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Healthy natural gas assessment – how Pakistan progress?

International experts recorded that world consumption of natural gas for industrial uses rises by an average of 1.7 percent/year, and natural gas consumption in the electric power sector rises by 2.2 percent/year, from 2012 to 2040. The industrial and electric power sectors together account for 73 percent of the total rise in world natural gas consumption, and they account for about 74 percent of total natural gas consumption through 2040. Consumption of natural gas rises in every IEO region, with demand in nations outside the Organization for Economic Cooperation and Development (non-OECD) increasing more than twice as fast as in the OECD. The strongest growth in natural gas consumption is projected for the countries of non-OECD Asia, where economic growth leads to increased demand.

Statistics showed that natural gas consumption in the non-OECD region increases by an average of 2.5 percent/year from 2012 to 2040, compared with 1.1 percent/year in the OECD countries. As a result, non-OECD countries account for 76 percent of the total world increment in natural gas consumption, and their share of world natural gas use grows from 52 percent in 2012 to 62 percent in 2040.

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Experts also identified that to meet the growing natural gas demand projected, the world’s natural gas producers increase supplies by nearly 69 percent from 2012 to 2040. The largest increases in natural gas production from 2012 to 2040 occur in non-OECD Asia (18.7 Tcf), the Middle East (16.6 Tcf), and the OECD Americas (15.5 Tcf). In China alone, production increases by 15.0 Tcf as the country expands development of its shale resources. The United States and Russia rise natural gas production by 11.3 Tcf and by 10.0 Tcf, respectively. Total natural gas production in China, the United States, and Russia accounts for nearly 44 percent of the overall increase in world natural gas production. Furthermore, world LNG trade more than doubles, from about 12 Tcf in 2012 to 29 Tcf in 2040.

In the developing country like Pakistan, natural gas is a critical input in Pakistan’s economy for numerous industries, including the power generation, commercial, fertilizer and transport sectors, among others. For Prime Minister Imran Khan’s government, using more natural gas serves a broader purpose as well: lessening the country’s reliance on furnace oil, a more expensive energy source per unit that inflates the import bill, particularly when dollar-denominated oil prices rise (of course, LNG is also denominated in dollars, but its price per unit is usually cheaper). And given the country’s slow climb out from its latest balance of payments crisis — which exacerbated the rising energy bill, forcing Islamabad to seek a $6 billion loan from IMF in July — the Government of Pakistan has a strong incentive to ease its dependence on oil.

Despite the clearly growing importance of natural gas to Pakistan’s economy, supply is failing to keep pace. Industry experts revealed that through the fiscal year ending in June 2020, Pakistan’s petroleum regulator has forecast a shortfall of 104.7 million cubic meters (mmcm), or 3.7 billion cubic feet, per day— more double last year’s deficit. The addition of 700,000 consumers to the overall consumer base of 9.6 million over the previous year partly accounts for an uptick in demand, which increases during winter. But the shortfall — predicted at an equivalent 2,000 mw of electricity — sheds light on fundamental problems in the energy sector involving distribution, transmission and circular debt.

 

A reliance on burning more expensive furnace oil to drive generators forces the government to offer subsidies to power firms. However, the failure of the cash-strapped government to actually pay these subsidies creates a cascading effect throughout the power supply chain as each customer is unable to pay its suppliers, leading to load-shedding, which greatly limits business activity.

According to the Economic Survey of Pakistan during FY 2019, the Natural Gas is a clean, safe, efficient and environment friendly fuel. Its indigenous supplies contribute about 38 percent in total primary energy supply mix of Pakistan. The country has an extensive gas network of over 12,971 Km Transmission 139,827 KM Distribution and 37,058 Services gas pipelines to cater the requirement of greater than 9.6 million consumers in the whole country.

The Government of Pakistan is pursuing its policies for improving indigenous gas production also imported gas to meet the growing demand of energy in Pakistan. At present statistics showed that the capacity of two Floating Storage and Regasification Unit (FRSU) to Re-gasified Liquefied Natural Gas (RLNG) is 1200 MMCFD and accordingly RLNG is being imported to mitigate gas demand-supply shortfall. The average natural gas consumption was about 3,865 million cubic feet per day (MMCFD) including 785 MMCFD volume of RLNG during July 2018 to February 2019. During July 2018 to February 2019, the two gas utility companies (SNGPL & SSGCL) have laid 69 Km Gas Transmission network, 3,232 Km Distribution and 1,366 Km Services lines and connected 165 villages/towns to gas network.

During this period, 428,305 additional gas connections including 425,404 Domestic, 2,770 Commercial and 131 Industrial were provided in Pakistan. It is expected that gas will be supplied to almost 430,695 new consumers during FY2019-20. Gas utility companies have planned to invest Rs. 7,161 Million on Transmission Projects, Rs. 48,288 Million on Distribution Projects and Rs. 18,556 Million on other projects bringing the total investment around Rs. 74 billion during FY2019-20. For viable growth of this sector, government has accepted provision of RLNG to this sector with fiscal incentives of gas infrastructure development cess (GIDC) at the rate of zero and sales tax at the rate of 5.0 percent.

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