Page 4 - AsianOil Week 45 2022

AsianOil COMMENTARY AsianOil

Pakistan set for gas, power

rationing amid LNG crunch

Pakistan is feeling the pain from its embrace of LNG years ago, but in the
long-term, the strategy is sound

PAKISTAN PAKISTAN is having to ration natural gas sup- volumes to cover its needs.
ply this winter for households, businesses and Circumstances have changed greatly over the
WHAT: industry, amid the country’s worsen energy past year, however. Global gas prices have soared
Pakistan is having to shortages and foreign currency exchange crisis, following a robust recovery in demand after the
ration gas and power and may have to implement rolling blackouts to worst of the coronavirus pandemic, and years
this year amid energy conserve electricity. With global economic vol- of underinvestment in supply. And spot prices
shortages and a foreign atility and high gas prices here to stay for some have been highest. At the same time, Pakistan
currency exchange crisis. time, the outlook for the country certainly is not has been grappling with fast depleting foreign
looking good. currency reserves, a slump in the value of the
WHY: The South Asian country embraced natural rupee and widening fiscal and current account
Pakistan embraced LNG gas a decade ago as a means of ending its reli- deficits. The rupee has shed 18% of its value since
as a means of weaning ance on what was then considered costly fuel oil December 2021, while the country’s reserves
itself off fuel oil, but that imports. The high cost of those imports, and the have shrunk to as little as $9.8bn, which is not
strategy has come back poor state of Pakistan’s energy infrastructure, has enough to pay for 45 days of imports.
to bite. left the country suffering perennial energy short- As such, Pakistan simply cannot procure the
ages over the years. Until very recently, gas was LNG it needs. And a weak rupee and shrinking
WHAT NEXT: considered a cheaper fuel option for gas, which foreign currency reserves mean the country will
LNG remains a solid is why Pakistan invested in two regasification also struggle to obtain other fuels it requires.
long-term answer for terminals to access the world’s LNG supply. For Pakistan has its own domestic gas – 0.4 tcm
Pakistan, amid declining much of the last decade, LNG prices have been proved at the end of 2020, according to BP data.
domestic output and a cheaper on the spot market than under long- But its output is steadily dwindling, from 36.6
lack of alternative energy term, oil-indexed contracts, and so, Pakistan bcm in 2012 to only 30.6 bcm in 2020. By late
sources chose to rely on a large decree on those spot 2021, it was equivalent to less than 29 bcm.

P4 www. NEWSBASE .com Week 45 14•November•2022