Dec 10 - 16, 2012

All the categories of consumers of natural gas are experiencing problems, which is likely to get worse with the drop in mercury level. Though given top priority, domestic consumers face drop in pressure, commercial and industrial consumers have to bear extreme load shedding and CNG users face double edged sword, station remain close for days and when open one has to stand in queue for hours to get gas. While everyone seems to be hit very few are able to understand the real reasons behind outages of gas.

While the Government of Pakistan (GoP) is trying to convince the consumers that there is an acute shortage of gas, experts completely reject the stance. They say the current crisis is the outcome of following bad policies, blatant disregard to good governance and above all to create a justification for the import of LNG. They warn even if the GoP makes a policy decision regarding import of LNG today, construction of necessary infrastructure will take around four years. They also term completion of Iran-Pakistan gas pipeline by 2014 a hoax call. Though, the scenario hints towards doomsday, experts are of the consensus that taking right steps can lessen miseries of the consumers. However, this demands 'political commitment' which is completely missing because all the groups having vested interest are trying to get their share in the booty.

According to the details often made public by the GoP the current shortfall is estimated around 1500mmcfd, which has to be managed through 'load management plan'. However, experts completely disagree with this and say the situation would have never aroused had the GoP taking prudent and timely steps. Nearly half of the shortfall can be overcome by stopping blatant theft and also through augmentation of transmission and distribution networks of SSGC and SNGPL.

However, the GoP has completely failed in resolving litigation pertaining to three mega gas fields, which are capable of adding another 1,000mmcfd. One understands as well as appreciates the concerns of Supreme Court of Pakistan regarding fixation of CNG price and closure of stations. However, if the honorable court is serious in providing any relief to consumers, it may please complete hearing of gas field cases and give its verdict at the earliest.

Oil and Gas Regulatory Authority (Orga) has completely failed in protecting the interest of gas consumers but has been prompt in raising tariffs; it has been protecting interest of one stakeholder only, the GoP. It has also failed in submitting gas pricing formula, which is acceptable to the court as well as the owners of CNG stations. After reading court producing in print media one gets the feeling that the owners of CNG stations are running a cartel as well as fleecing the consumers.

However, one is completely lost to read the details provided by CNG station owners. According to the data provided they get per kilogram of gas at Rs28.65 and GoP collects Rs20.50 as tax (including recently imposed GIDC of Rs10.95) and operating expenses come to Rs21.00. Therefore, if they sell gas at Rs54.16 they incur a loss of Rs15.99. While an ordinary citizen just can't say who is right and who is wrong, he/she says price of CNG can be reduced if GoP stops collecting fabulous taxes/cess on gas.

Experts say that chances of completion of Iran-Pakistan IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipelines are very bleak. Pakistan just can't go for IP because it is being opposed by the United States and chances of TAPI will get bleaker once Nato forces are withdrawn from Afghanistan.

Probability of completion of LNG terminal in the near future is also very low because Pakistan has not completed the basic requirements as yet. Unless gas re-gasification facilities are constructed on shore, discharging of LNG will not be possible. Even bigger issue is that Pakistan may take years in achieving 'financial close' or finalizing financing arrangements.

Since getting gas through pipeline or LNG is not possible over the next five years, Pakistan will to try to meet the shortfall by enhancing exploration and production activities, bringing already discovered field online (especially those facing litigation), containing theft and minimizing leakages by revamping transmission and distribution net works. However, this can't be done due to omnipresent 'circular debt issue'.

To improve cash flow of gas marketing companies the GoP will have to facilitate them in recovering outstanding dues, particularly those pertaining to power plants operating in the public sector as well as IPPs. In other words containing theft and improving recoveries can help in resolution of circular debt. Once cash flow of gas marketing companies improves only then they can revamp their transmission and distribution networks.

Running power plants on gas is the worst use of natural gas. The reason is simple, electricity distribution companies get payment for 30 units against a dispatch of 100 units. It has been highlighted repeatedly that the top item on the GoP agenda should be containing theft hovering around 30%. If this pilferage is contained there will be no need for increasing electricity tariff, in fact it could be brought down. It is estimated that power plants consume almost one-third of total gas produced in the country.

The endless debate regarding utilization of Thar coal is not likely to make its utilization over another decade; a possible solution could be switching over KESC's Bin Qasim Plant to imported coal. Some of the experts don't approve this because the country will still have to spend huge foreign exchange on import of coal and they call this 'out of frying pan into the fire'. However, in the meantime efforts can also be made to bring in coal from other coalmines to Karachi and complete switch over to indigenous coal.

Experts say Pakistan has to change its 'energy mix' and the most appropriate options are: 1) construction of smaller 'run of the river' type hydel units and 2) granting sugar mills status of IPPs. For facilitating the mills to produce more baggase, production of sugarcane in the country has to be increased. The added advantage will be production of more molasses that can be used for producing ethanol, an additive for E-10.