In the crucible of Pakistan’s energy sector, the relentless grip of the ongoing gas crisis tightens its hold, evolving into an intractable challenge that reverberates through the nation’s industrial landscape. The current crisis has imposed severe consequences on the citizens, especially in areas like Baluchistan, where having access to pipeline gas remains a distant prospect. The situation has worsened due to the absence of proactive measures and adequate response from the authorities, leaving the public in dire straits. The surge in gas demand coupled with declining indigenous production highlights the urgent need for immediate measures and interventions to address forthcoming challenges.
Pakistan’s population, currently standing at a staggering 241 million, has led to a gas demand of approximately 6.6 billion cubic feet per day (bcfd). As of 2022, the country’s total gas supply amounted to 3.3 bcfd, consisting of 2.63 bcfd from domestic sources and 630 million standard cubic feet per day (mmscfd) from imported gas. It is projected the that total demand for gas is likely to increase to 7 bcfd in the next few years, while indigenous production is expected to drop to less than 2 bcfd. This implies a situation where Pakistan will be required to import Liquefied Natural Gas (LNG) three times the volume of its locally produced gas. This, in turn, would affect both policy and regulatory aspects, notably impacting consumers.
Muhammad Ali, the Caretaker Federal Minister of Energy, highlighted the probability of increased gas shortage in the industrial sector in the winter despite the government’s earnest efforts to address the challenge. He stated, “The country only has two LNG terminals, which are insufficient to provide round-the-clock gas supply.” Even if these two terminals operate at their maximum capacity, they would not be able to fully meet the winter demand.
The limited supply of gas has had a detrimental impact on industries such as textiles, ceramics, gas, and steel, which are heavily reliant on a consistency of supply to sustain their production capabilities, meet delivery deadlines, and manage the cost of production. Apart from diminished industrial capacities, the unavailability of gas has a ripple effect throughout the entire supply chain. For example, on 23 May, 2023, the All Pakistan Textile Mills Association (APTMA) announced that the textile industry is compelled to halt its production due to disruption in gas supply and low gas pressure. This has wreaked havoc on the export-oriented textile industry, resulting in the closing down of numerous factories and a significant decline in large-scale manufacturing. According to APTMA’s Chairman Zahid Mazhar, textile exports have declined by more than 14 percent between July 2022 and April 2023 compared to the same period in the previous year.
Furthermore, Ismail Suttar, the President of the Lasbela Chamber of Commerce and Industry (LCCI), stated given that since Sindh and Baluchistan jointly produce almost 80 percent of the country’s natural gas, they must not be denied their right as guaranteed under Article 158 of the Constitution. He urged prioritising gas allocation for their needs first, with any surplus going to other provinces. The interruption of gas supplies to industries in Sindh, which accounts for 52 percent of the total Pakistan’s exports, is causing colossal losses in terms of foreign exchange and revenue.
The situation worsened with the announcement of a significant increase in gas tariffs, potentially reaching 193 percent for various sectors of the economy and households. This is likely to further increase the already elevated inflation levels to 24.5 percent in the current fiscal year, as industrialists are anticipated to raise their product prices to transfer the burden of increased costs to the end-consumers. Described as “historical increase,” a rise in gas tariffs would significantly threaten the sustainability of the industrial sector, rendering product manufacturing economically unviable, particularly for small and medium-sized enterprises (SMEs). A halt in industrial activities could have disastrous consequences for employment, which Pakistan is ill-equipped to handle. The government’s imposition of capacity charges on industries adds a financial burden, hindering their global competitiveness.
The gas crises in Pakistan demands immediate government action. At a minimum, swift measures must be put in place to install new gas infrastructure, provide greater incentives to upstream industry, and open the gas sector to private investment. Abolishing gas subsidies and promoting private sector engagement in LNG trade would establish a sustainable and competitive landscape for the LNG industry, which, in turn, would stimulate investment and secure a dependable gas supply across multiple sectors.
However, increasing the gas volumes alone would not solve the country’s sectoral problems; Pakistan also needs storage facilities and extended pipeline networks. Moreover, the gas supply base must be diversified to promote trade in the gas sector, which would eventually increase supply and reduce the burden on the government. Last but not the least, it is essential to reduce distribution losses for the Sui Southern Gas Company by drawing in additional investments in distribution and transmission systems.
Pakistan’s gas sector confronts a spectrum of systematic and operational challenges, but at the same time it also presents significant opportunities for investment and returns. It is important for the government to exhibit robust dedication and formulate policies and framework that are appealing, transparent and reliable. Only through collective efforts and decisive policies can Pakistan surmount its gas shortage issues and lay the foundation for a more sustainable and energy-secure future.
