F.P. Report
PESHAWAR: Pakistan Institute of Development Economics (PIDE), a national think tank of the country has launched a research study report on ‘Gas Crises in Pakistan’.
The report suggested prioritizing exploration activities to rely on LNG imports, correct well-head prices, and minimize government interference.
According to a press release issued here on Sunday, the study also emphasized a progressive and market-based exploration policy is needed and asked that Pakistan should de-regulate the natural gas sector and liberalize the pricing structure.
The PIDE study furthermore said that market-based pricing systems will also curtail the misuse of gas. For LNG imports, it asserted that incentivizing third-party access increased involvement of the private sector in the LNG supply chain happening in mature LNG markets like Japan, South Korea, and even India.
Higher private sector participation in these countries facilitates cheaper fuel availability, smooth procurement processes and allows market-based price discovery (SBP, 2021), it added.
The research study emphasized that to maximize returns from private sector involvement and guarantee the sustainability of the natural gas sector, it is essential to first solve the profound structural and operational challenges.
Without rationalizing the subsidy structure, the financial viability of the natural gas sector is difficult to achieve. The tariff must be set on a cost-of-service basis for a reliable and sustainable gas sector.
Gas allocation to industries should be from a growth perspective and not based on political decisions. Energy efficiency legislation and strict implementation in all sectors are compulsory.
Restructuring of gas utilities is required to improve their operational and managerial efficiency. Unbundling these monopolies between ‘pipeline’ and ‘retail’ is inevitable before allowing for other private participants in the ‘pipeline’ and ‘retail’ business.
To improve management and administration in SNGPL and SSGC, slicing them into smaller units may also help.
It’s high time to get rid of guaranteed returns based on network expansion. Companies must have a business model to earn profits from operational efficiency.
All gas companies should operate commercially without any political interference by any government.
Government should limit its role to policy making and effective legislation for market liberalization.
There should be a single autonomous regulatory authority for upstream, midstream, and downstream activities.
But the regulator must have the powers and capacity to monitor the sector effectively and ensure market development.
PIDE research showed that 78 percent of households have no access to natural gas in Pakistan. Natural gas consumption in the domestic sector has grown by about 11 percent over the years. Supplying gas to households requires significant investments. The cost of gas supply to households is much higher than the cost of supply to the industry or power sector. Gas allocation policy has remained based on political priorities rather than on the objective of maximizing value addition.
Low gas prices and inefficient gas allocations have encouraged higher demands.
With 30.6 billion cubic meters of natural gas, Pakistan shares 0.8 percent of global production. There is a sharp increase in gas demand in Pakistan, but due to the inefficient distribution of natural gas resources, Pakistan has been facing a colossal gas shortfall, the brief revealed.
