Gas shortages likely to persist

Minister says even operating at full capacity, two LNG terminals are insufficient

LAHORE:

Caretaker Federal Minister for Energy, Muhammad Ali, has indicated that the gas shortage for the industrial sector is likely to continue into the summer due to various constraints, including limited Liquified Natural Gas (LNG) terminals in the country. Ali shared these insights during his visit to the Lahore Chamber of Commerce and Industries (LCCI) on Thursday.

He noted the possibility of gas shortages in the industrial sector during the upcoming winter season, despite the government’s best efforts to address the issue. “The country only has two LNG terminals, which are insufficient to provide round-the-clock gas supply,” Ali explained. He further emphasised that even operating these two terminals at full capacity would not fully meet the winter demand. However, the minister underscored the government’s commitment to bring in more LNG cargos to minimise shortages, stating, “Long-term contracts for LNG are not sufficient, and spot LNG is costly. Operating at full capacity is our option to mitigate gas shortages.”

Regarding gas pricing, Ali mentioned efforts to rationalise gas prices across Pakistan for both the industrial and domestic sectors. He assured that any forthcoming price hike would aim to avoid burdening the low-income group. The minister elaborated on regional differences in gas tariffs, stating, “Currently, the prices, especially for the industrial sector in the North and South regions, are not equal. We will not increase the gas tariff for the North region as it is already high, and the tariff will only be raised for the South region this time.”

Discussing electricity prices, the minister acknowledged the challenges of reducing tariffs due to the International Monetary Fund (IMF) programme. He explained, “Under the IMF programme, it is not possible to reduce or provide subsidies on electricity prices. However, we are working diligently to combat electricity theft to address this issue.”

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Caretaker Federal Minister for Trade, Industries, and Production, Gohar Ejaz, also addressed the energy crisis’s impact on industries in Punjab, particularly the gas shortage that began in 2009, leading to the decline of provincial industries and exports. Ejaz highlighted that the country’s overall exports had decreased by 20%, despite a more than 100% devaluation of the Pakistani rupee over a year.

He emphasised the potential for economic growth through the rationalisation of energy prices across Pakistan, proposing regional tariffs for energy. He estimated that such measures could add $10 billion to export revenues and generate 10 million jobs in Pakistan, especially considering the country’s current non-textile and non-agricultural exports stand at just $5 billion.

Addressing concerns about the exchange rate, Ejaz clarified that the situation was not as dire as portrayed, citing a surplus of $100 million in August. He also expressed the government’s commitment to cracking down on the illegal trade of dollars generated through tax evasion, drugs, and Afghan Transit Trade, which has increased to $6.5 billion from $4 billion. Ejaz reassured the public that measures to stabilise the exchange rate would continue and urged against panic.

 

Published in The Express Tribune, September 22^nd, 2023.

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