KARACHI: Pakistan’s entrenched dependence on LNG has pushed it down a path that leads to worse energy insecurity as it recently has been unable to secure a single cargo for July because Europe is throwing its money around to suck all the liquid gas available leaving none for poorer nations.
To bridge demand-supply gap, Pakistan has started importing LNG and the share of import in total gas consumption is increasing.
Natural gas, being a cheap and environmentally-friendly energy source, has always been the first priority of both households and other consumers, a study of Pakistan Credit Rating Agency (PACRA) says.
It said that in line with the rising population and increasing economic activity the demand of natural gas is also increasing, whereas the local production is not enough to cater the demand.
The coalition government has failed in last three attempts over the past couple of weeks to secure even a single cargo for July from the spot market as whatever quantities are available in the spot or otherwise are herded by the Unites States towards Europe, suffering energy shortages amid Russian-Ukraine war and eager to pick every molecule at any cost.
“This was the third tender to be lost by the country since November 2021. Other risk factors include the Russian-Ukraine conflict suspending LNG supply, which is spiralling LNG prices upwards, rising crude oil prices, limited import sources due to the conflict; dwindling forex reserves available for importing the costly LNG; and a rupee rout led increase in the projected cost of LNG imports, study shows.
It says that OGDC, PPL, MARI, and UEP are the largest producers of natural gas in the country. However, Pakistan’s reliance on imported energy is increasing with the passage of time.
At present, the country meets around 80 percent of oil and 25 percent of gas consumption demand through imports, which forms a substantial part of the import bill. Even though gas is still the dominant domestic energy source, very few sizeable discoveries have been made in more than a decade with domestic production declining to 3.5 Bcfd from a plateau of 4 Bcfd, which was maintained for many years up till 2018-19.
Amid an absence of any big discoveries in recent periods the overall gas reserves have shrunk 45 percent from FY08 to last fiscal year.
PSO and Pakistan LNG Limited are the only importers of natural gas in the country wherein combined regasification capacity of both the regasification units of the country is 1200 MMCFD.
Study suggests that it is strategically important to increase the overall re-gasification capacity of the country to cope up with rising imports of RLNG, which have increased by 39.9 percent in the last fiscal and will continue to do so to meet domestic and industrial demand in winter.
“Due to its significance in meeting consumption needs, stalled LNG imports will impact power generation and economic growth going forward,” report said.
It also pointed out that the circular debt of the gas distribution sector is also increasing and, if not addressed, has the potential to significantly dent the sector’s ability to deliver to its consumer which, in turn, will have a serious implication for the overall economic growth of the country.