Last week, “RLNG -The Great Debate’ on a private news channel took place between Nadeem Baber and Shahid Khaqan Abbasi. On political point scoring, Nadeem Babar emerged the clear winner but beyond politics, the real debate on RLNG (or more broadly on the petroleum sector) never took place.
This space has repeatedly argued that there is no solid argument on the RLNG pricing on spot cargos and it is more of a waste of time. The questions should have revolved around the 2.5 years that have passed and another 2.5 years that await us. Whether Nadeem Babar has been able to walk the talk should have been the debate.
The petroleum ministry domain spans from Exploration and Production (E&P) of oil and gas to oil refineries to oil marketing companies (OMC) and gas marketing companies (SSGC and SNGPL). RLNG is a fraction of the portfolio, and the debate should be on the performance of the complete value chain.
In E&P, questioned need to be asked on how many new blocks have been made available. How much improvement is in there on the existing blocks production? Unfortunately, the numbers are depicting that the production is on a decline. In this regime, 240 mmcfd gas is being added from 24 small discoveries in the existing fields (till August 2020); but higher amount is being depleted. New blocks’ auctions are still awaited.
The crude oil produced at home and the imported part goes to domestic refineries to convert in petrol, diesel and other usable fuels. Furnace Oil (FO) is a by-product in the process, as virtually all the refineries at home are of age-old technology (hydro-skimming) and have to produce FO. The consumption on FO is on decline with better fuel (RLNG and coal) power plants are coming online. The global use of FO is diminishing after IMO2020. Refineries are to be upgraded to produce other useable fuel/products to replace FO. The talks on refineries upgradation are in third winter seasons. In December 2019, Babar categorically said that government will stop buying white oil from refineries if they don’t give a viable plan to upgrade in 4 months. For details read “Refineries do or die”. Where are the plans to upgrade?
The refined white oil goes to the OMC sector for distribution and retailing. There is lack of storage in it. The oil crisis this summer emerged due to the lack of storage. How much new storage is built in the past 2.5 years and what are the plans for the remaining? Oil is mostly transported through trucks on roads in Pakistan. It’s not safe – there was an accident killing many people in the recent past. What is the progress on oil pipeline development? There are issues on Oil Piers at KTP to handle imported petroleum products – what is being done to resolve these?
In the gas sector, production at home (and imported RLNG) is distributed in the country through SSGC and SNGPL networks. There was circular debt on it when this government came and the debt (other receivables) of SNGPL has increased from Rs122 billion in June 2018 to Rs297 billion in March 2020, and is growing. What has been done to curb this increase?
On RLNG, enough has already been said. The real issue is of under-ground storage and pipeline laying, imperative for new terminals as well as expansion of the existing. The work is in progress as PM office is involved and the issue is being hyped up. Someone in media needs to bring the other issues in the petroleum value chain in the limelight to make PM office notice it too.