LNG imports hurt local energy industry

Liquefied natural gas (LNG) imports have once again started hurting the local oil and gas industry as exploration companies have suffered a loss of $192 million in the last four months due to the addition of LNG to the transmission system.

Following LNG import, gas utilities have curtailed supplies from local fields, which are operated by exploration companies. According to sources, the total curtailment of gas supply is calculated at 329 million cubic feet per day (mmcfd), resulting in a monthly loss of $48 million. Oil and gas industry officials say the impact borne in the last four months came in at $192 million. Additionally, a halt to crude oil production due to gas curtailment has caused an impact of Rs5 billion.

Officials added that the value of 329 mmcfd of imported LNG was $500 million over the period of four months. They claimed that the loss faced by the national exchequer due to non-recovery of taxes stood at Rs20 billion.

Leading energy companies, including the MOL Group, Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL), have reported substantial losses due to gas supply curtailments. MOL has reported the risk of permanent reservoir damage and severe productivity deterioration due to liquid loading.

OGDC has suffered a revenue loss of approximately $8 million in the past eight weeks, with production being reduced to 1,461 mmcfd of gas, 26,394 barrels of oil and 1,391 metric tons of liquefied petroleum gas (LPG). PPL has also highlighted the adverse impact of curtailed production on field development plans and operational longevity. Persistent reduction in gas supply, combined with the lack of clear resolution, has created a negative investment environment, resulting in stakeholders losing faith in energy sector governance.

In case of high line pack in Sui Northern Gas Pipelines Limited (SNGPL) network and to avoid curtailments from fields, gas is diverted to Sui Southern Gas Company (SSGC) in larger interests of companies and the country. Industry officials say Pakistan's energy sector is spiralling into a crisis as local and international investors express frustration over significant gas curtailments and the mismanagement of affairs.

The situation has compounded problems for Pakistan's already struggling energy sector. Domestic gas production is facing a drastic decline. Critical fields, which form the backbone of the country's energy needs, are being curtailed at a rapid pace. Available data shows that 50 mmcfd of gas supply has been reduced from Sui, 25 mmcfd from Qadirpur, 70 mmcfd from Ghazij and HRL, 30 mmcfd from Mari-GTH, 45 mmcfd from Nashpa, 15 mmcfd from Togh, 10 mmcfd from Dhok Hussain, 4 mmcfd from Tolanj and 80 mmcfd from MOL.

Industry insiders say the curtailments are being made to make room for expensive LNG imports. This strategy is seen as a direct affront to local and international investors in Pakistan's upstream energy sector. The reduction in indigenous gas supply is not just an economic mistake; it is a strategic misstep, industry officials say, adding that Pakistan's reliance on LNG imports comes at a heavy price, both financially and geopolitically, as the country becomes increasingly dependent on foreign suppliers.