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coronavirus
Coronavirus
VERY HIGH
Source: covid.gov.pk
Pakistan Deaths
29,037
824hr
Pakistan Cases
1,338,993
5,47224hr
Sindh
509,308
Punjab
455,499
Balochistan
33,744
Islamabad
112,557
KPK
182,619

Since the beginning of the last few decades, LNG has become an extremely popular source of energy and many countries irrespective of their economic prosperity, they all have been converting their oil and coal-based power generations to LNG.

The main drivers for the popularity and the shift have been due to its lower price and as a cleaner source of energy against the other two fossil fuels, namely oil and coal. Now, with the global warming concerns due to planet’s rising temperature, and frequent extreme weather conditions occurrences, general public is getting overly sensitive about these changes. Additionally, with the rise in pollution in every major city of the world, chronic diseases like asthma and respiratory illnesses are on the rise.

The situation is demanding actions by the health officials, environmentalists, activists, and the citizens of every country. This fast-moving climate catastrophe has created global sensitivity and determination for reducing the carbon footprint by every nation to stop further deterioration of the climate change by taking all viable measures on every level of society.

With the conclusion of the COP26 conference last November in Edinburgh, Glasgow, all participants of the conference pledged to do their part in stopping the global warming by reducing the use of the fossil fuels by replacing them with the renewables (solar, wind, hydro, nuclear, etc.). Since this goal cannot be accomplished overnight due to large investments requirements for building the renewables sources and their infrastructures ground up, it made more sense to go through a transitory fuel, like the LNG that is significantly cleaner, cheaper and can be easily used in the existing infrastructure in many countries.

In the past, natural gas used to be flared that was found during the oil exploration and refining processes of the crude. But later, during the quest for discovering new oil fields and instead stumbling on vast amount of gas reserves and realizing its value, the entire landscape of the fossil fuels changed. With the advancement of technology to harness it and to convert it as fuel and downstream building blocks started to monetize it.

This shift in the paradigm opened up new opportunities for the natural gas. With the buildup of pipeline infrastructure for its transportation and commercialization of its liquification process, storage, and regasification, it became another energy commodity, like the oil, which can be transported from its source to far flung destinations safely and economically. This opened up new and lucrative market for the LNG and with its upfront advantage of being a cleaner fuel than oil and coal, its growth continued and outpaced the capacity.

Australia, Russia and the GCC became the major players of this new commodity. Continued addition of the new capacities brought the LNG prices down that made it the most favored fuel for the power generation, industrial activities, chemical downstream manufacturing, transportation and for heating and cooking by the households. This was the beginning of the floodgate of applications that all happened in just during the last decade.

While this transformation was taking place globally, quietly the USA was going through its own revolution, called the “shale-gas” revolution. By using the unique horizontal drilling, the USA became the lowest cost producer of oil and gas. This changed the entire balance of the energy supply chain.

As a result, the USA not only became self-sufficient for its energy needs but also a major player in the global energy supply. As a matter of fact, in just a few years after the “shale-gas/oil” revolution, the USA became a net exporter of Oil & Gas more competitively than the established players. And this created a new momentum in the global economy and the world started riding on its full speed with all of its cylinders roaring!

However, with the Covid-19 pandemic, the global economy nosedived, and like its cousin oil and coal, LNG demand also plummeted. Under these circumstances, energy prices collapsed and fell through the bottom (first time in history reached the negative territory) that forced to reduce the production of all type of fuels.

These conditions pushed drastic reductions in investments for new explorations and capacity additions and forced shutdown of oil & gas wells that were not cost competitive. This led to large layoffs of all types of the energy sector employees. Houston, Texas, as the global capital of energy, recorded about half million of energy sector employees layoffs in a single quarter.

But about a year later, by following the WHO (World Health Organization) directives, the economic recovery started globally. As the global recovery was rolling out, fossil fuels’ limited supply became major concerns for the recovery’s sustainability. Additionally, as the winter in Europe started settling, energy supplies did not keep up with its seasonal demand and as such prices shot up to unprecedented, elevated levels.

On the top of it, logistical challenges for the fuels’ deliveries created further bottlenecks, particularly for the LNG supplies. Due to the USA imposed economic sanctions on Iran, Russia and Venezuela, their energy volumes were not accessible in the international markets, and it was felt globally. If that volume would have been available in the market, the prevailing extremely dire conditions could have been avoided.

Pakistan having a lack of vision for its “energy security” became very discernible during its economic recovery period. And, in the absence of coordination within its procurement agencies Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) for the LNG supply created situations that were unmanageable by its inexperienced staff. Because of the mismanagement and chaotic actions, Pakistan had to buy its needed LNG volume at exorbitant price levels that could have been easily avoided if its policymakers and procurement agencies had been working in a coordinated manner.

(To be continued on Monday)

(The writer is Executive Director, Polykemya International)

Copyright Business Recorder, 2022

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