LNG demand in Pakistan is soaring in the wake of nascent economic recovery, as being anticipated. The paucity of energy has been rather detrimental over the decades in Pakistan. The domestic exploitation of energy resources has not been ample to address the perennial conundrums of the industrial sector.
Natural gas contributes to around 50% of the energy needs of Pakistan, to be precise. Pakistan made headlines in the world way back in 2015 regarding the purchase and import of the super-chilled fuel. It is staggering to witness hike in the demand of LNG for over three years in particular. The market is abuzz with the news that LNG would replace the erstwhile favorite CNG in the transport sector of the country as well. The closure of CNG stations during certain days of the week by virtue of the paucity of the fuel triggered malaise since millions of rupees were invested to set up CNG stations and for the conversion of vehicles from petrol to CNG for economic reasons. It is yet to be seen whether LNG is the answer of all ills. Pakistan is one of the leading consumers of CNG in the transport sector for which Pakistan was lauded since it is a clean fuel, keeping aside the right use of the fuel for the economic prosperity.
Since the demand for LNG seems sky high, massive investment has become inevitable for more terminals and the distribution system to address the issue at the earliest. Over 7 million tonnes of LNG was imported during the preceding year, which is sure to hike to the proximity of 25 million tonnes over the next three to five years as being anticipated by the relevant quarters. It is believed that the existing two LNG terminals are nearly fully utilized and three more terminals are required to meet the growing demand. Here comes the agile role of Pakistan LNG Ltd, a state-owned company that buys LNG and supplies to the market. What strategy would help Pakistan meet the soaring demand and how the required investment would make its way is yet to be seen.
Pakistan, a debt-laden economy, needs enormous amount for the construction of pipeline to distribute the gas and for the storage facilities. Here comes the financial prudence to be applied. Let’s see how the economic managers and the relevant authorities in the energy sector play their cards to address the chronic issues of the energy sector of Pakistan. There is a possibility of Exxon Mobil, Royal Dutch Shell, Mitsubishi, Italy’s Eni, China’s PetroChina, Azeri state oil company SOCAR and Trafigura playing crucial role in the energy sector of Pakistan.
Price of the commodity is always foremost issue while making investment in any sector. It is widely discussed that domestic gas is cheaper and LNG is relatively expensive which may be a detriment to the local and foreign investment in the sector.
Pakistan needs gas for power generation to cope with the lingering power load-shedding and the long-standing demands of the manufacturing sector. Manufacturing sector needs to be underpinned with the uninterrupted gas supply to be competitive in the global market, which hitherto has been a dream. Let’s see when this dreams come true to boost the economic activities of the country. It is indeed a fact that Pakistan loses over 2% of its GDP growth in the wake of the dearth of the energy supply to the industry.
The fertilizer sector is one of the largest consumers of gas. Pakistan is unable to meet the requirement of the sector failing to which fertilizer is imported which adversely impacts the external balance sheet of the country. This inadvertently brings about the massive input cost in the agriculture sector which is the mainstay of the economy of Pakistan. The lower the input cost in the agriculture sector, the better the economic activities of the country would be.
Undoubtedly, Pakistan is being viewed as one of the growing markets of the global LNG industry owing to the demand and lower domestic gas production. The incumbent government has to work on two primary issues one being the hike in the domestic gas production and the second rationalizing the price mechanism to lure the investors. Pricing might play a vital role in making decision for the investment in the most crucial sector of Pakistan. Here comes the need for the immediate action rather than the rhetoric as has happened in the past.