PAKISTAN'S DOMESTIC GAS PRODUCTION WILL FALL TO 2 BILLION CFD BY 2020

KANWAL SALEEM
(feedback@pgeconomist.com)

Dec 10 - 16, 2012

The energy crisis in the country seems to be deteriorating with each passing day. The gas crisis that confronts this nation is no less serious but the measures that are being taken by those at the helm of affairs in the government, to deal with this grave problem, are grossly insufficient.

Pakistan and Iran signed the Gas Sale and Purchase Agreement (GSPA) in June 2009. The Government of Pakistan has already made an assessment that natural gas imported from Iran would provide the cheapest and perhaps the most suitable fuel for power generation. It has been estimated that 750 mmcfd gas would help generate around 4,000 MW of electricity.

Pakistan's economic self-reliance mainly depends on the self sufficiency in its energy requirements as those provide oxygen for the national economy. The dream to bring prosperity in Pakistan has been shattered by energy shortages, which are sinking the country into the quicksand of poverty.

Pakistan's daily gas requirement is 6.5 billion cubic feet (BCF), against its current supply of 4 BCF, depicting a shortfall of 2.5 BCF. It is predicted that Pakistan's domestic gas production will fall from the current level of 4 billion cubic feet per day (cfd) to 2 billion cfd by 2020. Demand, on the other hand, is expected to soar to 8 billion cfd by that time, creating a 6 billion cfd deficit.

It may be noted that Pakistan meets 85 per cent of its energy requirements through imported petroleum products, resulting in a huge drain on foreign exchange.

Presently, the demand-supply gap in the energy sector has reached one of its highest levels in the country. This gap subsequently produced a huge shortage of power that has adversely affected the economy. The crippling economy was further damaged when many industrial units had to be shut down, rendering thousands of the skilled workers jobless. A number of investors have relocated their units to Bangladesh to take advantage of uninterrupted electricity supply and cheap labour. Consequently, this ongoing chain-reaction of crises is accelerating inflation and contributing to a rise in the cost of living to new heights. The gas shortage in the country is not an over-night phenomenon as experts had predicted the imminent crisis well before time, in 2006. Hagler Bailly, a global management consulting firm based in Islamabad, released its study report in 2006 saying that Pakistan is going to witness a gas shortage starting 2007, and the demand-supply gap will continue to grow every year to stand-still the by 2025, when shortage will reach a level of 11,092 MMCFD (million standard cubic feet per day) against total 13,259 MMCFD production.

The report added that Pakistan's gas shortage would worsen in the next two decades if it did not manage to produce energy from alternative sources. What we are experiencing today is the vindication of Hagler Bailly who warned us as early as 2006.

However, no pragmatic steps have so far been taken to resolve the gas shortage phenomenon which is aggravating with every passing day.

Despite an early warning and a clear indication of the hovering energy crisis, Pakistani authorities did not bother to take a serious action against the threat which has fractured our industry and exports. Under these circumstances, the significance of Pakistan Iran gas pipeline project has increased manifold as it is the only viable option to provide an extra amount of gas to the system. But it is unfortunate to observe that lethargy; inaction and a sense of indecisiveness have collectively caused an inordinate delay in the project and have further worsened the crisis. If Pakistani leadership sincerely wanted to steer the country clear of the energy crisis, it might have completed its part of the pipeline project and it could have been functional today.

The authorities say that the project will be completed by 2014 but the reality is that due to the slow pace of progress on the Pakistani side that seems unlikely. Iran, on the other hand, has undertaken its commitment by completing the laying of 1,000 kilometers up to the Pakistani border.

The two sides signed an export deal in 2009 for Iran to supply natural gas to its eastern neighbour from 2014, with sales to reach 750 million cubic feet (21 million cubic metres) to one billion cubic feet per day by mid-2015. The finalised project, in 2007, included India and Pakistan as the beneficiaries of the Iranian gas but India withdrew from the project over pricing and security issues.

The US pressure on Pakistan to forego the Iran-Pakistan (IP) gas pipeline project must be viewed in the context of the ground realities. Its real purpose is to build up pressure on Iran more than anything else. But if we give in to the US demand, it would have serious (negative) consequences for Pakistan, which is facing serious energy crisis because of electricity and gas shortages.

Also, from the economic point of view, it seems appropriate for Pakistan to complete the Iran-Pakistan pipeline project as early as possible to meet its fast-growing energy requirements. The alternate project that would bring gas through pipeline from Turkmenistan (TAPI) doesn't seem to see the light of completion, in the near future, because of the continuing armed conflict in Afghanistan.

Energy is vital for economic progress and prosperity. Had timely decisions were taken the situation would be different today. The government needs to exploit all available resources to meet energy requirements.