also stopped gas supply to industrial units and the worst hit is textiles and clothing units located in Faisalabad. Industries facing prolonged outages are not able to meet export orders.
Closure of CNG stations is adding to oil import bill because vehicles have to be run on alternative fuels. Interestingly, the first axe falls on CNG because vehicles can be run on alternate fuels. However, experts are of the opinion that CNG stations consume less than 10 per cent of total gas used in the country.
The situation turns amusing because closer of CNG stations within SSGC's franchised area for 24 hours hardly makes any difference except building pressure in transmission and distribution lines because the saving is around 20mmcfd as compared to an overall shortage of more than 200mmcd.
Efforts are made to overcome shortage of gas through import of LNG. One point is very clear that LNG will be too expensive as compared to locally produced gas. Experts are of the opinion that LNG import is aimed at meeting shortfall during winter and meeting part of the requirement of industrial consumers, specifically fertilizer units. The logic is 'opportunity cost': use expensive gas or face complete shutdown of industrial units.
Ideally, Pakistan should go ahead with Iran-Pakistan (IP) gas pipeline project, a viable solution for the looming gas shortage. This project has been in doldrums due to opposition by the United States and noncooperation by the Indian authorities. Interestingly, India has declined to curtail oil purchase from Iran and latter also showed accommodating gesture by allowing former to make payment in Indian Rupee rather than dollars. The two countries have arrived at consensus mainly because India is helping Iran a lot in the construction of Chabahar port and linking it to Central Asia via Afghanistan through road and rail links.
However, the U.S. is actively pursuing Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, which faces bleak outlook due to war-torn Afghanistan. To prove that TAPI is more secure as compared to Iran-Pakistan-India (IPI), reference is often made to blowing up of gas pipelines and electricity transmission towers. However, experts are of the view that perpetrators are supported by foreign intelligence agencies. These perpetrators have developed safe sanctuaries in Balochistan mainly to undertake cross-border activities in Iran.
However, an impression is created that these sabotage activities are undertaken by those fighting for 'Independent Balochistan'.
Experts are of the considered opinion that gas crisis can be overcome by following immediate, short-, medium- and long-term policies. Gas load shedding can be overcome if all the consumers make efforts to contain wastage and use it more prudently. Cutting down consumption voluntarily by 10-20 per cent can help in containing load shedding spells. Efforts should also be made to run power plants on alternate fuels rather than insisting on burning gas.
Experts say containing theft may not help in increasing availability of gas but can certainly improve cash flow of gas distribution companies. Current level of pilferage hovering around 300mmcfd is a big black hole.
Improvement in cash flow will allow the gas marketing companies to revamp their transmission and distribution networks and contain leakages.
Recovery of outstanding dues will not only improve the cash flow of gas marketing companies but also reduce financial cost. This can be best understood if one looks at SSGC and KESC relationship.
At present, KESC owes more than Rs30 billion to SSGC. If the full amount is paid in full, it can help SSGC to expand its T&D network, revamp it and improve overall quality of service provided to its consumers.
The last but the most important option is resolution of ongoing litigation regarding various gas fields. Experts said that if this legal battle is over, more than 1000mmcfd could be injected into the national grid, which will resolve the issue to a large extent. However, efforts must continue to complete LNG terminal at the earliest.
If the government is serious in containing use of gas in vehicles, it should expedite E-10 project. Use of E-10 (motor gasoline containing 10 per cent alcohol) will not only help in containing motor gasoline import but also make sugar mills operating in Pakistan more efficient because at present they export bulk of molasses. Similarly, introduction of bio-diesel will also help in containing import of high-speed diesel.
Many options are available to improve availability of gas in the country but political commitment, introduction of right policies and above all creation of supporting environment can help in achieving even the difficult targets.