The Planning Commission is suggesting a broad shift from liquefied petroleum gas (LPG) to liquefied natural gas (LNG), which is relatively cheaper, and also working to operationalise gas pipelines from Iran and Turkmenistan. However, the recent policy advice from the Commission’s energy wing also suggests a further hike in domestic gas prices to remove or reduce the effective subsidy on imported LNG. The Energy Planning and Resource Centre also believes higher prices will reduce demand, although this seems unlikely since gas demand is relatively inflexible for domestic consumers.
One effective but possibly controversial demand reduction measure is a suggestion to stop gas supply to captive power plants. While this would obviously cut gas requirements, it would not go down well with companies that have spent millions and billions setting up plants to compensate for what is, at the end of the day, the government’s historical failure to provide reliable power supply to industries that depend on it. Another efficiency suggestion is to use old gas fields as storage depots for imported LNG. A third floating LNG regasification terminal is also suggested — the first two are privately held and operate near Port Qasim. The Commission also says that terminal capacity will be reached in 2025, and a new terminal will have to be made operational before then to avoid supply interruptions.
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But none of these measures is going to compensate for the massive difference between domestic gas prices and the price of imported LNG, which can be as much as six times higher during seasonal peaks and is generally two to three times as high as the price of domestic gas. While LNG is still about 50% cheaper than LPG, the priority needs to be gas pipelines, which are still the only truly cost-effective solution for domestic gas needs. Expediting work — and cooperation — on the Turkmenistan-Afghanistan-Pakistan-India Pipeline and finding a sanctions workaround for the Iran pipeline need to be top priorities.
Published in The Express Tribune, August 23rd, 2023.
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