By Mobeen Jawad
As the world is trying to fight the aftershocks of the pandemic Pakistan is also facing major challenges in its utilities (oil, gas, and power) sector, when the news broke that due to a new virus outbreak there would be a global lockdown on 12th March 2020 by the world health organization, this resulted in the closure of some of the major industries due to strict safety measures taken to stop the virus spread this resulted in the decrease in demand of LNG and other utilities.
Due to this decrease, the exploration and import prices stayed the same but the supply decreased due to which Pakistan faced issues in managing the dropping supply as the import prices and exploration costs started rising the regulatory authorities didn’t bother to control or revise the prices according to the global market this backfired when things started getting back to normal and the demand started to increase drastically.
In the past few months Pakistan’s demand for LNG increased dive to upcoming winter and it hasn’t revised its contracts with the previous suspires as they failed to fulfill certain commitments in the contract, recently state-owned company floated an emergency tender and procured the costliest LNG from Qatar which is causing political and economic unrest, but still, the increasing demand of LNG is not being fulfilled. Although the state-owned companies are opting for spot supply it is unclear whether they are going to be able to afford the prices. Through this behavior, these state-owned gas supply companies are putting a negative impact on the utility supply chain in Pakistan.
As 40% of the energy consumed is generated through LNG operated plants in Pakistan the hike in the prices of LNG and its disrupted supply chain and spot procurement at high prices is, in turn, increasing the prices of electricity. This is also a challenge that hasn’t been solved over the past few years recently the prices of electricity were increased by 2 RS in terms of Fuel Price Adjustment (FPA) which is the result of costly procurement of LNG. This shortfall means that the country is going to face power outages in the upcoming months.
These issues with the utility supply in Pakistan need to be solved quickly so that we can recover from this crisis the only solution is to keep a check on these state-owned power and gas supplying companies because they have certain monopoly over the utility sector and their supply chain strategies are not efficient enough to cope with the rising demand and supply of these utilities.