Gas provision has become one of the most hotly contested topics between the provincial and federal governments. Punjab’s industry has been forced to procure R-LNG for its operations, which is almost double the cost of system-based natural gas due to a shortage of the latter.
This shortage will only get worse in the times to come. According to the Oil and Gas Regulatory Authority’s recently released state of industry report, the shortfall will reach almost 4000 mmcfd by FY19-20 and the gap will reach almost 6,611mmcfd without imported gas by FY2029-30.
With these statistics in mind, it seems the push by the federal government to reportedly award almost 1 million new domestic gas connections seems to be nothing short of a populist measure come election time. As of the end of FY17, the consumer base of both SSGCL and SNGPL stood at almost 8.5 million consumers out of which the majority are domestic consumers.
This task is an exercise in futility at best. The main question is even if these connections are awarded and the pipelines laid down, where will the gas come from? Most energy experts believe the share of RLNG will steadily increase. The government’s main motive for importing RLNG was to cater to the power sector; specifically, the three RLNG power plants it has set up to try to end load-shedding.
On the other hand, the industry in Punjab has aped up its complaints when it comes to the provision of more expensive RLNG for its more operations. Yet, setting up a weighted average cost for determination of RLNG is remains elusive because of political realities in light of the 18th Amendment.
Barring proper pricing for RLNG and the continued decrease in system-based natural gas, even if the gas connections are awarded, domestic consumers will be unwilling to buy more expensive RLNG. Moreover, as far as subsidies go, the federal government does not have the fiscal room available anymore to placate future domestic gas consumers.
Another aspect that needs to be considered is the cost of laying pipelines to cover isolated locations. Both the SSGC and SNGPL face rampant UFG losses, which will only exacerbate further if the existing pipeline infrastructure is extended without addressing the underlying causes behind the high rate of unaccounted for gas.
Unless parity is achieved in gas pricing and UFG losses brought down to internationally acceptable limits, awarding more domestic gas connections will only result in losses to the national exchequer and should be discouraged by policy-making quarters.