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EDITORIAL: Oil and Gas Regulatory Authority (Ogra) is reportedly coming under increasing pressure to allow millions of new connections in spite of gas shortages, rising reliance on imports due to the natural rise in demand as well as no new domestic gas field discovery, and the rise in the gas sector circular debt reflective of poor management of the sector.

Soon after Imran Khan took oath as the country’s prime minister, he set up more than 25 task forces comprising sector experts to identify the issues facing these sectors/subsectors and to provide recommendations to deal with bottlenecks with the objective of improving performance. A task force on energy was formed to propose immediate, medium- and long-term policy interventions with the aim of providing indigenous, affordable and sustainable energy for all.

It was noted that the country’s dependence on natural gas declined to 34.6 percent in 2018, against over 50.4 percent in 2006, due to: (i) declining natural gas; (ii) restricting gas consumption in transport; and (iii) induction of imported LNG whose share rose to 8.7 percent in 2018, against 0.7 percent in 2015. This trend has continued and nearly two years later, the Development Plan for Pakistan: Oil and Gas Industry 2020 was prepared that is designed to “balance the demand and supply over the long-term” intended to “guide the Oil and Gas working sub group of the Energy Working Group of the China Pakistan Economic Corridor in finalizing plans to develop the oil and gas industry through participation of all parties, for the country’s energy security.”

Disturbingly, the recommendations of the Development Plan were no different from what previous studies had proposed, including enabling appropriate oil and gas projects recovery and foreign exchange protection policies, promoting foreign investment with or without joint ventures with public or private entities, encourage foreign oil and gas companies to invest in this sector through “friendly policies”, pursue development of oil and gas infrastructure (new refineries, upgrading of existing refineries, above ground strategic oil storages, construction of additional LNG terminals and facilitate Thar coal to liquid project) and encourage Exploration and Production (E&P) activities by offering blocks through competitive bidding or through direct negotiations on G2G basis. The Ministry of Energy’s website indicates no gas sector project in the Public Sector Development Programme or any E&P activities, though mid-April 2021 the then minister for energy Omar Ayub stated that the “onset of E&P activities would help to expand oil and gas business, create job opportunities in the country as well as possible decrease in import bill.”

To add to the woes of this sector, the government failed to learn a valuable lesson from last year’s delay in procuring LNG that led to severe shortages in the country in summer, the first in our history, a season when demand is considerably less, as well as a higher import bill due to the subsequent rise in the price of the commodity. In the week ending 29 July 2021 this mistake was repeated and Bloomberg noted that “Pakistan LNG this week bought four cargoes for September delivery at around 15 dollars per million British thermal units, the highest since the nation began imports in 2015…the importer scrapped a tender for September cargoes that closed earlier this month in a gamble that prices would fall.” This would imply that power generation would be more expensive and be a drain on the budget.

In the context of severely flawed and delayed decisions coupled with the annual rise in demand necessitating rising imports, fuelled further by no success in making E&P activities attractive, political considerations to give gas connections have begun to weigh in as the 2023 scheduled elections loom large on the horizon. There is of course no economic justification for expanding the supply network; however, that has not stopped our politicians from putting pressure on the supply chain in the past; it is quite likely that supply chain will come under only increased political pressure in view of the 2023 general elections.

Copyright Business Recorder, 2021


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