Gas shortage exposes economies to more pain
PHOTO: FILE
With a little over a month to go for peak shopping season during Ramzan, the head of Pakistan’s retail industry body is shuttling between meetings, pressing officials to relax orders that forced malls to shut by 8.30pm to save energy.
More than 40% of annual retail sales occur in the 30 days of the holy month, and malls are packed between 8pm and 10pm, Tariq Mehboob, also the Chief Executive of Pakistani menswear franchise Royal Tag, said in a letter to the government.
“Early closure could result in job losses for 3-4 million people,” Mehboob wrote.
Fear in the retail sector highlights how a shortage of imported gas has cut power output and hit the economy in Pakistan, just as it reels from soaring inflation and a sliding currency. Bangladesh faces the same issues.
Both countries are scrambling to avoid a repeat of massive power cuts they faced last year, but industry officials and analysts say the crisis is likely to worsen this year because of a sharp drop in imports of liquefied natural gas (LNG).
Pakistan and Bangladesh are heavily dependent on gas for power generation, but have had to slash their imports of LNG after prices rocketed on a surge in Europe’s demand to replace Russian supplies following the Ukraine war.
“High spot LNG prices and dwindling domestic production will mean that Pakistan will continue facing issues with ramping up gas-fired power generation,” said Poorna Rajendran, LNG consultant at FGE.
“We expect power outages to worsen in 2023,” he said.
Despite LNG prices having fallen from last year’s record highs, the super-chilled fuel is still expensive for South Asian buyers as their currencies have weakened sharply, making it hard for them to boost LNG imports this year.
Pakistan relies on gas for a third of its electricity output, but is grappling with dwindling foreign exchange reserves to pay for energy imports.
Ship tracking data from Kpler shows Pakistan’s LNG imports in 2022 fell 17% from the previous year to a five-year low.
As a result, in the first 11 months of 2022, Pakistan’s gas-fired power production fell 4.4%, even as overall generation rose by 1.8% to 129 gigawatt hours (GWh), data from energy think tank Ember showed.
Published in The Express Tribune, February 21st, 2023.
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