Conversation with Syed Imran Ahmed — Chief Manager, SSGC
Profile:
Syed Imran Ahmed is the Chief Manager at SSGC’s Corporate Communication Department where he is also the section head of Advertising, Publications and Events. An MBA from IBA Karachi and a Master in International Trade from Melbourne University, Mr. Ahmed is also the Visiting Faculty at the Institute of Business Management (IoBM). He regularly writes in the top publications on energy and business-related topics. Mr. Ahmed is a content developer for a number of social media pages.
PAKISTAN & GULF ECONOMIST had a conversation with Syed Imran Ahmed about the energy sector. Following are the excerpts of the conversation:
Energy is considered a vital factor for the economy. Pakistan is an energy-starved country and its energy appetite is expected to grow further in the coming years. The country’s major energy supply comprises oil, natural gas (including imported LNG), coal, LPG, hydro and nuclear electricity. Oil and gas dominate the energy sector, contributing over 70% of the overall primary energy mix. Over the years, Pakistan’s energy mix has remained steady. The easily accessible and affordable indigenous natural gas meets the major portion of the country’s growing energy needs. The past decade has seen economic growth of 4% which has driven the energy demand. In addition, the ever-rising customer-base too has contributed to the rise in demand for energy sources in domestic, industrial and transportation sectors.
According to Pakistan Energy Outlook 2020, total primary supply stands at 83.8 mmtoe in 2019, a reduction of 2.8% from 86.3 mmtoe in the previous year. The reduction in energy supply is due to a decrease in demand for energy due to the slowing down of the country’s economy.
Diverse Energy Mix:
The primary energy supply mix of Pakistan comprises natural gas, oil, coal, renewables and hydroelectricity. Indigenous gas at 35% takes the lion’s share of the energy mix, followed by Oil (25.7%), LNG imports (10.6%), Coal (15.4%), Hydroelectricity (7.8%), Nuclear Electricity (2.8%), Renewables (1.3%) and LPG (1%). Natural gas is the largest supply source in the country with a 45% share of the total supply mix, which in volumetric terms stands at 38 mmtoe. In recent years, the share of oil in the supply mix has declined due to the substitution of furnace-oil-based power generation with other energy sources. On the other hand, coal has maintained its upward trajectory.
Pakistan’s energy sector comprises four primary sectors namely the upstream sector, oil downstream sector, gas downstream sector and power sector. The upstream sector comprises 24 Exploration and Production (E&P) companies which are responsible for supplying oil and gas to the country’s rising consumer base. The average oil and gas production is 4.36 MMTOE oil and 29.33 MMTOE natural gas. Oil and Gas Development Corporation Limited or OGDCL is the largest producer of oil and gas in the country, contributing 45% and 29% of indigenous oil and gas produced in the country. There are six oil refineries operating in the country with a combined refining capacity of 19.37 million tonnes per year. Of the six refineries, Pak Arab Refinery (PARCO) is the largest refinery in the country with more than 4 MMTOE crudes processed in 2020. Of the 34 oil marketing companies (OMCs), Pakistan State Oil (PSO) is the largest OMC with a 61% share of the oil market.
Gas market:
Pakistan has a large and segmented gas market. Two state-owned utility entities dominate the gas downstream sector. They are Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Ltd. (SNGPL), both of whom own and operate a gas transmission and distribution network of more than 190,000 kilometers across their respective franchise areas. SSGC which serves 3.1 million customers in the provinces of Sindh and Balochistan provides gas to 1,200 cities and towns in Sindh and Balochistan and has a transmission network of 3,973 kms and a distribution network of 45,521 kms. The company also owns and operates the only gas meter manufacturing plant in the country, having an annual production capacity of 356,000 meters on a single-shift basis. SNGPL’s transmission system extends from Sui in Balochistan to Peshawar in KPK comprising over 9,051 km of the transmission network. SNGPL’s distribution network comprises 142,998 kms of the pipeline. SNGPL serves more than 7.2 million customers. The total gas consumption in the country stands at 1,453 bcf. The power sector consumes 511 bcf of gas while the domestic sector consumes 311 bcf. The industrial sector, on the other hand, consumes 290 bcf of gas.
With the advent of RLNG in the country, two LNG Terminals, Engro Vopak and Pakistan GasPort consortium have assumed a new significance in the gas downstream sector. Both companies operate LNG Terminals of 12,000 mmcfd capacity each. On the other hand, Pakistan has an extensive power sector that provides approximately 81% of the population. The country has a total installed power generation capacity of 43,775 MW as on 30 June 2022. This includes 26,683 MW thermal, 10,635 MW hydroelectric, 1,838 MW wind, 530 MW solar, 369 MW bagasse and 3,620 MW nuclear.
Over the years LPG has proved to be an excellent option for our households on account of three main reasons. Firstly, it is a more-calorific valued, energy efficient fuel that undergoes complete combustion, creating no residue in the process. Secondly, it is a fuel with low emissions, low Sulphur content and more energy value than other fuels and third, it can be stored in cylinders for longer time periods without any spillage that makes it accessible to the customers.
Determining energy prices:
Pakistan has a regulated gas pricing regime, wherein, OGRA is mandated to determine the prescribed gas prices for each category of customers and the Government of Pakistan fixes the final consumer gas prices. Gas prices remain uniform throughout the country and are inclusive of producers’ gas price, excise duty, transmission and distribution costs, depreciation, return on assets in line with financial indicators and gas development surcharge. Natural gas prices in Pakistan are among the lowest in the world and unlike oil prices, which are market-driven, are not subject to fluctuation.
Energy Regulatory Structure:
Pakistan’s energy sector and its sub-sectors are governed by the Ministry of Energy, Government of Pakistan. The Ministry of Energy comprises two divisions namely the Power Division and Petroleum Division that are further segregated into different wings. The oil downstream sector is regulated by the Oil and Gas Regulatory Authority (OGRA) to foster competition, increase private investment and ownership in the midstream and downstream petroleum industry and protect the public interest while respecting individual rights and providing effective and efficient regulations. Upstream activities in the oil and gas sector are governed and regulated through the Directorate General of Petroleum Concessions (DGPC) of the Policy Wing, Ministry of Energy (Petroleum Division).
According to worldometers.info, Pakistan holds 19 trillion cubic feet (Tcf) of proven gas reserves and has proven reserves equivalent to 12.0 times its annual consumption. Natural gas is being depleted every year at the rate of around 10%, creating a major demand and supply gap that becomes even more pronounced in winter seasons when space and water heating needs increase. Especially during winter, gas companies implement the Government of Pakistan’s Gas Load Management Plan to ensure that domestic and commercial customers that are on top of the Plan’s priority list, get gas on a regular basis to fulfill their needs.
Indigenous oil and gas production:
Pakistan’s upstream oil and gas production is sourced from two on-shore areas, namely the lower and middle Indus Basin and the Potwar-Kohat basin. The country has a large sedimentary area of 827,268 km2 in which 1102 exploratory and 1450 development wells have been drilled so far. The country’s oil and gas production has taken a nosedive due to the natural depletion of producing oil fields, combined with a slower reserve replacement rate and decreased exploration and investment. Potential for increase in production remains in mature and more complex fields yet experts see future growth from unconventional resources and initiatives such as enhanced oil recovery and also via intensifying exploration activities for ensuring faster oil and gas discoveries.
Despite having abundant solar and wind resources, Pakistan has lagged behind in installing renewable energy projects. An estimated 1.3 GW of wind and solar was installed in Pakistan by June 2018, with another 300 MW of bagasse-fueled generation also online. To date, all of Pakistan’s wind power development has been in the Gharo-Keti Bandar corridor in the south of the country which has a theoretical potential of around 50 GW of wind energy. This corridor combines good wind resources with relative proximity to load centers and national grid connectivity. Pakistan is considered to have vast quantities of untapped shale gas potential. The country’s shale oil and gas resources are mostly located in the lower Indus basin region, predominantly in Ranikot and Sembar, mainly in upper Sindh and lower Punjab while a sizeable reserve are also found in Khyber Pakhtunkhwa. Prospective basins are the Southern Indus Basin and Central Indus Basin along with the important Baluchistan basin and Northern Indus Basin.
Along with a focus on increasing exploration and development activity on conventional hydrocarbon resources, the exploitation of Unconventional Resources needs to be targeted to meet the country’s growing energy demand.
Major challenges:
Pakistan’s energy sector is badly hampered right now by a widening fissure between demand and supply. The sector can make a fine turnaround and be a catalyst for a sound economy if the country is able to attract large-scale investment in the E&P arena which can lead to a dynamic activity in both conventional and unconventional exploration. Secondly, there is a need for long-term sustainability of the oil sector in Pakistan with increased refining capacity.
Thirdly there is a need to harness alternative resources with a business model that mainly revolves around alternate energy projects such as renewable or environmental-friendly fuels like biogas/biomethane, electricity generation from thermal energy, futuristic energy projects like coal to gas production and hydrogen production.