Pakistan Energy Outlook sample essay

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Pakistan Energy Outlook sample essay

Primary energy consumption in Pakistan has grown by almost 80% over the past 15 years, from 34 million tons oil equivalent (TOEs) in 1994/95 to 61 million TOEs in 2009/10 and has supported an average GDP growth rate in the country of about 4.5% per annum. However since 2006/07 energy supply has been unable to meet the country’s demand leading to shortages. Meanwhile per capita energy consumption in Pakistan at under 0.5 TOEs/capita remains only one-third of world average.

Indigenous natural gas is the largest source of energy supply in Pakistan contributing 27.7 million TOEs (45.4%) in 2009/10, followed by oil products, mainly imports, at 21.3 million TOEs (34.9%), hydel power at 7.5 million TOEs (12.3%), coal, mainly imports, at 3.7 million TOEs (6.1%) and nuclear power at 0.8 million TOEs (1.3%). Consumption of indigenous natural gas has grown rapidly in all sectors of the economy (residential, commercial, industrial, transport and power) over the past 15 years, driven by growing availability of gas and a low, government-controlled gas price as compared with alternate fuel prices. As a result, Pakistan has developed a vast natural gas transmission and distribution network across the country.

However Pakistan’s indigenous natural gas reserves are declining and a low gas price has become a significant disincentive in attracting new gas supplies, either through increased domestic exploration activities or via imports of liquefied natural gas (LNG) or regional gas pipeline imports. If current gas policies persist, Pakistan’s natural gas supply is expected to decline from 4 billion cubic feet per day (bcfd) in 2010/11 to less than 1 bcfd by 2025/26. This will lead to a growing gas/energy shortfall reaching 8 bcfd (over 50 million TOEs) by 2025/26 and will depress Pakistan’s average GDP growth rate over the next 15 years.

It is also unlikely that Pakistan will be able to substantially develop its other indigenous energy sources of hydel power and coal by 2025/26 under current policies, and the energy import requirements of the country may grow from the present 30% to over 75% of the energy mix by 2025/26 costing over $ 50 billion per annum in foreign exchange.

The government-controlled power sector in Pakistan, one of the largest consumers of primary energy, is facing growing problems due to an unrealistic power tariff, high inefficiencies, low payment recovery and the inability of the government to manage its subsidies mechanism. This has led to a serious “circular debt” issue which is becoming a barrier for future energy sector investments.

This Pakistan Energy Outlook document identifies a set of energy “Blueprints” which, if implemented, could allow the energy sector in Pakistan to thrive and grow and become the engine for the social and economic development of the country, allowing accelerated GDP growth rates. As with all reform processes, the “Blueprints” will require significant political will to execute and it is hoped that the present and succeeding governments in Pakistan will rise to the occasion.

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