Pakistan using more oil as regional demand shifts to coal, water

KARACHI: Pakistan’s use of oil has increased during the last five years despite a constant rise in oil prices and a shift in regional consumption trends from oil to coal and hydel power energy.

Oil’s share in Pakistan’s energy consumption mix has increased to 31 per cent in the year 2009 as compared to 26 per cent in 2005. This is alarming as the country imports 85 per cent of the total oil consumption.

This will have negative repercussions for the overall balance of payments and will also affect the overall cost of manufacturing. If gas and other energy supplies remain at their current levels in the energy consumption mix, then the share of oil could grow up to 38 to 40 per cent during the next four to five years, according to estimates of analysts at Topline Securities.

Unfortunately Pakistan shifting focus to oil

Pakistan and Australia‘s reliance on oil in overall energy mix has increased over the last five years. Pakistan which used to meet 26 per cent of its energy requirement through oil is now meeting 31 per cent of its energy demand through oil.

“If we look at the region, five years back share of oil on an average was 33 per cent whereas it is now 29 per cent,” said Topline Securities’ analyst, Farhan Mahmood. India, Bangladesh and Indonesia have reduced their reliance on oil from 33 per cent, 25 per cent and 51 per cent to 32 per cent, 20 per cent and 48 per cent, respectively.

Reliance on oil has been growing due to a constantly rising demand for furnace oil from thermal power plants, so that they can generate more electricity. Pakistan generates 35 per cent of its electricity through furnace oil. Five years ago, the country generated 16 per cent of electricity through oil.

Given the fact that oil is the most expensive way to produce electricity, the world has shifted its focus from oil-based power to coal and renewable energy resources. Interestingly, Pakistan still meets 14 per cent of its energy requirement through furnace oil which mainly comes from thermal power plant. On the other hand, furnace oil contributes only four per cent to the global energy mix.

Pakistan’s gas share in energy mix is one of the highest

Something to cheer about is the fact that despite a decline in gas share in the overall energy mix, it is still better in the region. The share of gas, which is one of the cheapest energy resources after hydel, in the overall energy mix is 52 per cent. New Zealand is the only country which meets 31 per cent of the energy resources through hydel energy.

Published in The Express Tribune, July 30^th, 2010.