New Delhi: Pakistan’s gas sector has gone into a structural decline, which, in turn, is damaging industrial competitiveness, discouraging exploration investment, increasing LNG dependence and weakening Pakistan’s long-term energy security, according to an article in the local media.
Policymakers have been treating the gas crisis as a supply shortage problem, but the rot runs deeper, as it is the structure of the gas market itself that no longer works, the article in Karachi’s Business Recorder pointed out.
Pakistan now faces declining indigenous gas production, expensive RLNG imports, shrinking industrial throughput, and severe financial stress across the energy chain. Yet the institutional structure has barely changed. The most dangerous consequence is declining throughput.
Industrial consumers are steadily reducing dependence on pipeline gas because tariffs have become unaffordable and unpredictable. Businesses are shifting toward solar, coal, biomass, furnace oil and self-generation because pipeline gas is no longer viewed as commercially reliable.
This destruction of demand has been accelerated by misguided policy, the article said.
The wrongly calculated and irrational levy imposed on captive power plants effectively priced many industrial users out of the gas system. Instead of preserving industrial throughput and export competitiveness, policy moved aggressively to force industry away from gas consumption.
The result was predictable: industrial consumers reduced off-take, switched fuels or invested in alternatives altogether. This has inflicted severe damage on the economics of the pipeline system, the article said.
Pakistan’s gas infrastructure carries enormous fixed costs. Pipelines, compressor stations, maintenance, debt servicing and staffing costs do not disappear simply because fewer molecules move through the network. Instead, these costs are spread over smaller and smaller gas volumes.
The result is a classic utility death spiral: lower throughput leads to higher tariffs, higher tariffs reduce demand further, and declining demand pushes tariffs even higher.
The core problem is that the fixed costs of the system are being recovered from a shrinking and increasingly stressed customer base.
As throughput falls, the Sui companies continue attempting to recover infrastructure costs, UFG losses, financing costs, RLNG obligations and historical shortfalls through a shrinking customer base.
Consumers increasingly face the absurd situation where service quality weakens, industrial competitiveness deteriorates, and supply reliability becomes uncertain, yet tariffs continue rising.
The diversion of imported LNG away from industry toward the domestic sector has further worsened the crisis. Pakistan originally imported LNG primarily to support industrial growth, efficient power generation and economic expansion. Instead, increasingly large volumes are being diverted toward low-paying and heavily subsidised domestic consumption. The financial consequences are enormous, the article observed.
(IANS)
