Pakistan’s gas crisis is often described as a shortage problem. It is not. The country has pipelines, LNG terminals, private-sector expertise, industrial demand and regulatory institutions. What it lacks is a functioning gas market.
Pakistan once possessed one of the most successful gas sectors in the developing world. Domestic production expanded steadily and indigenous gas powered industrial growth. Today, the sector is burdened with liabilities exceeding Rs 3.5 trillion, domestic production is declining, exploration activity has weakened and consumers face shortages despite substantial infrastructure investment.
The deterioration is not merely geological. It is largely institutional. For years, exploration and production companies were not paid on time. Receivables accumulated. Pricing signals were distorted. Contractual commitments were frequently delayed or modified. The result was predictable: investment slowed, exploration activity weakened, reserves replacement declined and domestic production suffered. Pakistan’s gas shortage is therefore not simply the result of depleted reservoirs; it is also the result of policies that discouraged the very investment needed to discover and develop new resources.
Instead of creating competitive markets capable of attracting capital, successive governments expanded administrative controls. Instead of encouraging competition, they relied on allocation. Instead of transparent pricing, they preferred cross-subsidies. Instead of rewarding efficiency, they often protected incumbents.
Consider LNG. Pakistan invested billions of dollars in LNG import infrastructure. The terminals are internationally competitive and technically successful. Yet rather than becoming gateways for competition, they have largely been confined within a centrally managed system. In most countries LNG terminals are commercial platforms where multiple suppliers compete for customers. Pakistan built the infrastructure but never allowed the market to emerge.
The same problem affects the broader gas sector. Transportation, distribution and commodity supply remain bundled together. The companies that own pipelines are also suppliers. Potential competitors face uncertainty regarding access, pricing and regulatory treatment.
The electricity sector, despite its many flaws, has at least begun moving toward competition through CTBCM. The gas sector requires precisely the same evolution. Pipelines should transport gas regardless of ownership. Suppliers should compete for customers. Consumers should be able to choose suppliers. Transportation charges should be transparent and non-discriminatory.
A major obstacle remains the persistent belief that government control is a substitute for markets. The consequences are visible in rising circular debt, high unaccounted-for-gas losses, declining exploration investment, underutilised LNG infrastructure and weakening industrial competitiveness.
The irony is that many of the shortages now cited to justify intervention were themselves created by intervention. When producers are not paid, investment falls. When prices are distorted, resources are misallocated. When contracts become uncertain, capital leaves. The resulting decline in domestic production is then used as justification for even more administrative control, creating a vicious cycle.
Pakistan’s LNG terminals should be permitted to import and sell directly to customers. Genuine third-party pipeline access should be introduced. Transportation should be separated from commodity sales. SNGPL and SSGC should ultimately evolve into network operators rather than protected merchant monopolies. Competitive balancing arrangements and market-based pricing should become the norm.
Investors do not commit capital because governments announce reforms. They commit capital when they believe those reforms will endure. Predictability matters. Contractual certainty matters. Competitive neutrality matters.
The country already possesses most of the physical infrastructure needed for a competitive gas market. What remains missing is the willingness to trust markets more than administrative controls.
Pakistan’s gas crisis is therefore not fundamentally a resource problem. It is a governance problem. Until that reality is recognised, the country will continue investing in infrastructure while neglecting the markets needed to make that infrastructure productive.
Copyright Business Recorder, 2026