January issue 2019

After the Pakistan People’s Party-led government in Sindh threatened to halt the gas supply to other provinces and launch a protest movement over what it termed a “step-motherly” attitude towards it by the centre, Islamabad resumed the gas supply in the province.

The gas supply had been suspended for almost a week in Sindh, leading to closure of CNG stations and other related industries. Domestic consumers as well as small factories bore the brunt, with the PPP reminding other provinces that Sindh accounted for at least 71 per cent of national gas production. The Sindh government maintains that Karachi has suffered on the energy front owing to the federal government’s incompetence.

Petroleum Minister Ghulam Sarwar Khan rules out that the gas crisis had been created, saying it had occurred due to some technical fault. During his emergency visit to Karachi, Khan promised that the industries all over Sindh would receive 50 per cent of the supply.

The Sui Southern Gas Company (SSGC) had stopped gas supply to the CNG sector after reiterating that it had not been receiving the requisite pressure and amount of gas for distribution due to a technical fault at some gas fields.

As a result, cities across the province – including the capital of Karachi – suffered a serious transport crisis because a majority of the public transport vehicles stayed off the roads due to non-availability of gas at CNG stations. 

Public transport owners charged hefty fares citing CNG closure, saying it was “impossible” to bring vehicles on the roads after the SSGC had said that the situation was unlikely to change in the near future. In Lahore and Faisalabad, industries had their gas supply suspended for about 30 hours. 

Prime Minister Imran Khan was told that management of two gas companies – SSGC and SNGPL – was responsible for the impending gas crisis. The companies had their respective boards of directors (BoDs) dissolved. A four-member committee, headed by Oil and Gas Regulatory Authority (OGRA) chairperson Uzma Adil Khan, was constituted to conduct an inquiry into the matter. 

According to official data, a 3.65 percent plunge in economic growth has been witnessed between 2006 and 2015 owing to gas outages. The said decade saw a 0.29 percent decrease in consumption. The numbers are expected to get worse, with gas shortfall set to reach around four billion cubic feet per day (bcfd) by 2020 and 8.5 bcfd by 2030.

Meanwhile, the state’s first policy for liquefied natural gas (LNG) – believed to be the solution to the aggravating gas crisis – was passed in 2005 and then revised in 2011. And yet, question marks remain over LNG import. In August 2013, the Economic Coordination Committee approved the first ever LNG terminal project.

SSGC says that it is getting 1,200 million cubic feet of gas per day from gas fields as opposed to 1,280 million at this time last year due to natural depletion of indigenous gas reserves. This is the problem at its core. Pakistan is running out of gas and successive governments have not developed any alternatives.

Petroleum Minister Ghulam Sarwar Khan

Fingers have been pointed towards the government’s decision to bar Pakistan LNG Limited (PLL) from importing additional cargoes. The reason cited was the government’s plan to renegotiate agreements for the two LNG import terminals with Engro Corp, which Petroleum Minister Ghulam Sarwar Khan maintains the previous government “agreed to pay too much” for.  

During his visit to Doha in December, Finance Minister Asad Umar said that Pakistan is looking to source more LNG from Qatar, with three terminals being planned under Shell, ExxonMobil and Mitsubishi, in a bid to increase gas import.

As the government shares its plans for the future, the All Pakistan CNG Association Chairman Ghayas Paracha believes it hasn’t been entirely transparent about the recent past and is yet to share the actual causes behind the gas crisis.

“One doesn’t know the inside story, but the government must have erred somewhere. We have winter every year, but never have we seen Sindh – which has so much gas – being completely shut down. The government hasn’t shared the actual facts,” he says.

Paracha doesn’t understand why the LNG shipment was cancelled. “We don’t know why the import of LNG was cancelled, because that had a significant impact on the gas supply. Maybe the government had been sold a wrong idea, which it doesn’t want to confess to, or perhaps it fell victim to a conspiracy. We won’t know until we get the actual facts.”

Senior economic analyst Dr Ikram Ul Haq believes the LNG import was deliberately stopped, hinting at political point-scoring.

“It had been obvious since October that Pakistan was going to face a major gas crisis this winter. The government knows about the gas demand, it should have been aware of the coming shortage, and yet nothing was done to import and fill the gap,” he says, adding, “So it’s obvious that the import was stopped on purpose. What we need is a mechanism in the country and parliamentary committees with the representation of all major parties, which ensure continuity in agreements with foreign countries and companies.”

Paracha also underlines the role of the ‘furnace oil lobby’ in aggravating the crisis. “The furnace oil lobby has been trying to blackmail the government,” he says.

“As per the law, furnace oil is to be extracted less in winters, up to 5 per cent, because less electricity is to be produced. They took it to 30 per cent, which means that their storage was full. As a result, the oil which is extracted alongside gas couldn’t be taken out, which resulted in the closure of fields.”

Ikram Ul Haq calls for consistency in government policies, which shouldn’t be impacted by a change at the helm.

“We’ve had terrible experiences negotiating LNG with Qatar and Rental Power Plants with Turkey. What is needed are consistent economic policies, which is only possible if we develop political maturity – the lack of which is the primary reason behind Pakistan’s major crises.”