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December 7, 2018

Interrupted gas supply breaks growth at 3.65 percent in a decade

Business

December 7, 2018

LAHORE: Gas supply interruption has cut economic growth to an average 3.65 percent in a decade spanning over 2006 to 2015, official data suggested, indicating a crucial link between the prime energy source with the Pakistan's economy.

Natural gas consumption grew at a compound annual growth rate of 8.1 percent from 1997-2006. It peaked in 2005/06 when Pakistan achieved an impressive growth rate of 7.6 percent. The average annual economic growth rate, during the period, remained at 4.27 percent, a review of official data revealed.

Since then, the gas availability started to see a decline and so does the national growth rate. Unavailability of natural gas led to its consumption falling to 0.29 percent for the 2006-2015 period.

Pakistan will face an increasing deficit in gas supply due to ever-increasing demand for gas. Gas shortfall is anticipated to reach around four billion cubic feet per day (bcfd) in 2019/20 and the gap will reach 8.5 bcfd by 2029/30.

An official document showed that the first liquefied natural gas (LNG) policy was promulgated after the then government foresaw shortfall of natural gas back in 2005. The policy was revised in 2011. Since then, multiple efforts were made for import of LNG but to no avail.

While grappling with persistent shortage of gas for about a decade, the Economic Coordination Committee of the Cabinet approved tendering of first ever LNG terminal project in August 2013 with the aim of augmentation of gas supplies with imported gases.

Consequently, uninterrupted supply of regasified liquefied natural gas (RLNG) to the power, compressed, fertiliser, commercial and industrial sectors has allowed them to operate at a comparatively cheap, efficient and clean fuel.

Fluctuation in natural gas supplies directly impacted GDP growth rate during the last about two decades. The country has heavily been dependent on natural gas for meeting its energy needs as it is the largest contributor to the primary energy mix of the country.

The greater use of natural gas means higher growth rate of the economy. It highlights necessity of meeting demand and supply of gas for pushing economic growth rate high. Otherwise, sustainable development will remain a dream as economic growth will continue to be hampered.

The consumption of natural gas and economic growth data of last two decades suggest that low use of gas has had a direct impact on the national GDP. Especially, the negative impact significantly increased between 2006-07 and 2015-16.

A study said one percent of GDP growth in the country requires 1.25 percent escalation in energy supply, which primarily happens to be natural gas.

LNG import emerged as the only immediate viable solution for bridging burgeoning gap in supplies. The greater gas availability in early 2015 on the back of opening import window of LNG, which expanded to over 1.2 billion cubic feet, increased supply to industrial and other sectors of the economy.

It is feared that the gap between gas demand and supply will soon start widening unless its supplies are not increased at par with the rising demand through exploration of available solutions. The economy will start suffering again owing to energy starvation.

Natural gas is a major contributing fuel in country’s energy mix. The positive growth of various sectors, such as power, commercial, residential and fertiliser and depletion of gas reserves resulted in constrained natural gas availability. The demand for natural gas will further increase in the coming years and hence gap will further be widened.

Following initiation of gas imports, the share of RLNG in the gas supply started to increase and is hovering around one-sixth of total supplies presently. It is playing an important role in meeting demand during most of the year. In peak winter months, however, it hardly meets one fourth of demand. This gap would tend to increase unless supplies are not increased on continuous basis.

A well-developed and integrated infrastructure for transmission and distribution of natural gas is one of the biggest in developing world. However, gas paucity will render this network useless, and cripple the economy.

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