A gas crisis in Punjab in winters doesn’t sound unfamiliar; a gas crisis in Sindh and parts of Balochistan does, especially when the provinces enjoy the first right of use under the Constitution. However, the domino effect of gas crisis starting with industries shutting down – to the transport sector to the domestic residential sector has been witnessed in Sindh, especially Karachi.
Industrial zones like SITE, Port Qasim and Korangi have been affected, while public transport, which continues to be vastly on CNG in Sindh, has come to a halt due to the closure of CNG stations as gas is suspended to them. Stakeholders and businessmen are not in favour of RLNG as an alternative option as it will increase their cost of production for obvious reasons of imported gas being expensive. (RLNG is being used in Punjab)
After the first bout of gas shortage in Karachi and the rest of Sindh, the Prime Minister dismissed the heads of the two state owned gas distribution companies – SSGC and SNGPL after the report on the inquiry he ordered. Now a second spell of gas shortage has erupted. Reasons like dropping of mercury levels aggravating demand make sense especially as Karachi experiences a harsh
winter by its standards, which has reportedly created an additional demand of 50-100 mmcfd of gas.
On the production front, things are not very bright for gas. Local gas reserves are on a decline; key fields are maturing, and many of the new finds are either too small, or too expensive or not commercially viable.
But this is not a recent phenomenon. The recent decline in gas supply could also be inked to the clamp-down on furnace oil, where cracks started appearing in the upstream oil and gas sector. (Read: FO saga – the beginning of the domino effect, published on December 1, 2018) Decline in furnace oil demand and hence a decline in crude oil production partly leads to a decline in natural gas production as well as not all fields in the country are solely gas-based. This adds to the already low gas supply in the country.
Apart from proactive demand forecasting and load management, what is needed however, are reforms in the E&P as well as gas distribution sectors. In the upstream sector, drilling activity needs to increase along with clear-cut policies to improve the investment and the regulatory environment. On the distribution side, heavy losses and wastage, lac of professionals and on the pricing side, subsidised prices for a commodity that is already scarce are two key areas that need to be fixed.
The government has taken steps to rationalise prices of gas and electricity since it has come into power, but there is still room; the IMF wants more, but will the government to incur the social cost of further increasing prices is another story (read the recent 143 percent hike in gas tariffs). However, plugging the leakages in the distribution sides still remains unaddressed.
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