An Overview
1. Exploration
Natural Gas Reserves: Pakistan has domestic gas reserves in Sindh, Balochistan, and Khyber Pakhtunkhwa. Sui (Balochistan) remains a key gas field.
Decline in Production: Domestic gas production has declined from around 4 billion cubic feet per day (bcfd) to under 3 bcfd.
Under-Investment: Exploration is limited due to outdated policies, lack of incentives, and political instability.
2. Imports
LNG (Liquefied Natural Gas): Pakistan imports LNG mainly from Qatar and on spot markets.
Expensive Contracts: Some LNG deals are expensive or inflexible, often signed during high-price periods.
Port & Terminal Constraints: Pakistan has limited LNG import capacity (2 main terminals), limiting how much gas it can bring in.
3. Consumption
Sectors:
Domestic: ~25% of total usage; often subsidized.
Commercial: Restaurants, malls, small businesses.
Industrial: Fertilizer, textile, cement, and other industries rely heavily on gas.
Power Generation: A significant portion is used for electricity production.
Transport: CNG is widely used in vehicles.
4. Shortfall
Demand > Supply: Demand is over 6 bcfd while supply is under 4 bcfd.
Winter Shortages: Domestic users face gas outages in colder months.
Load Management: Industrial and commercial sectors often face cutbacks.
5. Reasons for the Crisis
Depleting Local Reserves
Poor Exploration Strategy
Over-Reliance on Imported LNG
Subsidized Tariffs for Domestic Sector
Circular Debt in Gas Sector
Lack of Gas Storage Facilities
Inefficient Distribution Networks
6. Hurdles to Getting Cheap Gas
Global Price Volatility: Spot LNG prices are unpredictable.
Limited Long-Term Contracts: Pakistan lacks access to low-price, long-term LNG deals.
Geopolitical Constraints: Sanctions on countries like Iran prevent pipeline imports (e.g., Iran-Pakistan gas pipeline).
Dollar Shortage: Payment for LNG requires foreign exchange, which is often in short supply.
7. Hurdles in Domestic Exploration
Security Issues: Balochistan and other exploration-rich areas face law and order challenges.
Investor Reluctance: Political instability and inconsistent policy deter international energy companies.
Regulatory Red Tape: Licensing, profit-sharing, and policy delays reduce private sector interest.
8. Exploration & Ethics for Communities
Displacement: Exploration often displaces local communities.
Environmental Damage: Drilling can contaminate water and degrade the environment.
Lack of Local Benefit: Communities near gas fields rarely see development or revenue benefits.
Corporate Social Responsibility (CSR): There’s a need for ethical exploration that includes fair compensation, education, and healthcare investments in local areas.
9. Gas Use by Sector
Domestic Users
Often prioritized for political reasons.
Receive gas at subsidized rates.
Urban users benefit more than rural users.
Commercial Users
Charged higher rates than domestic.
Often face reduced supply during shortages.
Industrial Users
Major consumers.
Face high tariffs and unplanned outages.
Hurt by inconsistent supply, affecting productivity and exports.
10. Why Are Prices High?
Global LNG Prices: Imports are based on global market rates (e.g., linked to Brent crude).
Currency Depreciation: The falling rupee makes dollar-denominated LNG even more expensive.
Gas Theft & Losses: UFG (Unaccounted for Gas) losses are over 10% of supply.
Heavy Subsidies for Domestic Users: Others pay more to cover the subsidy gap.
11. Huge Taxes
GST + Other Levies: Federal and provincial taxes are added on top of base gas prices.
Cross-Subsidization: Industrial/commercial sectors subsidize residential users.
Circular Debt: Government struggles to pay gas suppliers due to unpaid subsidies and receivables.
12. Way Forward: Solutions
Short-Term
Targeted Subsidies: Only poor households should get subsidies.
Gas Rationing: Prioritize industrial and export sectors for economic benefit.
Spot LNG Diversification: Explore cheaper suppliers or regional options.
Medium-Term
Explore New Gas Fields: Incentivize local and foreign investment in exploration.
Reduce UFG Losses: Upgrade infrastructure, smart metering, and better governance.
Build Storage Facilities: To manage seasonal supply better.
Long-Term
Regional Pipelines: Resolve diplomatic issues for TAPI and Iran-Pakistan pipelines.
Transition to Renewables: Reduce dependence on gas by investing in solar, wind, hydro.
LNG Terminal Expansion: Increase import capacity.