Pakistan needs more gas. What to do? How to add to its natural gas reserves again? Can liquid natural gas (LNG) provide a solution? One of the most gas intensive countries in the world, Pakistan has witnessed shortages and load shedding as part of its overall energy crisis.
The country has significant indigenous resources that are stuck in the ground because prices paid to firms to explore and produce gas are not competitive. Production of gas in recent years has stagnated and reserves are on a decline. Production from new gas fields is barely replacing the depletion from the existing fields.
Natural gas is the country´s main source of fuel accounting for 50% of all energy consumption. And this figure has been a constant feature for decades. It is used not only for generating electricity, but also by industry for manufacturing and fertilizer production. Many people use it to fuel their cars, and Pakistan has one of the largest networks connecting households which use gas for cooking and heating.
In the short to medium term, natural gas is part of the answer to Pakistan´s electricity shortage at an acceptable cost. While hydropower can produce cheaper electricity, it takes time to construct and commission a hydel plant. Thermal plants will always be needed for when water flows are low. Coal based projects have not gotten off the ground. The government’s initiative to import LNG costs more than producing gas locally. The country has gas infrastructure in place and a well-developed demand.
Whereas the sector faces challenges of different nature- social license to operate, an inclusive growth agenda which includes revenue management schemes, the strengthening of its core institutions – local gas field development can be done quickly.
Pakistan must continue improving the investment climate in the gas exploration and production sector. The Petroleum Policy 2012 offers improved prices for new concessions and existing producers.
Will it be enough to revitalize domestic production? And if it does succeed, can we be sure that gas will be used for the best economic purpose?