Pakistan & Gulf Economist

Acute economic crises yet solution is a piece of cake

Pakistan is going through serious economic crisis yet the solutions are within reach in a few month time. Of course, needless to say, mismanagement of the energy sector is one prime reason. Energy is lifeline of any economy. Energy not only makes an economy but breaks it too. Import bill of US$ 17 Billion (Jul-Mar 2022) has been in the limelight of crisis. Following steps are suggested for getting rid of economic crisis with in 1 year:

1. Get 7500 MW of Low Cost Solar via Net-Metering without of 1 MW Limit: GENCOs having installed capacity of 5782 MW have been derated to 3927 MW, a loss of 1855 MW. Kot Addu has been derated by 256 MW. Nuclear Plants have been derated by 100 MW. Miscellaneous IPPs have lost about 200 MW. Thus, about 2500 MW cannot produce a single Kwhr (unit). The Government may allow Net Metering of 7000 MW without limit of 1 MW on immediate basis. Net metering may be allowed via NEPRA Internet Portals within 10 working days, compliance based NOT approval based. The compliance may be made easy. Without any funds from Government or PSDP the country will get replacement of de-rated Power stations within 6 months’ time. This will save the economy Rs 400 Billion annually (US$ 2 Billion annually).

2. Replace 70 Lowest Merit Order Units with Solar: There are 70 Power Generating Units producing between Rs 31 and 71/Kwhr; exorbitant indeed. In order to lower the overall cost of production, the Government may allow 10,000 MW Solar IPPs with an upfront tariff of Rs 12/Kwhr; no question asked. All approval may be made available via NEPRA Portal. This can be achieved within 1 year time with a saving of US$ 2.5 Billion annually without Government Funding AND lower Tariff.

3. Public Sector Street Lights ON Not during daylight: Public Street lights are turned ON 1 to 2 hours before sunset and remain ON 2 to 3 hours after sunrise in cities and towns. Pakistan consumes 385,000,000 Kwhr (Units). If Street lights are turned ON, 15 minutes after Maghrib Prayers and 45 Minutes after Fajr Azan, Pakistan would save 20% of 385,000,000 Kwhr (Units) at Rs 40/Kwhr or 385,000,000 Kwhr x 0.2 x Rs 40/Kwhr = Rs 3 Billion annually.

4. Introduction of Regular Plus (Euro-II/RON 82) Petrol: This grade of Petrol can be introduced on immediate basis for 20 Million Motorcycles and 1 Million old cars. This will save Foreign Exchange of USD 1 Billion annually and provide low cost Petrol to the Motorcyclist and old car owners without any Subsidy.

5. Accelerated Sui Gas Production: Indigenous Gas production can be increased from 3300 to 4400 Million Cubic Feet per day within 10 Months by applying accelerated production techniques. This is about production and not Exploration; the latter is time taking. This will save Foreign Exchange of USD 7.5 Billion annually under the prevailing LNG and HSD prices.
6. LPG Air Mix Vs LNG: There is shortage of LNG due to Ukraine crisis, however LPG is surplus in the international market, especially in the Arab Gulf; our neighbors. Couple of years ago, LNG was much cheaper than LPG but it is the opposite now. Prices of LNG will remain high till Russia and USA becomes friends; highly unlikely in the next 2 decades. The Cold war is here to stay. The following Table-1 shows comparison based on USD/million Btu; apple to apple:

Fuel Prices Comparison 16- June-2022 (Table-1)
US$/Million Btu
Coal 21.0597
Imported LPG 21.3731
Indigenous LPG 23.2373
LNG SNGPL 24.2998
LNG SSGC 26.4509
HFO 26.8392
Kero 29.8788
Petrol 34.1930
HSD 34.3960
Electricity 42.3368

7. The Government may opt to inject LPG Air Mix at various predetermined nodes of SNGPL/SSGCL to replace expensive, unavailable and unreliable RLNG. The difference between imported LPG and imported LNG is USD 4/mmbtu. One LNG ship has 3,606,000 Million Btu, therefore saving by injecting LPG equivalent to two LNG ships monthly is USD 350 Million annually.

8. ECC, OGRA and the Ministry of Energy need to allow LPG Air Mix as an alternate to Sui Gas in housing societies, high rise buildings, cities and industries on fast track basis. Current, approval process is a big deterrent in development of the economy.

9. Accelerated Crude Oil Production: Indigenous Crude Oil production can be increased from 68,500 to 90,000 Barrels per day within 10 Months by applying accelerated production techniques. This will save Foreign Exchange of USD 0.8 Billion annually.

10. UFG Gas Losses: Pakistan loses US$ 1.5 Billion of precious gas every year. Hi-tech metering and monitoring is a viable solution to arrest this menace.

11. Expeditious Exploration of Oil & Gas: Pakistan has prolific on-shore and off-shore sedimentary basins, which remains unexplored. The Government needs to engage with experts on this matter.

12. Expeditious Connectivity of Discovered Oil & Gas Fields to the National Grid: A number of oil and gas discovered fields remain disconnected for years. The Government needs to engage with experts on this matter.

13. Traffic Engineering: Traffic is in disarray, indeed. Considerable amount of Petrol and Diesel is wasted at traffic lights, where cars are seen waiting while there is no vehicle on the other side. An estimated USD 0.5 Billion annually is wasted due to inadequate traffic engineering.

14. Pakistan worries are self-inflicted. Oil and Gas sectors is the largest single factor in dismal balance of payment and Pak Rs free fall. Oil and Gas sectors has the capability to bring the economy on track and bring PKR/USD into double digit parity.

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