Fears of gas shortage

Once again, it is likely to be our winter of discontent. In recent years, the country has been facing a gas shortage in winter when it is needed the most. Like last year, this winter, too, a gas crisis is being predicted, as there is a plan to continue to avoid the use of furnace oil in power plants. This will likely lead to the suspension of oil and gas supplies from some fields. Oil refineries might reduce their production if power plants don’t lift furnace oil as it is expensive compared to the locally-produced gas and imported LNG. In the previous winter season too, oil refineries had cut production and threatened to shut down their plants following refusal by power producers to buy furnace oil. The cut in output by refineries led to the closure of some oil and gas fields. This led to a reduction in the supply of locally-produced gas and this sparked a crisis.

Last year the government had asked refineries to export furnace oil and set up conversion plants. Oil industry officials say it was not feasible as furnace oil prices in the international market were lower compared with the prices of the locally-produced furnace oil. Besides, the setting up of conversion plants is a capital-incentive process. The Power Division secretary told a sub-committee of the Public Accounts Committee on Tuesday that they would take fewer LNG supplies for power plants and would not run the plants on furnace oil. He said LNG-based power plants were outside the priority order. Officials say the stock of furnace oil would start piling up again and a similar situation could arise that had been faced last year. They claim power producers gave wrong projections of furnace oil and gas demand, and it is causing problems for the entire oil and gas industry.

The country has been experiencing CNG rationing for the past several years. The power supply has lately improved, but it is yet to be back on the rails. Now there are fears of another gas crisis this winter. All this shows there is something amiss in managing the affairs of the energy sector.

Published in The Express Tribune, September 26^th, 2019.

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