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Energy crisis crippling economy

An endemic energy crisis, blamed on years of mismanagement in Pakistan, is crippling the economy and making the lives of millions miserable.

But with political posturing becoming more acute as the weak coalition stutters towards general elections, there is no quick end in sight.

Pakistan’s demand for natural gas and other forms of energy is outstripping supply. At one point, the gap between supply and demand hit 7,500MW or nearly 40 percent of national demand in the outgoing year 2012. This ignited protests and riots all over the country, particularly in Punjab.

According to analysts, under the present government, the power sector is at the top of the list of hurdles crippling industries.

In a letter to the Ministries of Water and Petroleum, the Ministry of Textiles noted that the textile industry suffered Rs200 billion annual losses since the last four years and recommended that the industry should be the priority for gas allocation.

Haroon Agar, president of Karachi Chamber of Commerce and Industry (KCCI), said that the overall business in 2012 contracted by around 25 percent primarily due to energy crisis coupled with law and order issues.

Advisor to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussain has categorically said that there is not enough gas to meet demand. According to Hussain, the country’s two largest natural gas fields are expected to run dry by 2022.

However, on the eve of new year, Hussain issued a purely political statement praising the present government’s energy policies that would bring a significant change in the days to come.

Hussain highlighted the government’s consistent efforts in streamlining an enabling and investor-friendly regulatory and fiscal framework and working environment for the oil and gas sector.

“As evident by our recent initiatives, which include the 2012 petroleum and tight gas policies and the road show held to draw foreign investment, the government is determined to transform the oil and gas industry into a fully integrated energy enterprise, using the best available technology,” he said.

The industry people blame the delayed petroleum policy for the prevalent energy crisis and depleting hydrocarbon reserves.

A senior official of a state-owned petroleum company said that the exploration process slowed down due to the delayed policy.

“The auction of new exploration blocs, wellhead gas prices; everything is defined in this policy,” he said. “Had there been timely announcement of policies in the past decade, the situation could have been much better.”

On top of everything, the inter-corporate circular debt remained beyond the government’s control.

Several private power producers had to halt or slash their production because the state-run power purchasing company had not paid them. This is because the biggest consumers (especially provincial and federal governments) had not paid their electricity bills. The bills that had been paid was not enough to cover the generation cost.

In view of natural gas, the demand- supply gap hovered around 2.0 billion cubic feet per day.

Former President Pervez Musharraf’s government began promoting the use of CNG in private vehicles nearly a decade ago. The idea was to reduce the money spent by the government on buying international oil and instead rely on Pakistan’s domestic natural gas reserves.

Today, the use of natural gas in vehicles has become the biggest issue as the government wants to stop CNG, while CNG filling stations are concerned about investment worth billions of dollars that might drown.

There are over 3,500 CNG filling stations in the country and about 3.5 million vehicles have been converted to gas. The issue is still unresolved.

The Planning Commission says that power cuts shaved three to four percent of GDP, with industry bearing the brunt.

According to experts, there is no quick solution in sight as major projects, such as the $12 billion Diamer-Bhasha dam, which is expected to generate 4,500MW, will not come online for another five or six years.

The rivers and valleys of the mountainous north may offer more than 50,000MW of untapped hydroelectric potential, but the power generated could be unreliable and not guarantee year-round supply.

Coal reserves have been found in the Thar desert but the quality is uncertain and international donors are unwilling to invest in such an environmentally-damaging form of energy.

The government is keen to develop nuclear power as it tries to wean itself off expensive imported hydrocarbons.

The country spends 7.5 percent of GDP on buying fuel, according to the Planning Commission.

There are currently three nuclear plants generating a total of 740MW of power and there are plans to expand this to 8,800MW, but only by 2030.

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