Islamabad (TDI): In an effort to relieve pressure on gas utilities, Pakistan is planning to formally request Qatar to decrease its LNG imports, as the nation’s power industry has demonstrated a reluctance to increase its allotted gas quantities.
According to contractual agreements, Pakistan imports 10 LNG cargoes each month. Of them, nine are imported by Pakistan State Oil (PSO) from Qatar and one is imported by the Italian company ENI.
Sources, however, claim that PSO has been requested by Sui Northern Gas Pipeline Limited (SNGPL) to reduce LNG imports by postponing three shipments per month.
This reflects a decline in domestic gas consumption since PSO would only purchase six LNG cargoes each month as opposed to nine.
Pakistan’s electrical and commercial industries are the main users of LNG.
The electricity industry, on the other hand, has declined to use all of its allotted LNG due to a decline in demand for energy.
This decline has been primarily caused by two factors: growing consumer inclination for solar energy and increased power rates.
Although they do not have data on the off-grid solar electricity generation, which is thought to be even higher, power distribution companies assert that net metering has added almost 7,000 MW of electricity to the national grid.
Based on estimates from these companies, solar net metering adds 80 MW of electricity to the grid per month.
Soaring electricity costs, according to experts, are a major factor in industrial closures.
The power regulator has been notified by distribution companies (Discos) that excessive electricity bills have caused several industrial units to close.
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There are increasing concerns that power rates could increase much more now that the administration is in talks with the International Monetary Fund (IMF).
The electricity industry does not want to take on further LNG supplies given current conditions.
As their costs and income requirements are being met by customers, sources also show that gas utilities have moved their emphasis to marketing and distribution in an effort to become more profitable.
According to sources, users are paying far more than the true cost of gas, which is between $2 and $6 per million British thermal units (MMBtu).
For instance, local gas might cost up to $10 per MMBtu, while imported LNG can cost up to $13 per MMBtu.
Restructuring state-owned gas companies to save costs and lower gas prices is something experts advise the government to think about given the current circumstances.
The possibility of selling contracted LNG to private parties has been investigated by a government committee headed by Foreign Minister Ishaq Dar in an effort to decrease the burden on the state due to the decline in demand for LNG.
Over time, the distribution of LNG to domestic consumers has resulted in a build-up of circular debt, which has put additional pressure on the economy.
Financial strain on regional oil and gas exploration companies has also increased due to mishandled LNG shipments.
State-owned gas utilities have refused to raise indigenous gas in order to accommodate LNG imports, resulting in a reduction of up to 440 million cubic feet per day (mmcfd) in gas supplies from nearby sources.
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The fact that consumers are being forced to buy costly imported LNG instead of less expensive domestic gas has drawn the attention of the prime minister.
Local oil and gas industries are seeing some relief as the drop in gas supplies has surpassed 200 mmcfd.
These firms, who have invested a combined $5 billion, had already alerted the government to the possibility that their capital might be jeopardized by the reduction in domestic gas supply brought about by the importation of LNG.
