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Addressing the gas shortage to spur economic growth

Four regional countries, namely Turkmenistan, Afghanistan, Pakistan and India along with the Asian Development Bank (ADB) took a historic step recently-when they finally inked an agreement on 11th December, 2010 for implementing the long-waited Tapi gas project of over $7.6 billion, to help the gas deficit countries of the region, including Pakistan to overcome their difficulties. Pakistan is in dire need to meet its galloping gas shortages as early as possible. Pakistanis are now the major consumers of this natural fuel. Vast majority of city dwellers are directly dependent on natural gas for its multiple uses, ranging from kitchen burners, gas heater, geysers and for running the increasing number of vehicles with compressed natural gas (CNG) cylinders.  On the other hand, the countryís industrial establishments are also critically dependent on the un-interrupted supply of gas.  In 2008-09, share of gas consumption stood at 43.7 per cent in the total energy mix of the country, followed by oil (29 per cent), electricity (15.3 per cent) and coal (10 per cent).  The share of gas in the energy mix has been increasing very sharply. From 2004 to 2009 the consumption of gas in the total energy mix has jumped by 9 percentage point.  The demand for natural gas has surged by almost 10 per cent annually from 2000-01 to 2007-08, reaching around 3,200 mmcfd, against the total production of about 3,000 mmcfd, according to the Ministry of Petroleum.  During 2008ó09, the demand exceeded the available supply, with production of 4,528 mmcfd against a demand for 4,731 mmcfd, indicating a shortfall of 203 mmcfd. 

The consumption of gas by the industrial sector has also witnessed a significant rise over the years.  For example, during 2009-10 industries consumption of gas swelled by 5.3 per cent mainly due to an increase in domestic demand for manufacturing production.  On the other hand, there are a number of areas and sectors including the vast rural areas, manufacturing, transport and communication sectors where gas demand remains unmet due to supply shortages.

Many gas-dependant manufacturing units are on the verge of a shutdown due to its deficiency.  The textile millers in various cities of Punjab have given seven days to the federal government to restore gas supply to their units, which has been suspended, jeopardising the monthly $800 million textile exports target in Punjab alone. All Pakistan Textile Mills Association (APTMA) Chairman of the Punjab Chapter, Ejaz Gohar has recently said that about 13,000 industrial units in Punjab have been closed down due to cut in gas supply.  The badly affected industries are textiles, ready-made garments and food manufacturing.  Meanwhile, the CNG sector, has assumed unprecedented importance in the country due to rapid transformation from petrol-based to gas-based running of private and commercial vehicles.  Frequent closure of CNG stations is only escalating hardships of the people.  The people are also facing rising transportation costs due to rise in CNG charges.  Sui Southern Gas Company (SSGC) has also decided to suspend gas supplies to the CNG stations in areas of Sindh and Balochistan for two days in a week, in a bid to cope with soaring gas demand.  This would aggravate problems for the people of those areas.  The supply constraints of various other energy components are also responsible for gas load shedding and price hike in the country. 

Consumption of gas by various sectors is given in the table below:-

Interrupted gas supply to the domestic and industrial consumers and refueling stations has now become a burning issue in Pakistan.  The country is facing gas supply cuts due to a widening supply-demand gap.  It is being apprehended that the crisis will worsen in the next few years with the gas shortfall likely to double to more than two bcfd.  The gap between demand and supply presently stands at around one bcfd which would go up to 2.1 bcfd by next year.  The shortfalls would enhance by more than 300 per cent to 6.5 bcfd by 2020.

Sky-rocketing costs of electricity and gas were already creating massive inflationary pressures in the country, putting extra burden on the poor consumers and the economy, at large.  Rapid increase in power and gas tariffs has also raised the cost of doing business and consequently, a number of small and medium sized units are on the verge of closure.  Business community wants the government to extend support to industries, especially the textile value-added sector in the form of lower utility and capital costs.

According to a reliable report Pakistanís natural gas production is estimated to level off by 2011 and in 2030 more than 70 per cent of domestic demand for natural gas will have to be met through imports or new discovery.  To meet the demands of natural gas several options were under consideration by Pakistan; including pipeline projects from Iran and Turkmenistan to ensure cheap gas supply to domestic consumers.  The government was also considering importing liquefied natural gas (LNG) from countries like Qatar and Australia.  Natural gas remains a major asset for Pakistan.  According to the World Fact Book, Pakistan had proven natural gas reserves of 0.89 trillion cubic meters in 2009, with the major gas-production fields being Sui in Balochistan, Mari and Kadirput in Sindh.  But this modest reserve is not enough to meet the growing demands of the country in the near future.

Timely completion of Tapi pipeline and flow of natural gas through this pipeline to the energy deficit Pakistan is a feasible option.  Construction of the pipeline is likely to commence soon and may be completed by 2013-14.  The project would help overcome Pakistanís growing energy crisis that is causing widespread resentment and protests across the country.

Pakistan and Iran have also signed a gas sales purchase agreement, which binds both the countries to meet certain targets for realisation of the project.  Pakistan will import 750 mmcfd of gas from Iran.  Iran has reportedly started construction work on the proposed pipeline in its territory but in Pakistan a take-off in construction activities is still awaited.  Both the pipeline projects are essential to meet the energy demands of the country.  Pakistan is already spending about $10 billion per annum to import costly oil.  The gas pipeline projects will surely provide a much cheaper alternative.  Cheap and abundant energy will help the country in achieving rapid economic growth.  However, for versatile and diversified supply of energy, the country should concurrently develop indigenous sources of energy, for which it has limitless potential.

Consumption of gas in Pakistan

(Billion cft)

Year          Household          commercial          Cement          Fertilizer       Power          Industrial          Transport

2007-08          204.0          33.9          12.7          200.1          429.8          322.6          72,018

2008-09          214.1          35.5          07.3          201.1          404.1          319.0          88,236

2009-10          184.5          28.6          01.7          162.5          264.8          246.1          71,225 *

* July-March 

Source: Pakistan Economic Survey 

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