Energy Crisis — Auspicious Developments | Malik M Ashraf

In regards to surmounting energy crisis, two very significant developments have taken place recently. One is the much awaited and badly needed LNG deal signed between Pakistan and Qatar during Prime Minister’s recent visit to that country. According to the deal, Qatar would supply LNG worth $ I billion per annum to Pakistan for 15 years, from 2016-2030. It is noteworthy to mention that the price agreed for gas is much below the gas price negotiated for TAPI and IP Gas Pipeline. The fact that the Prime Minister himself travelled to Qatar for the purpose indicates the commitment and resolve with which the government is trying to tackle the energy crisis and ensure energy security for the country in the years to come.

The importance of the agreed arrangement can be better understood by having a look at the ground realities in regards to power generation in Pakistan. Presently more than 50% of the current total energy mix of Pakistan —including hydel power, fossil fuel, nuclear and renewable—is based on natural gas. Pakistan’s constrained demand for natural gas is 6000 MMCFD against a supply of 4000 MMFCD and the unconstrained demand was estimated to be 8000 MMFCD. Over the last ten years production of gas in Pakistan has remained stagnant at 4000 MMFCD and the new gas discoveries have barely kept pace with natural depletion of existing gas fields.

LNG imports from Qatar reportedly would meet 20% gas requirements of the country. In terms of impact of the LNG import, it is estimated that it would help in the generation of 2000 MW of electricity at much cheaper rates; it would revitalize the fertilizer and other industries; eliminate gas load shedding for the domestic consumers besides reviving the fortunes of the CNG industry which almost faced extinction and has not been supplied gas for the many last month. It would be pertinent to mention that in view of the shortage of gas, the previous government even mulled over the option of shutting down the CNG.

The supply of re-gasified LNG to CNG industry would, besides protecting Rs. 450 billion worth of investment in the industry will save the existing 70,000 jobs and eventually create about one million new jobs by the time the LNG imports become effective. Supply of gas to the CNG stations would also help in reducing transport fares, provide substantial savings to the users of petroleum products and play a significant role in checking the unbridled inflation creating a healthy impact on the overall economic situation in the country.

The government has already completed one LNG terminal at Port Qasim to handle the imports and the second one is in the process of being built. The government is also contemplating to build a few more such terminals in the near future. In the short run the re-gasified LNG would be distributed through the existing distribution networks of SSGPL and SNGPL but in the long term a separate network will be constructed for the purpose as the existing network is not capable of coping with the increased demand for gas. An agreement with Russia has already been signed for the construction of a gas pipeline between Lahore and Karachi costing $ 2 billion.

The government has also recently taken steps to revive and implement the TAPI and the required sale purchase agreements have been concluded. The second welcome development is the revival of the chances of resurrecting the Iran-Pakistan (IP) Gas Pipeline, in the wake of lifting of UN sanctions against Iran. Pakistan government has also notified lifting of sanctions against Iran that would pave the way for restoration of normal trade ties with Iran and building the IP Gas pipeline section on Pakistani side. In this regard Pakistan and Iran already have started negotiations to finalize the modalities and other requirements. The IP project has remained in doldrums ever since it was conceived in 1995 due to a variety of reasons including financial constraints and the unrelenting US pressure in view of UN imposed sanctions.

The only trans-regional project relevant to Pakistan’s situation at the moment is the Iran-Pakistan gas pipeline. Gas imported from Iran would add 4000 MW of electricity to the system. Pakistan and Iran are also in the process of clinching a deal for import of 1000 MW of electricity for Gawadar.

In view of the foregoing developments and the energy projects initiated under CPEC with a cumulative power generating capacity of 10,640 MW of electricity, poised to come on stream by the end of 2017-18, the prospects of tiding over the present energy shortages as well as making Pakistan an energy secure country in the near future, look almost certain. The government deserves unqualified accolades for the foregoing efforts and reviving the economy through prudent policies.

— The writer is freelance columnist based in Islamabad.

Source; http://pakobserver.net/2016/02/23/energy-crisis-auspicious-developments/