WASHINGTON: Pakistan has resources of 164 million barrels of oil and 24.6 trillion cubic feet of natural gas, says a research paper published recently by a US think tank.
The paper — “Geopolitics, poverty, and climate change in Pakistan” — urges Islamabad to consider ways to enhance investment in domestic exploration and development of these resources to overcome its energy crisis.
The author — Robert F. Ichord, Jr. — is a senior fellow at the Atlantic Council and a former deputy assistant secretary for Energy Transformation at the US Department of State’s Energy Resources Bureau.
The paper notes that Pakistan depends principally on oil and gas for over 70 per cent of its primary energy and has become increasingly dependent on oil and gas imports. Although Pakistan produced about 90 thousand barrels of crude per day in 2018, this only accounts for 18pc of total oil consumption.
The author shows how the growing oil-import bill puts great pressure on budgets and reserves. The International Monetary Fund (IMF) estimates Pakistan’s 2017-18 oil imports at $14.6 billion, or about a quarter of total estimated current account imports.
US think tank says the country has petroleum resources of 164m barrels of oil and 24.6tr cubic feet of natural gas
Noting that the depreciation of the Pakistan rupee in 2018 “added an additional burden to the import bill,” the paper points out that in 2019-20, the country’s oil imports would increase to at least $17bn.
More pressures come from gas imports as domestic gas consumption grew by 7pc in 2018 and outpaced domestic production. Pakistan’s indigenous gas production has stagnated at about 34bn cubic metres (bcm) in 2018, accounting for 80pc of domestic consumption.
That’s why, the author argues, “expansion of electricity generation to meet rising demand and reduce the endemic power blackouts and outages has been a high priority of the Pakistan government”.
The paper notes that Pakistan’s installed generation capacity has greatly expanded from 23,337 megawatts (MW) in 2014 to 33,836 MW in February 2019, and electricity generation increased by 11pc from 2017 to 2018.
“Pakistan continues to have a gap, however, of several thousand megawatts in the non-summer months when hydropower output is lower and electricity demand is high,” the paper adds.
Discussing Pakistan’s energy crisis, the author points out that 58m people still lack access to electricity, and the challenge is particularly acute in rural areas, where only 54pc have access.
Pakistan plans to achieve universal electricity access by 2030 and is focusing heavily on grid expansion in the rural areas to achieve this target.
The paper identifies the huge circular debt in the energy sector and large transmission and distribution losses as some of the main problems that Islamabad needs to overcome if it wants to achieve its goal.
The paper also highlights the overall cost to Pakistan of the power sector’s poor economic and financial performance. It also quotes from a recent World Bank report, which estimates that the total economic cost of power-sector distortions in Pakistan was $17.7bn in financial year 2015, or about 6.5pt of GDP stemming from the negative impacts ($12.9bn a year) of unreliable electricity to firms and households.
The paper also suggests policy directions for addressing the issue: (1) creating a sound policy, legal, and regulatory environment; (2) developing efficient institutional and market structures; (3) achieving a cleaner and more resilient generation mix; (4) expanding electricity access to the poor and rural areas; (5) collaborating with neighbours on regional electricity and gas networks and markets; and (6) attracting international investment and financing.
The author also advises Islamabad to reorient its policies away from coal and greatly ramp up their renewable energy, energy efficiency, and gas and LNG development efforts.
Published in Dawn, February 2nd, 2020