The week in focus

The unending energy shortage showed its new face last week when petrol stocks plummeted after a major refinery went into annual maintenance, slowing down supplies and drying up some filling stations in two major provinces of the country.

First, the province of Punjab faced a dearth of petrol following Attock Refinery, which meets 15 per cent needs of the country, closed for annual maintenance for a month. Later, Karachi also felt the heat of fuel shortages with motorists queuing up at filling stations to keep their vehicles moving. These prompted emergency meetings at the highest level, including one chaired by the prime minister, in which oil marketing companies were asked to keep required quantity of oil stocks in their storages.

The law says oil marketing companies must keep 21 days of petroleum product stocks in order to meet any eventuality.

Refineries have been operating much below their capacity at around 60 per cent for months, the reason being cash flow constraints caused by billions of rupees stuck in the inter-corporate circular debt. Besides, refineries have pricing issues with the government while oil marketing companies want an increase in their margins, which they want to be set as a percentage of oil prices instead of a fixed amount.

In these critical times, Pakistan State Oil (PSO) is meeting most of the petrol needs of the country and has booked import orders for 120,000 tons of petrol this month.

Long-term strategy a satisfactory solution

The development of energy resources has become the top priority for the government after security matters in recent years as they fuel the whole economy and shortages of power and gas in the outgoing financial year have impeded industry production leading to low economic growth. The issue needs to be resolved through not only short-term measures but also a long-term strategy which is mainly based on exploiting domestic resources and less reliance on imports.

“We have huge energy resources but we are not exploiting them because of mismanagement on the part of the government,” said economist AB Shahid. According to estimates, he said, Pakistan had 25 trillion cubic feet of gas reserves, of which 19 trillion cubic feet were in Balochistan. However, political infighting for decades has hampered the progress of the oil and gas sector, causing shortages of energy resources and putting heavy reliance on imports.

Laying stress on aggressive exploration of oil and gas resources as a long-term solution, he said imports were only a short-term solution for petrol shortages. At present, the country meets only 16 per cent of its oil consumption through domestic production, a level which Shahid said should be taken to 25 to 30 per cent in the next two years.

The government has been working on the Iran-Pakistan gas pipeline project for years, but tangible progress is yet to be seen. However, on its part Iran has completed a major portion of the pipeline in its territory. Another project is the Turkmenistan, Afghanistan, Pakistan and India gas pipeline which has not moved beyond papers for years.

In Pakistan, according to an analyst, though incentives have been provided for exploration and production companies, security risks in some areas have deterred them. Expressing hope that better results will be seen in the long run, he said development of domestic energy resources was the best solution which would shield the country from external shocks. Two to three years ago, international oil prices skyrocketed to $147 per barrel, disturbing the external account of the country in which oil imports had the largest share.

the writer is incharge Business desk for the Express tribune and can be contacted at [e-mail]

Published in The Express Tribune, June 13^th, 2011.