Pakistan should enhance gas exploration and production: study

KARACHI: Pakistan faces a pressing need to boost its exploration and production efforts to reduce reliance on RLNG imports due to rapidly diminishing natural gas reserves and increasing demand from households, fertilizers, and power sectors, according to a report by the Pakistan Credit Rating Agency (PACRA).

The country’s proven natural gas reserves have been decreasing due to a lack of significant new discoveries. From FY15 to FY23, Pakistan’s natural gas reserves declined by 8.5 per cent. As of FY23, the reserves were recorded at 14,981 billion cubic feet (bcf), a 7.3 per cent decrease from the previous year. In FY24, Pakistan’s nominal GDP reached Rs106 trillion, marking a 2.8 per cent increase in real terms compared to the previous year. Large Scale Manufacturing (LSM), crucial for economic growth due to its extensive links with other sectors, accounted for 75.6 per cent of manufacturing activities in FY23. Although LSM decreased by 10.3 per cent in FY23 compared to an 11.7 per cent drop in FY22, it experienced a slight increase of 0.99 per cent year-on-year in the first 11 months of FY24.

Globally, proven natural gas reserves were reported at 206,430 billion cubic meters (bcm) in CY23 (calendar year 2023), up 0.3 per cent from CY22. In contrast, Pakistan’s reserves were down to 14,981 bcf, reflecting a 7.3 per cent year-on-year decline.

During FY23, local gas consumption was 29.4 million metric tons (MT), showing an 8.7 per cent decrease year-on-year. Local production fell by 3.9 per cent year-on-year, while RLNG imports, which decreased by 15.2 per cent year-on-year, totalled 8.3 million MT. Consequently, the total gas supply was 36.8 million MT, a 6.7 per cent decline from the previous year. In the first nine months of FY24, the total supply was 20.8 million MT, down 1.4 per cent year-on-year, with local production contributing 78.3 per cent and RLNG imports making up 21.7 per cent.

The study indicates that as domestic natural gas production continues to decline, Pakistan’s gas demand-supply gap is expected to widen in the coming years. To address this, there is an urgent need to ramp up domestic exploration and production activities or increase gas imports to meet the country’s growing demand.

Forecasts suggest that Pakistan’s local gas production will drop to 2,989 million cubic feet per day (MMCFD) by FY25 and further to 1,722 MMCFD by FY32. Meanwhile, overall demand for gas is expected to rise to 5,057 MMCFD by FY25 and 5,710 MMCFD by FY32. The current supply mix, which stands at 75 per cent indigenous gas and 25 per cent imported RLNG, is projected to reverse by FY32 to a 25:75 ratio.