EDITORIAL: Addressing a seminar on "Sustainability, Security and Affordability of Natural Gas Supply in Pakistan" the prime minister, Imran Khan, said: "I see a severe gas crisis in the country during the coming winter that will become worse in the next year". Earlier, the federal minister for energy Omar Ayub and Special Assistant to the prime minister (SAPM) on Petroleum had also warned about massive load shedding as all provinces will be facing gas shortage. The reason for the impending crisis is that gas production in Pakistan is falling at a rate of 9 percent per annum and while existing reserves are falling new discoveries are far and few in between.
In the past few years, imported RLNG has been added to the system to bridge the gap, particularly in the Punjab, which has historically been woefully deficient in gas. Since the imported gas because of the additional cost on account of freight and the process of degasification, decanting and gasification is expensive, the other provinces that produce more than their needs are not ready to bear high cost in the mix.
Historically, these provinces have had excess supply and have been providing gas to Punjab where consumption is the highest and production close to nil. There was no constitutional provisioning of the first right on gas to the producing province; still Punjab used to have higher load shedding in winters. The reason was that gas production in the country was not enough to meet peak demand.
After the passage of 18th Amendment, the gas producing provinces have the first right to consume gas with the proviso that gas allocations at the time of the 18th Amendment shall remain protected. In other words, the province of Punjab is assured of supplies that it was receiving until the passage of amendment in the constitution. However, with the passage of time and absence of any new substantial discovery or increase in gas production, the increase in domestic consumption of gas had exacerbated the demand and supply gap. Time is not far when other provinces too will become gas deficient and face load-shedding.
Sindh with around 70 percent of gas production can face load-shedding in the next 12-18 months. It makes sense for Sindh to have an adequate mix of RLNG in the supply. For that to happen, pricing is a major road block. Sindh does not want to have a countrywide weighted average price and may agree to a higher price for the portion of imported gas. The federal government at times wishes to revisit certain clauses in 18th amendment to counter it. Here, politics comes into play and it has started creating an impediment to any potential agreement. The technocrats need to understand polity in the country and try to avoid using such terms or arguments where spoilers can play politics. Since 18th amendment talks about the right of gas (mineral) but not pricing, there is no real issue. Political parties usually resolve such resource-based issues through give and take. The federal government has to think on 'give and take' philosophy to reach an amicable solution.
Business Recorder has never supported the uniform price strategy across the country. Back in the 1960s, petrol prices in South were cheaper than the North as there were freight charges associated with carrying products. Then, in the 1960s, a uniform pricing mechanism was introduced through the mechanism of 'freight adjustment surcharge' in the pricing policy for POL products. This step led to giving birth to corruption in the segment. It created another problem that continues to exist. The issue in electricity is similar. Why the better performing discos in Punjab (LESCO, FESCO, etc.) have to share losses with other three provinces. There should be no incentive for poor performers to improve.
Debating an issue is a healthy exercise, but endless debates without engaging with the stakeholders in a spirit of 'give and take' is often an unproductive and frustrating exercise in futility. While the 18th constitutional amendment confers the priority for use on the gas producing province but the gas pricing and regulation of the sector remains the exclusive domain of the federal government. Offering representation, the provinces on the board of the gas regulator, Oil and Gas Regulatory Authority (Ogra), and issuance of exploration concessions, that the provinces have been clamouring for, would be a suitable point to commence negotiations with provinces in earnest to resolve this fast building crisis in the gas sector.
Copyright Business Recorder, 2020