Amir Saeed

Pakistan’s increasing dependence on imported liquefied natural gas (LNG), is leading to the high energy production cost, exacerbating energy insecurity and compromising financial independence in the energy sector. Speaking to WealthPK, Shah Jahan, Managing Director of the Private Power & Infrastructure Board (PPIB), said the suppliers did not deliver the contractually obligated cargoes at least 11 times in the last two years, causing a shortage of fuel/power. “Causing Pakistan to source LNG volumes through emergency tenders led to paying exorbitant prices or no bids at all directly impacted the economic productivity of domestic firms. The government should address the fundamental issues related to the natural gas pricing, governance in the distribution companies, and uncertainties at the end of gas supply chain, the domestic LNG market, and the overall gas sector,” he suggested. It is equally important to enlarge the LNG-user base, as it will reduce the per unit terminal capacity charges that the private sector is paying for, he opined.

Instead of being the cleaner, cheaper source, LNG has caused Pakistan to rely on dirtier and more polluting fuels. As the natural gas price hikes, factories buy coal from Afghanistan to meet their energy needs. It is crucial to align the local gas prices with the imported LNG prices, as it will redirect gas from the industries to more efficient LNG-fired plants, which will reduce the shortage of domestic gas supply to the LNG plants, causing a reduction in the operating cost. Natural gas, including the imported LNG, contributes about 38% of the country’s primary energy supply mix. The total domestic gas production is about 4 billion cubic feet, while the domestic demand for gas is 6 to 8 billion cubic feet daily. The estimated demand for LPG in a year is about 1.4 million tonnes, while the domestic production of LPG is 0.88 million metric tonnes. The difference between the demand and production is met by importing LNG, which is five to ten times more expensive than domestically produced gas.

Talking to WealthPK, Ilyas Hussain Khan, Director of Alliance Energy, said Pakistan must not rely only on the imported LNG. It is imperative to mitigate the energy insecurity and financial strain on the energy sector by enhancing production of natural gas, he added. He opined that by aligning the local gas prices with the imported LNG rates and prioritizing supply to the most efficient LNG-based power plants, Pakistan could optimize its energy mix, reduce reliance on costly imports, and foster a more sustainable and economically viable energy landscape. This shift, he said, not only promises enhanced energy security but also holds the potential to alleviate the financial burden on domestic firms and improve overall economic productivity.

Credit: INP-WealthPk