KARACHI: Pakistani industries are likely to face a hiatus in production this winter season as an energy crisis looms after the country received no bids for the supply of liquefied natural gas (LNG) cargoes for December and January, industrialists and analysts said on Thursday, amid a surge in gas prices globally.
This week, Pakistan was expecting bids for the supply of eight cargoes for December and January, but it turned out that no supplier submitted any bid, mainly due to high volatility of the LNG market. Without the supplies, the country might face a shortage of 300 to 400 million cubic feet per day (mmcfd) of gas.
The South Asian nation, which started importing LNG just six years ago, remains reluctant to buy gas at higher prices from the international market as the world economy reopens post-COVID-19 vaccination campaigns across the globe.
“It is not feasible for Pakistan to purchase gas at the current high rates from the spot market,” Tahir Abbas, the research director at Arif Habib Limited securities brokerage and investment banking firm, told Arab News.
“In winter, the demand for gas increases manifold and this year, we will have no spot cargoes, which would create an estimated shortfall of 300-400 mmcfd.”
In winters, Pakistan’s demand for gas peaks to around 1,000 mmcfd, mainly from domestic consumers for heating purposes. The demand-and-supply situation is managed through a gas load management plan.
A few industries and the compressed natural gas (CNG) sector fall victims to this shortage, and suffer a partial or complete shutdown. Industrialists fear that gas outages would disrupt production this year.
“It is mismanagement and this happens every year. If you know the demand in winter rises, you must be prepared for that,” said Mian Nasser Hyatt Maggo, the Pakistan Chambers of Commerce and Industry (FPCCI) president.
“This is the government’s responsibility to manage the demand-and-supply situation. The cargoes should have been secured timely; [now] production will suffer and industries will be closed.”
CNG stakeholders said frequent shutdowns and high prices had rendered their business unviable.
“The sales have dropped from 70-72mmcfd to 15-16mmcfd due to the shutdowns and price hike,” Samir Najmul Hussain, the coordinator for All Pakistan CNG Association (APCA) Sindh Zone, told Arab News.
“At the current rate (Rs180 per kilogram), the business is increasingly becoming unviable. If the situation persists, CNG as a fuel would be a thing of the past.”
On Tuesday, Pakistan’s Energy Minister Hammad Azhar assured of uninterrupted gas supply to the power, export and fertilizer sectors as well as domestic consumers under the load management plan, according to a statement issued by his ministry.
Pakistan meets 70 percent of its gas requirements from local production that costs around $4 per million British thermal units (mmbtus).
Analysts said the country needed to increase gas exploration to enhance its local production.
“Local production has declined from 4,000 mmcfd to 3,300 mmcfd in the last two to three years. No major discovery has been reported,” Tahir Abbas said. “The government must now pay more attention toward local exploration.”
In the absence of bids for winter cargoes, Pakistan now pins hope on early operationalization of a second long-term contract signed with Qatar in February for the supply of additional LNG to bridge the gap to some extent.
Under the new agreement, originally effective from January 2022, Qatar will deliver Pakistan around 200 mmcf LNG per month. It is likely to materialize from December this year.
Authorities have also decided to meet the requirement of power sector through the import of furnace oil, according to the Pakistani energy ministry.
In another move, the government approved the “seasonal electricity package” that encourages the use of electricity in winter, instead of gas.
Under this seasonal package, additional electricity consumed from November to February, compared to the same period last year, will have a discount of Rs5-7 per unit.
