Ban on new gas connections not the answer: analysts

Govt urged to step up exploration, improve management and supply.


Farhan Zaheer October 06, 2011

KARACHI:


The government’s decision to stop giving gas connections to new high-rise buildings and industries may help control gas shortage in the short run, but controlling the demand side will not help the economy unless the government aggressively works on the supply side, analysts say.


Approving proposals of the Ministry of Petroleum and Natural Resources on Tuesday, Prime Minister Yousaf Raza Gilani banned all new connections to high-rise buildings, industries and compressed natural gas (CNG) stations to tackle gas shortage in the country.

“Controlling the demand side of gas is not suitable for economic growth,” said Khurram Schehzad, analyst at Invest Capital Markets Limited. “What we need is to aggressively work on the supply side so that it could not hurt our economic growth.”

He said the government should improve investment in the oil and gas sector which has an average success rate of 33%.

Gas shortage has reached alarming levels which currently stands at around two billion cubic feet per day.

Though the decision to completely ban new gas connections to industries is counterproductive, it is good to see the government stopping new licences to CNG stations, Schehzad said, adding the CNG industry is the least productive sector compared to the industrial sector. CNG stations use just 8% of total gas consumption.

The government should give more share of gas to fertiliser and other industries, otherwise products with high demand will need to be imported, which wastes foreign exchange, Schehzad said.

According to breakdown of gas consumption, power sector consumes 28%, general industry 26%, domestic users 17%, fertiliser 14% and transport 8%.

The government says it aggressively wants to import liquefied natural gas (LNG) and liquefied petroleum gas (LPG) to overcome energy shortage.

“Gas shortage is so high that I do not think next winter will pass easily,” said Atif Zafar, analyst at JS Global Capital, adding “the government has a long way to go.”

Pointing to rising demand of CNG in vehicles, Zafar said CNG usage was just 2% of total gas consumption in 2005, but today it is more than 8%. “The precious gas can be used in more productive sectors like the industry.”

Regarding the ban on gas connections for new high-rise buildings, he said since domestic consumers consume around 17%, the ban over short term would not hurt them very much.

Mohsin A Sheikhani, Chairman of the Association of Builders and Developers, a representative body of over 700 builders, also wrote a letter to the prime minister to review the decision of banning new gas connections to high-rise buildings. “This will hurt the real estate sector, as gas connection is a necessity for high-rise buildings whether they are commercial or residential,” it said.

Published in The Express Tribune, October 7th, 2011.

COMMENTS (1)

H.A. Khan | 12 years ago | Reply

Now who were the wise men who took this irrational decision. I seriously wonder what these guys eat for breakfast!

For a middle class family,the only way to own ones own residence is an apartment in high rise building. Reason being the cost of land is divided amongst large number of apartment holders in the building.

if gas connections are not provided to high rise residential buildings, how will people cook food?.use wood? or use electricity ( there is already massive shortage of electricity in the country).

The government needs to think before decisions are taken.

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