Economic growth – where is the gas?

Local expertise is not being utilised while LNG imports are eating into forex reserves

KARACHI:

Once upon a time, Pakistan was self-sufficient in gas. We used to have enough gas to meet residential and industrial needs.

With time – and the lack of will – demand has grown while production has kept on falling. Every year the situation is worsening. And we’re not doing enough about it.

Local gas exploration companies are either cash-strapped, distrust government’s ability to pay on time or haven’t had a major success.

Foreign oil and gas exploration companies are bidding adieu and fossil fuels get out of favour. Come what may, our economic lifecycle is still in early stages to ignore the gas shortage. But we’re relying on imports, again.

Liquefied natural gas (LNG) terminals are the way to plug the deficit within a country. However, Floating Storage and Regasification Units (FSRUs) are not as good as full-fledged onshore terminals. Plus, scarce US dollar has to be spent on importing LNG.

It would have been much better if we were to explore more domestically. Still, vast areas are well untapped while we look for shortcuts (imports). Even those so-called shortcuts are marred with delays.

Investors of two upcoming LNG terminals are facing difficulties. Regulatory delays, bureaucratic red tape and politicians’ interference irritate the investors.

Mind you, gas is the raw material needed for economic growth. Somehow it feels that the government is not preparing for growth in the medium term. How can you, if there is no infrastructure in place?

New terminals require government guarantees, they will bring investment and pave the way for future growth, setting them up will enable many more businesses to establish their units, citizens freezing in winters will be warmed, and naturally, this will lead to more taxes. That makes us wonder, why the delays?

It has been noted that decisions of the cabinet and the Economic Coordination Committee (ECC) are delayed/not implemented and pipeline capacity is not allocated on a firm basis. The pipeline capacity has been allocated for only three months to the two new terminals, starting January 1, 2023.

It is imperative for the policymakers to set the stage for economic growth, provide reliable and affordable gas to citizens and create jobs. It’s no rocket science to understand that without gas, the growth will be hampered.

This is the same as having an economic zone but without electricity or water. The clock is ticking and gas prices are over the roof.

While local expertise is not being utilised to the fullest, imports of expensive LNG are eating into the country’s foreign exchange reserves, which is putting pressure on the import bill as well as the rupee.

At Rs174 per US dollar, the government is under immense pressure as purchasing power of the masses is being eroded. There needs to be 10 times more efforts focused on export growth and import substitution.

We are only to blame our own selves. There is a lot within our own capacity that needs a push and no fear of the National Accountability Bureau (NAB). Don’t delay growth, jobs, localisation and tax revenues.

The writer is an investment specialist with keen interest in political economy

 

Published in The Express Tribune, November 1^st, 2021.

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