Pakistan, endowed with substantial natural gas reserves, has long relied on this critical resource as the cornerstone of its energy sector. However, the country now faces a dire situation as declining production, inefficient planning, and mounting economic pressures exacerbate its energy crisis. To navigate these challenges effectively, Pakistan must reassess 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.
Financial Strains and the Energy Crisis in Pakistan
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 honour 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.
Addressing Pakistan’s Gas Crisis: A Focus on Local Production and Pricing Reforms
The solution to Pakistan’s gas crisis lies in a multi-faceted approach, primarily focused on pricing reforms and incentives for local production. Recently, gas prices were raised significantly, a measure aimed at promoting cautious consumption. Historically, low gas prices led to wastage, with up to 30% of gas being consumed for CNG—often in luxury vehicles—rather than essential needs. By increasing the cost, the goal is to encourage more judicious use of this valuable resource.
Equally important, Pakistan must prioritize indigenous gas production over expensive imports. Currently, the country pays exorbitant rates for imported LNG while underpaying local companies at just $5 per unit. By increasing this rate to $10, local companies could generate substantial economic activity, with $2.5 of every $5 reinvested into Pakistan’s economy through royalties, taxes, and job creation. This recycling effect would stimulate domestic growth while reducing reliance on foreign energy sources.
Additionally, the infrastructure developed over the past two decades has sufficient capacity to support increased local production. Enhanced exploration and development of untapped reserves could quickly bridge the supply-demand gap. Oil and gas activities have a far-reaching economic impact, from corporate operations to end-user consumption, making local production an economically viable and sustainable strategy.
Securing Pakistan’s Energy Future: A Collaborative Path to Sustainability
Pakistan’s gas dilemma is a complex challenge requiring immediate attention and decisive action. While the country has historically benefited from its abundant natural gas resources, years of mismanagement and over-dependence have led to a precarious situation. By increasing indigenous exploration, incentivizing local production, and adopting sustainable policies, Pakistan can mitigate its energy crisis and secure a stable future. For policymakers and industry leaders, the path forward demands collaboration, innovation, and a commitment to long-term resilience.
Our company is uniquely positioned to assist in this transformation, offering expertise in exploration, production optimization, and sustainable energy solutions. With cutting-edge technology and a deep understanding of Pakistan’s resource landscape, we are committed to supporting the country in achieving energy security.
