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January 11, 2019

Managing the gas crisis


January 11, 2019

The gas crisis in the country has now become so acute that Prime Minister Imran Khan has taken the drastic step of removing the managing directors of Sui Southern Gas Company Limited and Sui Northern Gas Limited. This comes a month after the prime minister had dissolved the board of directors of both companies. The two gas supply companies have been blamed for the crippling shortages, with the government accusing them of mismanagement and withholding information. Even if that were true and the managing directors did deserve to be fired, we should not fool ourselves into thinking that the gas shortages will end overnight.

The country’s gas reserves have been rapidly depleted by the ever-growing demand for gas. This is mostly the result of government policy, which encouraged people to convert their vehicles to gas and sold gas at such cheap prices that it led to a massive increase in demand. On the supply side, Pakistan has been unable to import gas through the Tapi and Iranian gas pipeline projects because of security issues in the case of the former and US pressure in the latter. Clearly there need to be changes made in all aspects of the gas industry but the government is yet to explain which reforms it intends to introduce.

Clearly we need to find some way to reduce demand for gas. Pakistan is the largest consumer of gas in South Asia; with reserves dwindling, that will now have to change. One way to do that would have been to increase the price of gas but doing so would mostly hit the poor. We also need to acknowledge that our existed pipeline needs to be overhauled. Some estimates claim that as much of 40 percent gas is lost either through theft or in distribution. Importing LNG has not helped either as its supply has not been integrated with the existing network. This has meant that Pakistan has often had to reduce its domestic gas supply to accommodate the imported LNG in the country’s network. While the two gas distribution companies have been blamed for the crisis, the truth is that they can only distribute what is being given to them. In winter, when there is a sharp increase in the demand for gas, the supply simply cannot keep. Solving this conundrum will be the PTI government’s biggest challenge.

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