Pakistan, endowed with substantial natural gas reserves, has long depended on this critical resource as the backbone of its energy sector. However, the country now faces a grave situation, with declining production, inefficient planning, and mounting economic pressures compounding its energy crisis. To address these challenges effectively, Pakistan must reevaluate its energy policies and adopt a sustainable approach to resource management.
The Origins of Pakistan’s Gas Dependency
The discovery of natural gas in Pakistan dates to 1952, just five years after the country gained independence. This pivotal moment was marked by the discovery of the Sui gas field, which remains one of the largest in the nation’s history. Strategically located in central Pakistan, the Sui gas field enabled the efficient transportation of gas to both northern and southern regions. By 1955, Karachi, the country’s commercial hub, began receiving natural gas, facilitated by the swift installation of processing plants and pipelines.
However, this blessing soon became a double-edged sword. Pakistan’s energy policies shifted dramatically, focusing almost exclusively on natural gas. By the 1970s, approximately 70% of the country’s energy mix relied on gas. While this over-reliance facilitated short-term economic growth, it also created long-term vulnerabilities. As demand surged, additional gas fields were developed, solidifying Pakistan’s identity as a gas-prone nation. With an estimated 61 trillion cubic feet of reserves, natural gas became the backbone of the country’s energy and industrial sectors.
From Growth to Shortfall: The Evolution of Pakistan’s Gas Infrastructure
The early 2000s saw significant infrastructure development in Pakistan’s gas sector. By 2003-2004, production levels rose from 2 billion cubic feet (bcf) per day to 4 bcf, effectively meeting the country’s growing energy demands. These production levels were maintained for over a decade. However, by 2017-2018, a decline in indigenous gas production became evident, with output falling to approximately 2.9 bcf per day in recent years. This decline has created a substantial gap between supply and demand, as the country’s installed capacity requires 5 bcf per day, while population-driven needs hover around 10-12 bcf per day.
The infrastructure, initially designed for 4 bcf per day and later expanded to 5 bcf, has struggled to adapt to the evolving energy landscape. LNG infrastructure, developed over three years, was introduced as a stopgap measure. However, logistical and technical challenges have limited its effectiveness. High-pressure LNG injection into existing pipelines has disrupted the distribution of indigenous gas, further exacerbating the energy crisis.
The Debt Crisis: A Crippling Burden
Pakistan’s energy woes are further aggravated by financial mismanagement. Domestic gas production companies are grappling with severe liquidity issues due to unpaid receivables exceeding 1 trillion PKR. These companies, which rely on timely payments from their contracts, are now struggling to sustain operations. The failure of the government and other stakeholders to honor financial commitments has forced these entities to either reduce production or cease operations altogether.
Additionally, the transition to LNG has imposed a significant financial burden on the country. As indigenous gas supplies decline, Pakistan’s reliance on imported LNG has grown, placing further strain on its foreign exchange reserves. The absence of strategic planning to address depleting gas reserves has left the country in a precarious situation, with households and industries bearing the brunt of frequent gas shortages.
Lessons from Global Examples
The financial strain is not limited to production companies. Pakistan’s reliance on imported LNG—a stopgap measure—has further escalated costs. Comparisons with countries like Iran underscore the need for a shift in strategy. Despite facing international sanctions since 1979, Iran, with the world’s second-largest gas reserves, has prioritized domestic production and adopted a more frugal lifestyle to conserve resources. Pakistan, by contrast, has pursued short-term fixes, such as loans and subsidies, which have only deepened its economic woes.
The Path to Recovery
To address these intertwined crises, Pakistan must implement a comprehensive strategy that balances immediate relief with long-term sustainability:
- Incentivize Indigenous Production: Increasing payments to local companies like PPL and OGDCL can stimulate exploration and production activities. Raising the rate from $5 to $10 per unit could generate significant economic activity, with a portion of this revenue reinvested into the economy through royalties and taxes.
- Reform Financial Practices: Resolving the debt issue requires structural changes, including timely payments to energy companies and streamlined financial accountability. This will restore confidence among stakeholders and ensure the operational continuity of key players.
- Reduce Import Dependency: Expanding local production can reduce reliance on expensive LNG imports, easing the strain on foreign exchange reserves.
- Promote Energy Efficiency: Public awareness campaigns and policies to encourage energy conservation can alleviate pressure on the gas supply. Lifestyle adjustments, such as reduced reliance on luxury vehicles and air conditioning, can also contribute to resource conservation.
- Diversify the Energy Mix: Investing in renewable energy sources, such as solar and wind, can provide a sustainable alternative to natural gas, reducing the long-term demand for fossil fuels.
Conclusion
Pakistan’s gas and debt crises represent a critical juncture for its energy sector and broader economy. Addressing these challenges requires immediate, decisive action and a commitment to sustainable development. By incentivizing local production, reforming financial practices, and promoting energy efficiency, Pakistan can mitigate its current crisis and lay the groundwork for a more resilient energy future. For policymakers and industry leaders, the stakes have never been higher, and the need for collaboration and innovation has never been more urgent.
