The much-discussed 17-kilometer gas pipeline in Sindh became operational the other day, after the Sindh government permitted in late October. The Special Assistant to Prime Minister on Petroleum wasted no time in laying the facts bare that the delay was on part of the Sindh government and had the pipeline been allowed earlier, Pakistan may well have made room for additional gas in the ongoing winters.
Speaking at a press conference, he also touched upon the much talked about delays in construction of additional LNG terminals. Recall that of late, a lot of criticism has been directed at the government’s inability to have more LNG terminals in place. What has largely gone missing from the discourse is the demand side of affairs, which was rightly brought in light by Nadeem Babar.
The idea that more terminals would solve all the gas crisis that comes every other winter, is misplaced. That is because the extent of crisis is grossly overstated, for politicking and saucy media headlines. The gas demand obviously peaks in December and January as temperatures go down. There is some shortage for a brief period, for various consumer categories.
Recall that domestic sector remains number one on the distribution priority list, and that is part of the larger problem, as inadequate pricing for domestic gas using cross subsidy makes gas pricier for other more efficient users. But that can be left for some other day. The demand in the system surpasses supply for a very brief period, and load management for sectors such as captive power and transport makes good sense.
Just having an added terminal, assuming the transmission and distribution network is also put in place simultaneously, would surely ensure more gas can be transported, and everybody would have gas even in winters. That seems an overly simplistic approach, because building terminals is a costly affair and one where the government will do well to stay away from.
There is no fun in having a terminal in place, which sits idle for 10 of the 12 months, and the government keeps paying the capacity charges. It is understandable that the first terminal needed sovereign guarantees as Pakistan was trying to establish the LNG market, and needed assurances. But in a much-developed market, it only makes sense for the terminals to be built and operated by the private players. In the absence of blending of LNG price with that of indigenous gas, it will anyways be a disastrous idea to commit to another terminal on the state level. How much is the unconstrained demand is the questions that now needs to be asked, and the decisions should be taken accordingly.
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