AT a recent press conference, the prime minister’s special assistant on petroleum, Nadeem Babar, gave the impression that the country would not face a major gas shortage this winter. Mr Babar claimed the government was making all-out efforts to maximise supplies in the gas network through increased RLNG imports. In the same breath, he cautioned that consumers at the tail-end of the pipeline network could experience low pressure, which is just a roundabout way of warning of impending shortages. The SAPM’s claim came as a surprise to those who have been followed his statements on the issue in recent months; all along he has warned of a severe gas shortage in the wake of depleting domestic reserves and growing demand. What steps have been taken to balance supply and demand? He didn’t reveal any, except to say that the two RLNG terminals in Karachi will be operated at their full capacity of 1,200mmcfd during the winter.
Even if we consider the rationing of the fuel by gas distribution companies for some sectors, LNG industry sources estimate the present shortage to be somewhere between 200mmcfd and 300mmcfd. These figures are projected to rise with a further drop in temperature. No one knows how the government plans to fill the growing supply gap during the peak winter months even if it buys the excess regasification capacity of 150mmcfd available with one of the two terminal operators. Apparently, the SAPM had called the press conference to respond to what he termed was a politically motivated media campaign against the government regarding the volume and price of LNG imports. He insisted that the figures given by a TV show host were “fudged”, contending that 35 LNG cargo ships had been imported in the last 27 months at a lower rate as compared to the LNG agreement signed by the previous government with Qatar. He also sought to clarify that it was not possible to lock in cargoes during peak summer months when spot prices are at their lowest, for peak winters when prices shoot up. But what does it mean for consumers who still have to face gas shortages and low pressure in spite of paying higher prices?
Recurring gas shortage cannot be alleviated without ramping up RLNG imports as domestic gas reserves are drying up and no new major discovery has been made. However, LNG imports cannot be stepped up without radical changes in LNG policy to ensure the creation of a competitive RLNG market. Government policies and red tape are major hurdles in the way of the construction of new LNG terminals. Investors are unwilling to risk their money and want bureaucratic barriers to entry dismantled, infrastructure for evacuation of gas from the terminal built and a free market mechanism adopted. Mr Babar should explain why the government has not been able to reform its policy in the last two years.
Published in Dawn, November 27th, 2020