![sources said that two lng terminals will be operational after 2024 and therefore pakistan would be facing gas crisis due to limited capacity of lng terminals in pakistan photo reuters sources said that two lng terminals will be operational after 2024 and therefore pakistan would be facing gas crisis due to limited capacity of lng terminals in pakistan photo reuters](https://i.tribune.com.pk/media/images/11621105195-0/11621105195-0.jpg)
As the ill-planned and expensive Liquefied natural gas (LNG) imports have led to a reduction in indigenous gas supplies, the government is now considering a proposal to swap gas supply between two gas utilities. This proposal will be discussed in a high-level meeting chaired by Finance Minister Ishaq Dar on September 2.
Sources told The Express Tribune that the poorly planned LNG imports have resulted in a cut in indigenous gas supplies, adversely affecting the cash flows of exploration companies. Gas utilities have reportedly refused to take the entire volume of indigenous gas supplies due to contractual LNG imports from Qatar, leading to financial difficulties for these companies.
The gas utilities have sent letters to all exploration companies, including Oil & Gas Development Company (OGDCL), Pakistan Petroleum Limited (PPL), and MOL, asking them to reduce indigenous gas supplies to make room for the expensive LNG imports. Ironically, while domestic consumers are left without gas for cooking after 10pm, gas utilities are not ready to accept cheaper indigenous gas supplies. LNG prices currently range between $10 and $12 per mmbtu, whereas the cost of indigenous gas is between $2 and $6 per mmbtu.
Despite the availability of cheaper local gas, consumers are forced to use expensive LNG, which has created cash flow problems for oil and gas exploration companies. This issue has been brought to the attention of the prime minister and the Petroleum Division.
The main problem lies within the Sui Northern Gas Pipelines Limited (SNGPL) system, whereas there is no pressure on the Sui Southern Gas Company Limited (SSGCL) system. SSGCL is currently facing a 550 million cubic feet per day (mmcfd) gas shortage, prompting a proposal to swap gas between SNGPL and SSGCL.
Earlier, Prime Minister Shehbaz Sharif was informed that oil and gas exploration and production (E&P) companies had suffered a loss of Rs14 billion due to the reduction in gas supplies from domestic fields. It was noted that gas utilities had been unable to sell both locally produced gas and imported LNG, leading to cash flow problems for exploration companies.
E&P firms have also complained about delayed payments from gas utilities, which have further slowed their cash flows. As a result, these firms have been forced to curtail gas supplies by up to 320 mmcfd. The companies had pledged investments of $5 billion in exploration activities at potential sites to increase Pakistan's oil and gas production, but they have told the prime minister that current cash flow issues will prevent them from financing new exploration activities. Representatives of these companies have reported outstanding receivables of over $600 million, which their clients in Pakistan have yet to settle. The Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) has also claimed that LNG imports are being prioritised over ramping up domestic gas exploration, leading to a reduction of 300 mmcfd of gas supplies from local fields.
Currently, the upstream industry produces 3,200 mmcfd of natural gas along with 70,000 barrels of oil per day, which represents 35% of the country's primary energy supply. However, as of February 2024, only nine of the planned 23 wells have been drilled during the ongoing financial year. At present, only 19 rigs are operational in the country out of an available 42, and there has been a substantial slowdown in seismic activities. Oil and gas exploration companies have put drilling activities on hold due to cash flow problems.
Petroleum policy implementation
Earlier, the caretaker government approved amendments to the petroleum policy to enhance the share of gas offered to third parties. The government allowed oil and gas exploration firms to sell 35% of gas to third parties, significantly higher than the earlier share of 10%. However, after the Pakistan Muslim League-Nawaz (PML-N)-led coalition government came to power, the new petroleum minister began questioning the legality of those amendments.
Although the Special Investment Facilitation Council (SIFC) is urging the Petroleum Division to implement the policy amendments to open the oil and gas market to the private sector, these changes have not yet been approved. The issue was also raised with PM Sharif to ensure the implementation of policies approved in the past.
Another major challenge is the execution of the tight gas policy, which was also approved by the caretaker government. This policy was seen as a milestone aimed at adding the hitherto untapped tight gas deposits to the system. Tight gas is produced from reservoir rocks with such low permeability that massive hydraulic fracturing is necessary to produce the well at economic rates. The gas is sealed in very impermeable and hard rocks, making their formation "tight."
According to sources, the current management in the Petroleum Division is vehemently opposed to implementing this policy. When oil and gas exploration companies highlighted the matter, the PM constituted a committee to resolve all related issues. Background discussions with E&P companies revealed that they are seriously concerned about the delay in adopting the amended petroleum policy. They fear that the current management in the Petroleum Division intends to roll back policies approved during the caretaker administration.
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