PROVEN GAS RESERVES NEED SPEEDY DEVELOPMENT

AMANULLAH BASHAR
(feedback@pgeconomist.com)

Dec 10 - 16, 2012

Despite the claims made by the energy experts that country has sufficient reserves to last just over 20 years in view of the proven gas reserves at various locations especially in Sindh, yet it is the matter of serious concern why the people responsible for developing the available gas resources have failed to respond to the growing demand of gas primarily due to abnormal increase in international oil prices.

Today, Pakistan is confronted with acute energy crisis which consequently causing adverse effects on its socio economic development. The situation calls for immediate remedial measures to keep up the socio-economic growth and to give immediate relief to the people.

Currently, Pakistan producing over 4 billion cubic feet of gas against the demand of around 8 billion cubic feet of gas creating a 100 percent shortage of around 4 billion cubic feet of natural gas.

The growing shortage of gas has created a scene on the social front reflected in the endless queues of vehicles outside the filling stations most of the time due to closure of CNG stations usually for 48 hours in a week but it was shocking to note that Sui Southern Gas Company had to shut down supply of gas to CNG station in Sindh and Balochistan for over 72 hours last week. Consequently majority of the public and private vehicles had to stay away from roads. Since the POL prices have gone so high that it has gone beyond the purchasing power of the lower and middle income groups to buy petrol at a price of Rs103 per litre. According to a report the price of petrol is highest in Pakistan and over 46 percent more than the average income group of population.

Since the natural gas is a locally produced commodity it is the right of the people to use this locally produced fuel at an affordable price, but the people involved in CNG business managed to get a price mechanism that took the price of CNG almost at par with the petrol prices. It was the Supreme Court of Pakistan that came to protect the right of the consumers and pointed out that pricing of CNG besides the margin on CNG sales carries operational cost of Rs30 per kg which had no justification and was rightly reduced by the court.

Actually it is abnormal increase in petroleum prices which forced the consumer to switch over to natural gas especially in the transport sector is much below as compared to other sectors like power generation, industrial consumption, fertilizer or domestic consumption yet the gas distribution companies are unable to meet the growing demand from power generating companies or fertilizer industry.

Although the logistics and road transport is the first priority for economic growth but surprisingly some of the experts have strongly recommended that gas should not be used for transport purposes. This seems to be a shaded opinion as all over the world wherever economic development has taken place the first priority was given to mobility and road infrastructure.

The exports have ignored the fact that everywhere in the developed world over 50 per cent and in some cases 60 percent of power is produced through coal fired technology rather than consuming costly oil or natural gas. If the power generation in Pakistan which consumed over 2.63 billion cubic feet of gas which more than half of the current production may change the energy scenario in Pakistan.

In fact, there are different views and opinion regarding allocation of gas consumption in different segments of the economy. It may be noted that out of the total basket, around 2 billion cubic feet of gas is consumed by domestic consumers, 1.59 billion cubic feet by fertilizer, 2.63 billion cubic feet by power sector while the consumption in transport is hardly 90 mmcf a day.

There seems a silver lining in the announcement of KESC that it is working fast to shift on coal fired system hopefully when the KESC, WAPDA and other power producers shifted on coal it would be a great relief not only in energy supplies but also in terms of price as the use of coal may cut the general cost almost 100 percent.

According to Karachi Electric Supply Company (KESC) it is currently engaged with many large scale infrastructure projects, such as coal conversion, new coal fired power projects, LNG import and biogas power plant, that KESC is pursuing in line with its long-term vision.

This was informed to United States' Senior Advisor for Pakistan, Robin L. Raphel when she visited KESC Head Office along with the US Consul General in Karachi, Michael Dodman and other members of the US diplomatic team last week...

KESC's CEO, Tabish Gauhar, appreciated Mrs. Raphel for her keen interest in KESC's matters. He briefed the US delegation on the progress that KESC, under the present management team, has made during the last three and a half years.

It is the time that power producing companies should realize the pinch of high cost of power generation which adversely affects pace of economic growth especially the manufacturing sector which according to reports finding it difficult to meet the export target this year. The high cost of power rendering the local products uncompetitive in the export market on one hand while on the other hand use of gas for power generation doubly hitting the current account deficit.

It is good to know that KESC has managed to invest an unprecedented amount of one billion US dollars in various development projects including 1000 MW of new generation capacity, significant enhancement in the transmission and distribution infrastructures and many other projects of strategic importance.

After the privatization, the KESC has established strong commercial ties with US origin firms and the value of these relationships is in excess of USD 860 million with the potential to grow significantly in future. Mrs. Raphel showed a deep understanding of the present energy situation in Pakistan and informed the KESC team that the US government is very keen to help Pakistan in resolving the prevalent energy crisis. She also assured KESC of her full cooperation and stressed the need for an ongoing dialogue as a means to foster future collaborations.