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Saturday June 15, 2024

Policy paralysis: Energy sector stifled by government indecision, say experts

By Israr Khan
May 30, 2024
A general view of the high voltage lines. — AFP/File
A general view of the high voltage lines. — AFP/File

ISLAMABAD: Experts at a recent conference highlighted that government indecision on key policies and projects remains a major obstacle to the energy sector’s growth.

As Pakistan’s domestic gas reserves dwindle, the liquefied petroleum gas (LPG) sector presents significant investment opportunities, with demand expected to more than double in the coming years. Experts have, however, called for all stakeholders, including the government and regulators, to collaborate on a concrete strategy to counter various mafias hindering the sector’s promotion.

Ogra Chairman Masroor Khan said the authority ensures that all challenges are addressed and that products are transported safely from the south to the north, regulating 30,000 retail centers. He pointed out that there are 3,000 illegal petrol stations in the country, and steps need to be taken to eliminate such stations through engagement with district and provincial administrations. It has been a struggle to shut down these 3,000 illegal stations operating outside Ogra’s oversight.

Khan added that: “The only segment in the energy sector that is now ‘exponentially’ growing is LPG, which has vast investment potential from production and import to end-consumers.” At present, LPG holds a 1.3 per cent share of the country’s energy mix with a daily consumption of 5,000 metric tons. In the next six to seven years, its share is expected to grow to 7-8 per cent with daily consumption reaching 11,000 metric tons. Khan also highlighted the investment potential in port storage facilities for LPG, particularly at the Karachi Port, as the country needs more storage.

Notably, the federal government, through the Special Investment Facilitation Council (SIFC), is working on increasing LPG storage and procuring larger LPG vessels.There are approximately 300 LPG bottling plants in Pakistan, and with increasing demand, this sector also offers investment opportunities. Additionally, manufacturing commercial LPG cylinders of 200kg and increasing the number of bowsers on the road from 2,200 to 5,000 in the next six years presents further investment potential.

Regarding the compressed natural gas (CNG) business, Khan noted that while CNG is a dying industry, there are still 7-8 applications pending, which he found peculiar. He also mentioned that five LNG terminal licences have been issued, with two operational and three under process. Another three applications for virtual LNG terminals are under consideration.

Managing Director of Attock Refinery Ltd Adil Khattak called for stricter measures to control oil smuggling from Iran, which causes significant losses to the national exchequer. He cited an intelligence report indicating that 7,400 tons of diesel are smuggled daily, resulting in annual losses of $900 million. Khattak also noted the lack of new oil refineries in recent years and the need for high capital investment to upgrade existing refineries.

Khattak criticized the government’s indecision tendency, pointing to untapped hydel power generation potential and the lengthy deliberations over importing LNG and constructing gas pipelines. He questioned why Pakistan cannot engage in business with Iran like the rest of the world, hinting at the influence of the petroleum products import mafia.

Former prime minister/petroleum minister Shahid Khaqan Abbasi also spoke at the conference and stressed the importance of timely decisions. He attributed the growth of the LPG sector to the rapid depletion of local gas reserves and highlighted the enormous potential in the energy sector, which requires serious efforts to address problems on a priority basis.

According to Abbasi, “Despite awareness of the grave energy crisis, timely decisions were not taken to address it”. He also pointed to how the cabinet’s decision to deregulate the petroleum sector in 2018 has not been fully implemented. “The petroleum sector in the entire world has been deregulated, but in Pakistan, it remains partially deregulated”, added the former PM.

Abbasi pointed out the lengthy process of setting up a petrol pump in Pakistan, which takes three years, and noted that the refinery policy has been pending for eight years. He also criticized the absence of timely decisions as a hindrance to the sector’s growth.