Hagler Bailly, a global management consulting firm with an office in Islamabad, warned in a 2006 study that Pakistan is going to witness gas shortage starting in 2007, and the imbalance will grow every year to cripple the economy
by 2025, when shortage will be 11,092 MMCFD (Million standard cubic feet per day) against total 13,259 MMCFD production. The Hagler Bailly
report added that Pakistan's gas shortage would get much worse in the next two decades if it did not manage any alternative sources. It appears that we are seeing the beginning of the crisis that HB predicted back in 2006.
Demand for natural gas in Pakistan increased by almost 10 percent annually from 2000-01 to 2007-08, reaching around 3,200m cubic feet per day (MMCFD) last year, against the total production of 3,774 MMCFD, according to Pakistani official sources
. But, during 2008-2009, the demand for natural gas exceeded the available supply, with production of 4528 MMCFD gas against demand for 4731 MMCFD, indicating a shortfall of 203 MMCFD. This winter, Sui Northern Gas sources have reportedly told the media
that the company is dealing with a shortfall of 700 MMCFD of gas due to increasing use of heaters and geysers.
The potentially devastating effect of the gas shortage on the nation can be gauged by the fact that Pakistanis heavily depend on gas
for their energy needs, much more so than neighboring Indians. With a gas pipeline network stretching around 56,400 km, pipeline density of 1044 km/mmscmd (million metric standard cubic meter per day) and a 31,000 km distribution network to serve its domestic and commercial consumers and nearly 3000 CNG stations, the gas consumption in Pakistan is much higher than its bigger South Asian neighbor.
According to International Association of Natural Gas Vehicles
, as of December 2008, Pakistan has the world’s highest number of vehicles running on compressed Natural Gas (CNG). The number is 2 million. Pakistan also has the World’s largest number of CNG refueling stations, 2941 as of July 29, 2009.
Just as the worst electricity crisis of its history is currently gripping the nation, it appears that the gas crisis has begun to rear it ugly head, with recurring reports of low gas pressure, CNG station closures and rationing, and gas "load shedding" for businesses and consumers. The blame game has already started and there appears to be little relief in sight on either the electricity or the gas fronts. One of the reported effects of the gas shortage is delay in the availability of power from the rental power plants which are expected to operate on gas. It appears that the attempt to solve the electricity crisis has made life even more difficult for the people by spawning a gas crisis at the same time.
Citizens and industries in Lahore have been particularly badly hit, resulting in angry protests widely reported in the media
. The All Pakistan Textile Mills Association (APTMA), the textile industry group, has claimed that it suffered losses of about Rs 1 billion
in December due to lack of smooth gas supply to the industry. Pakistan's CNG industry
is also feeling the pinch after rapid growth in the last few years.
A story in Pakistani newspaper the News
is alleging that "these expensive rental power plants, which were being installed with tall claims to address the energy crises in the country, were said to have now become one of the major reasons behind a new sorts of energy crises in Pakistan, as their gas requirements are bound to hit other sectors of economy running on gas supplies".
In response to the alarming gas situation, there are reports
that Pakistan is finally going ahead with the multi-billion dollar Iran-Pakistan Gas Pipe Line Project and has initiated the process of arranging financing of US $1.245 needed for laying 800 Km long pipe line from Pakistan-Iran border to Nawab Shah. Pakistan will also import 1.05 billion cubic feet of gas per day from Iran at 78 percent of crude oil parity price. Pakistan and Iran have already signed Gas Sales Agreement (GSPA) for importing 750 million cubic feet gas per day which will be used to generate 4500 MW of electricity and would be a cheaper alternative to the presently expensive imported furnace oil used in the existing thermal power houses. Another 250 million cubic feet of Gas per day is also envisaged to the purchased for development projects at Gawadar in Balochistan. Considering the magnitude and strategic nature of the Gas Line Project, the government has adopted a private-public partnership approach for financing the project with debt equity ratio of 70:30 under which the Pakistan government will provide 51 per cent equity. This equity financing would be provided upfront through selected Public Sector Entities like OGDCL, Pakistan Petroleum Limited , Government Holding Private Limited, Employees Old Age Benefits Institution and State Life Insurance Corporation. The debt will be sourced from the market backed by the government guarantees for transportation tariff. Any gap in raising the required debt from the market, the funds will be available by PDSP
As the nation's attention turns to the gravity of the worsening gas energy crisis, the growing supply-demand gap for electricity
is still unaddressed. The government's attempts to fill the gap with rental power have raised many questions and drawn serious corruption charges
from the opposition parties and the media. Analysts at Center for Research and Security Studies
are asking why have some private power producers completely shut down? And why are other private power producers operating well below their full capacity? It is being alleged
that the reasons for buying rental power to fill the electricity gap rather than pay the outstanding dues of the independent power producers (IPPs) to fully utilize exiting installed capacity have to do with the kickbacks offered by the rental power operators. According to Reuters
, Finance Minister Shaukat Tarin almost resigned after failing to persuade the cabinet against renting, an option he considered expensive and inefficient.
There have been widespread complaints
in Islamabad, including by Mr. Tarin, that the government had solutions to improve the power output but was refusing to implement them in order to benefit a handful of power plant operators, such as those supplying rental power, while the IPPs are not being paid for supplying power from currently underutilized installed capacity. Requests for information by Transparency International Pakistan
regarding rental power contracts have been ignored by the Ministry of Water and Power. There are widespread corruption allegations against President Asif Ali Zardari
personally who has allegedly influenced the award of the 783 MW rental power contracts to a former governor of Oklahoma and his Pakistani partner.
The failures of the last and the current governments in tackling the growing energy crisis in Pakistan are shameful. Inaction at this point would be criminal. The Iran-Pakistan gas pipeline project has to be accelerated to avoid significant further harm to the country. At the same time, the shortages of electricity and gas need to be managed actively and fairly to minimize the impact on the consumers and the businesses to help the economy recover from the current slump. The issue of unpaid electricity bills
and the rampant power theft
should be confronted head-on to restore investor confidence
in long-term energy projects in the country. Since the federal government is the biggest dead beat
, followed by the four provincial governments, FATA, the KESC and the KW&SB, it is an opportunity for the current leadership in Islamabad to lead by example by paying off their outstanding utility bills.
Pakistan's Electricity Crisis
Pakistan's Gas Pipeline and Distribution Network
Pakistan's Energy Statistics
China Signs Power Plant Deals in Pakistan
Pakistan Pursues Hydroelectric Projects
Water Scarcity in Pakistan
Energy from Thorium
Comparing US and Pakistani Tax Evasion
Zardari Corruption Probe
Pakistan's Oil and Gas Report 2010
Circular Electricity Debt Problem
International CNG Vehicles Association