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Widening energy demand-supply gap major challenge to economy

Widening energy demand-supply gap is posing a major challenge to Pakistan economic health, which is estimated to have curtailed GDP growth by 200bps in last few years, financial experts said.

After a brief tilt toward expensive imported oil in FY11 though the reliance on indigenous gas has marginally increased in FY12, the overall power crisis remained at large. Moreover, unresolved issue of circular debt affecting the whole energy chain coupled with challenging security situation deterring exploration activities remain Achilles’ heel for the country going forward, said a report. Quoting Pakistan’s Energy Yearbook 2012, it said that primary energy supplies in Pakistan increased by just 0.3 per cent at the time when demand has risen to 64.7m toe compared to 64.5m toe in FY11. Gas contribution, however, to energy mix has inched up to 50 per cent in FY12 (versus 48 per cent in FY11) while oil contribution moderately declined to 31 per cent from 32 per cent in FY11.

During FY12, country’s primary energy supplies increased by 0.3 per cent to stand at 64.7m toe compared to 64.5m toe in the previous year, with major momentum coming from gas that rose by 4 per cent. On the other hand, oil and hydro supplies remained under-pressure as they fell by 3 per cent and 10 per cent respectively, despite growing demand in the country. In FY12 gas remained the major source of energy supply with its contribution increasing to 50 per cent in FY12 as compared to 48 per cent in FY11. Furthermore, the focus that shifted towards oil in the previous year is again aligning itself towards gas. Rather than anything else, we believe the reduced share of oil stems from circular debt that has adversely affected the operating environment of oil sector. Furthermore, of the total oil consumption, country’s reliance on the imported oil decreased to 83 per cent as compared to 84 per cent. Though declining by 1pps but such a high reliance on imported oil depicts country’s vulnerability to uncontrollable commodity shock that was witnessed in FY08. It is well worth noticing that reliance on imported energy primarily arises from increased demand of petroleum products, particularly furnace oil (FO), which is used primarily for power generation.

Pakistan imported oil worth $14b in FY12 that makes 35 per cent of total import bill. After adjusting transmission, system losses and non-energy use, final energy consumption of the country during FY12 stood at 40.0m toe, up 3 per cent as against 38.8m toe in FY11, according to statistics of Energy Yearbook. Owing to rising gas shortage despite rise in production, government’s top priority remained the domestic sector that has no immediate substitutes for the commodity. On the other hand, attention was given to power sector in FY12 that consumes almost 24 per cent of total country’s gas as supply to this sector was up 4 per cent, which resulted in 7 per cent higher electricity generation on gas.

Moreover, general industries consuming 24 per cent of country’s total gas faced better gas supply as well.

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