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Review of Pakistan’s energy sector

Review of Pakistan’s energy sector

Experts revealed that Pakistan’s energy sector is a developing market. For years, the matter of balancing supply against the demand for energy had remained a mainly unresolved matter. Pakistan faced significant problems in revamping its network responsible for the supply of energy. Energy generators were seeking parity in returns for both local and foreign investors showing it to be one of the main problems in overseeing a surge in electricity generation when Pakistan was facing growing shortages.

Other challenges included a lack of efficiency, growing demands for energy, and political unrest. It is said that the largest consumers in the country unluckily often do not pay their electricity bills.

According to the Economic Survey of Pakistan FY2022, the country is producing a very limited percentage of oil to meet the overall demand of Pakistan. Indigenous oil production is constrained by technological, technical and financial constraints. This necessitates the import of crude oil and other oil products in large quantities to meet a significant share of the total demand.

Statistics identified that the import bill of oil grew by 95.9 percent to US$17.03 billion during July-April FY2022 as compared to US$8.69 billion during the corresponding period last year. Higher oil prices in the worldwide market and the massive depreciation of the Pakistani rupee is making oil more expensive, triggering external sector pressure and widening the trade deficit of Pakistan. The surge in the oil import bill is attributed to raises in value as well as an increase in demand as the import of petroleum products went up by 121.15 percent in value and 24.18 percent in quantity.

Statistics also showed that crude oil imports grew by 75.34 percent in value and 1.4 percent in quantity during the period under review. Similarly, liquefied natural gas (LNG) recorded a rise of 82.90 percent in value, while liquefied petroleum gas (LPG) imports also jumped by 39.86 percent during July-April FY2022.

In the survey it is also recorded that the scarce natural gas reserves of Pakistan are quickly depleting because of a substantial rise in the demand for gas, putting huge pressure on the limited natural gas reserves of Pakistan.

The Government of Pakistan is looking for both shorts also long-term alternative solutions to respond efficiently to the substantial energy requirements. In FY2021, around 373 million MMBTU of LNG gas worth around US$3.4 billion was imported. This corresponds to approximately 30 percent of the total natural gas consumption in Pakistan. During July-February FY2022, 75.64 percent of gas is domestically produced, while 24.36 percent of gas is being imported.

Experts also identified that coal is no doubt also utilized for electricity generation in the country. Thar has the largest coal reserves in Pakistan which has been actively developed in present years. The first Thar plant, having a capacity of 660 MW, became operational in the first quarter of FY2020. Presently, statistics also identified that the overall electricity generation from coal has reached 5280 MW. Thar coal is contributing to 1,320 MW, while imported coal contributes to electricity generation is 3,960 MW which is almost 75 percent of the total electricity generation from coal in Pakistan. Electricity generation configuration is relying heavily on imported coal and this trend is likely to change as units based on the Thar field are added to the electricity generation mix.

Luckily our country is very rich in hydropower and has the enormous potential to generate electricity from water. The Estimated total hydropower potential of the country is almost 60,000 MW. Pakistan is not using its full potential and using nearly 16 percent of the total hydropower potential. The High investment cost for the installation of hydro plants, development of the electricity transmission network and resettlement of the affected population are a few reasons for hydropower not being exploited to its full capacity. Currently, the Hydro installed capacity is 10,251 MW which is almost 25 percent of the total installed capacity.

They also said that our country has wind corridors also and there is huge potential to generate electricity from wind. It is estimated that Pakistan can generate 50,000 MW from wind. The Contribution of Wind in the total installed capacity is 4.8 percent and recently reached 1,985 MW. The Potential for solar power in the country is also high. The Sunlight is available abundantly approximately throughout Pakistan. Currently, the capacity share of these renewable resources is small, but it was expected to increase sharply, as reflected in the Alternative and Renewable Energy Policy 2019. The Installed capacity of solar is 600 MW which is almost 1.4 percent of the total installed capacity. Pakistan is also producing energy from nuclear technology whose contribution is increasing gradually. The Gross capacity of the nuclear power plants was 2,530 MW which supplied about 7,076 million units of electricity to the national grid during July-March FY2021. Statistics in the survey also identified that the gross capacity of nuclear power plants grew by 39 percent and it reached at 3,530 MW which supplied 12,885 million units of electricity to the national grid during July-March FY2022.

Furthermore, unluckily, circular debt was almost Rs 450 billion which reached Rs 1148 billion in 2018. According to the data of the Central Power Purchasing Authority (CPPA), the circular debt stood at Rs 2467 billion by March 2022. Growing at the current pace and if it is allowed to grow unaddressed, it is estimated to reach Rs 4 trillion by 2025, demanding the urgency of reforms in the power sector.

Over the past three years, the stock of circular debt in the gas sector has nearly doubled to Rs 650 billion increased from Rs 350 billion in 2018. The inappropriate response of the government created problems in the import of LNG by the private sector which led to a gas crisis in the country, especially in winter.

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