THIS is the time of the year when households and other consumers connected with pipeline networks of the two public gas utilities start to face a shortage of the fuel. The supply woes will keep increasing as the demand spikes in tandem with falling winter temperatures before peaking in January, forcing the utilities to completely cut off supplies to certain sectors and ration the fuel for others, including households. This situation is not new for people and has been going on for more than a decade and a half. The reasons for gas shortages in the country are well known: our domestic production has depleted drastically because of decades of misuse of this energy resource and as no major gas discovery has been made in years to compensate for the shrinking reserves. The pipeline projects to bring gas from Iran and the Central Asian states continue to hit one snag after another. The import of expensive LNG is the only option we are left with to plug the supply gap. But volatile global market conditions and uncertainty surrounding the international supply chain in recent years, as well as balance-of-payments woes have taught us that this option, too, is difficult.

Encouraged by the revival of international LNG traders’ interest after a gap of one year to supply two additional spot cargoes next month — although at a premium to spot prices — Pakistan is looking to buy an additional shipment for January to help ease gas shortages during the peak winter month. Hopefully, the government will be able to pick up the additional cargo, though securing it at an affordable price will be a challenge. The prevailing spot prices are in the $17 per mmbtu range, and the suppliers will demand a significant premium on top of that as they did for the December delivery. Will Pakistan have a choice? Not really. The fresh tender comes as Pakistan failed to confirm a shipment from the State Oil Company of Azerbaijan Republic under a deal. With gas contributing nearly 38pc to the country’s primary energy supply mix, the total domestic production hovers around 4bcfd against a peak demand of 6-8bcfd. This kind of gas shortage leaves Pakistan with no choice but to pay the premium to the prevalent prices or face massive fuel cuts and rationing during the cold weather.

Published in Dawn, November 22th, 2023