Soaring Prices of Imported LNG Threaten Pakistan's Economic Recovery

Soaring LNG prices are adversely affecting Pakistan's balance of payments and threatening the nation's post-COVID economic recovery.  Pakistan's trade deficit has widened to nearly $12 billion in July-September 2021 quarter, up more than 100% from the same period last year. The nation's heavy reliance on expensive imported energy has been the main cause of prior balance of payments crises that have forced it to seek IMF bailouts more than a dozen times in the last 70 years. 

Global LNG Prices. Source: The Peninsula Qatar 

Pakistan: World's Fastest Growing LNG Market. Source: Bloomberg

Global Commodity Price Increases

The average LNG price for November delivery into Northeast Asia was estimated at about $32 per metric million British thermal units (mmBtu), up nearly 20 percent from the previous week, according to the Peninsula Qatar publication. Price agency S&P Global Platts said on Thursday that its Japan-Korea-Marker, which is widely used as a benchmark for spot LNG contracts, rose to $34.47 per mmBtu.       
Pakistan Trade Stats. Source: Topline Securities
Rising LNG prices have forced power generating companies in Pakistan, Bangladesh and the Middle East to start switching fuels pushing oil prices higher.  About 60% of Pakistan's current LNG needs are covered by long-term contracts at significantly lower prices than the current spot prices. US crude closed above $80 for the first time since late in 2014, bringing its climb since the end of last October to 125%, according to the Wall Street Journal
Pakistan Coal Power Plants Under CPEC. Source:China's Global Power ...

All Pakistani Power Plants Under CPEC. Source: China's Global Power...

The key to Pakistan managing its current accounts lies in reducing reliance on imported energy and dramatically increasing its exports. Pakistan already faces climate change pressures forcing it to change its energy mix to reduce the use of fossil fuels. 
Pakistan's Malik Amin Aslam with CNN's Becky Anderson 

Malik Amin Aslam, Pakistan Prime Minister Imran Khan's special assistant on climate change, said recently in an interview with CNN that his country is seeking to change its energy mix to favor green.  He said Pakistan's 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbon and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded. Here are the key points Aslam made to Becky Anderson of CNN:

1. Pakistan wants to be a part of the solution even though it accounts for less than 1% of global carbon emissions. 

 2. Extreme weather events are costing Pakistan significant losses of lives and property. Pakistan is among the countries most vulnerable to the effects of climate change. 
3. Pakistan is moving towards renewable energy by converting 60% of its energy mix to renewable by 2030. Electric vehicle (EV) transition is also beginning in his country. 
4. Aslam said:  “We are one of the world leaders on nature based solutions. However, the World Bank (WB) in its Report yesterday came up with really good numbers in a comparison done of countries who are shifting their mainstream development towards environment friendly policies and Pakistan came atop among them,” the SAPM explained. 
900 MW Zonergy Solar Park in Bhawalpur, Pakistan

To a question on Pakistan’s capacity to make investments in nature based solutions, he said, “We cannot afford not to do it….that’s a cliche in our country and we are living that cliche in Pakistan. We are not just talking the climate talk rather doing climate action in Pakistan.” 
1,100 MW Karachi Nuclear Power Plant Unit 2

To a question on the 26th Conference of Parties (COP-26) under the United Nations Framework Convention on Climate Change, Amin said his country’s revised "national determined contributions" (NDCs) are going to be released next week. “….that’s going to clearly tell the world that this (money) we had spent in nature and could do further and that was also our direction,” he added. The SAPM informed that Pakistan was going to COP 26 with a very clear message that the country has been affected by climate change, climate injustice, adding, “but we are one of the countries that are leading the way to nature based solutions.” 
Pakistan Among Top 3 Countries For Newly Installed Hydro

He cited the WB Report and said 44% of the country’s mainstream development was climate friendly investment and it had doubled in the past one year. He said 60% renewable energy target would to be based on solar, wind and hydro power projects, and 40% would come from hydrocarbons and nuclear which is also low-carbon. “Nuclear power has to be part of the country’s energy mix for future as a zero energy emission source for clean and green future,” he concluded.
Installed Wind Power in Pakistan. Source: Modor Intelligence 

It's noteworthy that Pakistan's neighbor India currently generates 70% of its electricity from coal extracted from Indian coal mine.  It is aiming for renewables and nuclear energy to account for 40% of its installed electricity capacity by 2030.   
Pakistan NDCs (Nationally Determined Contributions) For Climate Goa...

Here's a video of Malik Amin Aslam's interview with CNN"s Becky Anderson:"; title="YouTube video player" width="560"></iframe>" height="315" src="" width="560" style="cursor: move; background-color: #b2b2b2;" />

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Comment by Riaz Haq on October 30, 2021 at 11:19am

Energy Consumption in Residential Sector of Pakistan

Sadia Gul
University of California, Davis
Rafia Akbar
Muhammad Bilal Sajid
Ghulam Ishaq Khan Institute of Engineering Sciences and Technology

Energy consuming buildings account for 30-40% of the overall energy consumption in the world and are responsible for more than one third of greenhouse gases emissions. In Pakistan Residential building sector has around 47% share in total energy consumption. Study is conducted to identify the energy consumption pattern and the areas of energy wastage in residential sector of Islamabad. From the analysis of its annual energy usage it can be clearly seen that electricity consumption dominates in term of cost but natural gas has major share in annual energy consumption. Recommendations are provided which include required energy retrofit measures for improving building performance and financial assistance from Government officials. Through these energy efficiency measure significant reduction in carbon footprint can be achieved.

Comment by Riaz Haq on October 30, 2021 at 6:54pm

According to the World Bank, Pakistan is one of the top five vulnerable countries, despite having no significant contribution to climate change. Another report mentions: “In 2019, CO2 emissions for Pakistan was 223.6 million tons. Between 1970 and 2019, CO2 emissions of Pakistan grew substantially from 17.7 to 223.6 million tons rising at an increasing annual rate that reached a maximum of 15.38 percent in 1987 and then decreased to 1.33 percent in 2019.”

The drastic decrease in carbon emissions is, surely, the result of steps taken by Pakistan under its Climate Action – the Sustainable Development Goal (SDG) 13. The flagship project, Ten Billion Tree Tsunami (TBTT), is not just a tree plantation movement, but a comprehensive initiative for ecosystem conservation and management. More than a billion new plantations, revised plans for forest management and development across the countries with the engagement of provinces and administrative entities, and capacity of institutions have already been noticed and appreciated by the national and international environment and climate watchdogs.

The Sustainable Development Report 2020, written by a group of authors led by Prof. Jeffrey Sachs, President of the Sustainable Development Solutions Network (SDSN), and published by Cambridge University Press, has declared Pakistan accomplished all targets of the SD-13 ten years ahead of the actual date – 2030. The UNDP SDGs report has also shown Pakistan’s remarkable progress on SDG-13 Climate Action.

COP26 is an opportunity for Pakistan to vigorously showcase its achievements so far as well as its vulnerabilities. Pakistan has been facing the worst impact in the forms of short-span heavy rains, flash floods, unprecedented land-sliding incidents, glacial melting, air pollution and fast diminishing water resources, climate prone crop diseases and low productivity and many others. Overburdened by debt, incapacity and capital shortfall have further increased Pakistan’s vulnerability. Keeping in view the performance on climate action, Pakistan should be slated among the global top priorities for funding, human resource development and institutional strengthening to protect masses living at the edge and their livelihood resources.

The government has approved Pakistan’s Nationally Determined Contribution (NDC) for the UN Climate Conference COP26 where it has aimed for an ambitious 50 per cent reduction on top of the present 1.3 per cent carbon emissions by 2030 subject to the provision of $100 bn climate finance. Special Assistant to Prime Minister Malik Amin Aslam has mentioned that national funding, professional capacity and institutional strengthening will simultaneously take place while mobilising global resources to attain the goal.

Comment by Riaz Haq on October 30, 2021 at 6:57pm

‘Pakistan to present diverse agenda at COP-26’

Pakistan is all set to have a diverse representation at the 26th Conference of the Parties (COP-26) in Glasgow where the key negotiations would open up with a debate on developing countries’ plight of bearing the brunt of environmental degradation caused by the developed countries, said Dr. Abid Qaiyum Suleri, Executive Director, Sustainable Development Policy Institute (SDPI).

Dr. Suleri was addressing a pre-COP-26 briefing held here by SDPI.

Dr. Suleri said that this year, the conference is going to have an extraordinary representation of civil society, parliamentarians, think tanks, and the private sector from across the globe.

He went on to say that the developed countries during the moot would focus on emerging economies like China, India, Brazil, and South Africa to reduce their carbon emissions and provide a financing work plan for chipping in global climate change mitigation efforts.

Dr. Shafqat Munir from SDPI, while moderating the briefing highlighted the key features of the SDPI’s study on Green Recovery during COVID-19 in power and energy sectors.

Dr. Hina Aslam and Dr. Sajid Amin, authors of the study, underpinned the outcomes and recommendations of their research that suggested an ambitious opportunity to convincingly reduce emissions and debt burden through investments in renewable energy projects.

Earlier, SDPI held a discussion on ‘Green Financing and Economic Recovery of Pakistan’ in the backdrop of climate goals for COP-26.

Speaking on the occasion, Secretary Power Division, Ministry of Energy, Ali Raza Bhutta, asserted that the energy mix of Pakistan is very healthy as around 29% of electricity is coming through hydropower. Likewise, the contribution of solar, wind, and biogas is projected to increase significantly in the future.

Shah Jahan Mirza, Managing Director, Private Power, and Infrastructure Board (PPIB) informed the participants that the Government of Pakistan has shown a strong commitment towards increasing the share of renewable energy through HRE Policy 2019 which targets to increase the renewable energy share in power generation to 20% by 2025 and 30% by 2030.

Dr. Sardar Moazzam, Managing Director, National Energy Efficiency and Conservation Authority (NEECA) explained the role of energy efficiency and conservation in green recovery and said that it has been missing from the landscape of energy planning.

Faisal Sharif, Director, Project Appraisals, Private Power & Infrastructure Board, suggested that the green stimulus can accelerate the transition towards green and clean energy, simultaneously spurring green economic recovery and growth by creating millions of jobs and putting emissions into structural decline.

M Ali Kemal, Chief, SDGs, Planning Commission of Pakistan, emphasised the debt swaps and green financing mechanisms support green recovery from Covid-19.

Kashmala Kakakhel, the climate finance specialist, was of the view that there is a need to further address all the relevant SDGs of the country such as poverty as green recovery is not only about Net-Zero.

Hartmut Behrend, Coordinator, Pakistan-German Climate and Energy Initiative, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Dr Sajid Amin Javed from SDP and Dr Fareeha Armughan also shared their views with the participants, especially about green financing and climate finance mechanism.

Comment by Riaz Haq on November 5, 2021 at 5:27pm

With Climate Pledges, Some Wall Street Titans Warn of Rising Prices
Leaders of some of the world’s biggest financial firms say that the rush to transition to clean energy could have unintended consequences for the global economy.

GLASGOW — Big business finally seems to be taking the climate crisis seriously. After years spent lurking on the sidelines, the chief executives of the world’s largest banks, companies and investment firms this week took a spot at the center of the debate at COP26.

Banks, asset managers and insurers in recent days pledged to use trillions of dollars to achieve net-zero emissions targets as pension funds and other big investors move to divest trillions more from the fossil fuel industry.

Yet some leaders of the world’s biggest financial firms — including some who were part of pledges made at the climate summit in Glasgow — are warning that the rush to rapidly transition away from a carbon-intensive energy system could unleash unintended consequences that would jeopardize the world’s economic recovery in the near term.

While some of their concerns are so far largely speculative, they suggest that less investment in fossil fuel production could send energy prices soaring, and that divestment could make it harder to monitor dirty energy production.

Speaking at a conference in Saudi Arabia last week, Stephen A. Schwarzman, chief executive of the private equity firm Blackstone, said the growing number of institutional investors pledging to divest their holdings from fossil fuel companies was making it harder for oil and gas producers to finance production.

“If you try and raise money to drill holes, it’s almost impossible to get that money,” Mr. Schwarzman said, adding that an energy shortage could lead to “real unrest” around the world. It is a sentiment that has been echoed by other executives in recent weeks, as U.S. oil prices hit $85 a barrel, a seven-year high.

Jamie Dimon, the chief executive of JPMorgan Chase, said in an interview that the world should be transitioning to a decarbonized economy “right now.” But he cautioned that while less money was being invested in fossil fuels, therefore tightening the supply, it was important for banks to keep funding conventional energy production.

Comment by Riaz Haq on November 13, 2021 at 9:50am

#America Isn’t Ready for the #ElectricVehicle Revolution. #China controls Lithium-ion battery supply chain. #Russia's #Putin predicts #oil will reach $100 a barrel next year. #energy #FossilFuels #EnergyTransition #RenewableEnergy by Steve LeVine

China’s buildup continues to this day. Just a few weeks ago, Contemporary Amperex Technology, China’s largest battery manufacturer, said it would invest up to $4.96 billion on a plant to recycle used E.V. batteries. That was on top of the company’s $297 million acquisition of Canada’s Millennial Lithium Corporation, which was announced in September.

Can the United States hope to ever catch up? In recent months, General Motors, Stellantis and Toyota have each announced plans to build massive battery factories in North America. Ford said it and its South Korean partner will build three U.S. battery plants by 2025 with enough capacity to equip one million E.V.s a year. But no one seems to know exactly how the battery supply chain will come together and where they will obtain each of the necessary precursors, like cobalt and manganese.
Vladimir Putin, the president of Russia, last month added his voice to a bullish chorus predicting $100-a-barrel oil — double the price at the start of the year. He may have been showing restraint: Some traders are betting on an unprecedented $200 a barrel by the end of 2022. The return of a frenzied oil market is conjuring up unwelcome memories of a global petroleum goliath with the power to influence Western geostrategy and roil societies everywhere.

Yet this is the old story. We now stand at the precipice of the age of batteries and electric vehicles, technologies likely to steamroll fossil-fuel companies and petro states. From a few thousand fully electric cars sold around the world in the late aughts, consumers are on track to buy four million of them this year.

So far, the United States appears to be little more than a spectator to this revolution. While its battery makers and automakers are poised to produce cutting-edge batteries and popular electric vehicles, they will rely almost entirely on a supply chain controlled by China. Over the past decade, China has built up most of the world’s capacity to process the metals that make lithium-ion batteries — the heart of the electric vehicle revolution — work. It is this capacity that puts China in the catbird seat in the race for the future while America falls farther and farther behind.

Following the financial crash of 2008, the United States and China, along with Japan, South Korea and other countries, began an undeclared race to create and reap the dividends of the E.V. industry, including associated businesses such as battery production. This led the United States and China to inject stout public funding into battery and E.V. start-ups and established companies, in hopes of kick-starting an economic recovery.

In the United States, initially buoyant public and political support for President Barack Obama’s strategy eroded within just a couple of years, following accusations of squandered public funds in a government-backed loan to Solyndra, a California solar panel company that fell victim to cheap Chinese imports.

In China, by contrast, state-backed companies have secured a reliable supply of the raw metals and elements behind E.V. batteries. In the last three and a half years alone, Chinese companies have been the biggest international buyers of additional lithium assets amid soaring prices for the metal.

By 2018, Chinese companies also owned half of the largest cobalt mines in the Democratic Republic of Congo, the source of most of the world’s supply of the metal. Government funding for China’s electric vehicle sector during the past decade amounted to more than $100 billion, according to a study by the Center for Strategic and International Studies.

Comment by Riaz Haq on November 13, 2021 at 9:22pm

The Pakistan LPG market is expected to grow gradually in the coming years. The country is facing natural gas shortages to meet its energy needs, and, encouragingly, LPG is being promoted as a bridge fuel, especially for energy-starved populations in remote and hilly areas. However, the pace of demand growth will be determined mostly by whether government policies will move LPG toward pricing parity with natural gas and restructure the priority order in the natural gas allocation policy.

Natural gas market overview

Natural gas is a major contributor to Pakistan’s primary energy mix, providing almost 50% of the total energy needs (see Figure 1). It is used extensively across a number of sectors—power, residential and commercial, industry, fertilizer, and transport (compressed natural gas [CNG]).

Domestic natural gas production comes primarily from mature nonassociated gas fields in the province of Sindh (see Figure 2). The country’s major gas fields include Sui, Uch, Qadirpur, Sawan, Zamzama, Badin, Bhit, Kandhkot, Mari, and Manzalai. Pakistan’s gas production has been largely flat since 2008, with production peaking at 4.23 Bcf/d in 2012, and eased to 4.01 Bcf/d in 2016 (see Figure 3).

Natural gas reserves have also fallen, from 0.85 Tcm (30.0 Tcf) to 0.50 Tcm (17.6 Tcf), declining by an average of 5% per year since 2005 (see Figure 3). Based on the current rate of production (4 Bcf/d), reserves are expected to last less than 20 years. New investments and exploration have been challenged by regulatory hurdles, insufficient gas prices, and security risks, particularly in the province of Balochistan.

Gas demand in Pakistan is spread across multiple sectors, but high regional imbalances exist. The Punjab region accounts for the most consumption but has the lowest share of production (see Figure 2). The power sector was the largest consumer at 33% of total demand, followed by the residential (21%), industrial (19%), and fertilizer (19%) sectors in fiscal year 2016 (see Figure 4).

The country has a well-developed gas transmission and distribution pipeline network. The network of more than 11,000 km of transmission lines and over 139,000 km of distribution lines belongs solely to two companies: Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC). Owing to the country’s large transmission and distribution gas grid, natural gas will remain a major part of the energy mix (see Figure 1).

Gas demand is Pakistan is highly supply constrained, with an unmet demand potential of 1.5–2.0 Bcf/d (see Figure 5). To supplement the gas shortages in various sectors of the economy, Pakistan has plans to ramp up LNG imports. The country’s first LNG import terminal developed by a JV between Engro Corporation and Royal Vopak of the Netherlands came online in March 2015.

The government awarded three tenders to Eni and Gunvor in 2016, two of which are tied to the second FSRU targeted to start up in 2017. Pakistan has plans for development of transnational gas pipelines— the TAPI and IPI pipelines—but both projects face geopolitical and technical challenges.

IHS Markit anticipates Pakistan’s LPG production from gas processing to remain stagnant owing to sluggish E&P activities and domestic gas shortages. Furthermore, LPG production from refineries is expected to increase modestly over the forecast period, as no significant Greenfield and brownfield capacity expansions are envisaged


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