by The government of Pakistan has announced a significant policy shift regarding gas connections for households, industries, and businesses: new gas connections will now be based on imported Regasified Liquefied Natural Gas (RLNG) rather than domestic natural gas. This marks a critical development in the country’s energy policy, reflecting both the challenges and opportunities Pakistan faces as it grapples with an increasing energy demand, dwindling local gas reserves, and the growing cost of imports.
This decision carries broad implications for the economy, consumers, industries, and the overall energy security of the nation. While some see it as a practical solution to Pakistan’s persistent gas shortages, others argue that relying on imported energy comes with risks such as higher costs, exposure to global market volatility, and foreign exchange burdens. Let’s explore the full context behind this policy, its impact, and what it means for the country’s energy future.
The Context of Pakistan’s Gas Crisis
For decades, Pakistan’s energy backbone has been its abundant domestic natural gas reserves. From households cooking on gas stoves to industries powering their machinery, natural gas has remained a vital and relatively affordable resource. However, in recent years, the picture has drastically changed.
- Declining reserves: The country’s domestic gas reserves, particularly in fields like Sui, are depleting rapidly. With no major new discoveries, Pakistan is unable to meet its increasing gas demand.
- Rising demand: Population growth, industrial expansion, and higher living standards have escalated the demand for natural gas far beyond what local fields can supply.
- Seasonal shortages: Every winter, Pakistan experiences severe shortages of gas, forcing consumers to rely on alternatives such as LPG cylinders, electric heaters, or even wood.
These challenges have compelled policymakers to look toward alternative energy sources. Since 2015, Pakistan has been importing Liquefied Natural Gas (LNG), which after regasification becomes RLNG and is fed into the national gas distribution network.
Why RLNG for New Connections?
The decision to tie all new gas connections to RLNG stems from both necessity and strategy.
- Limited local gas availability: Domestic production is not enough to support new consumers without further straining existing users.
- Ensuring supply for existing users: By diverting new connections toward RLNG, the government hopes to reserve indigenous natural gas for existing households and critical industries.
- Global energy integration: RLNG allows Pakistan to integrate with global energy markets, ensuring more flexibility and diversity in supply.
- Cost-reflective pricing: RLNG is more expensive than domestic gas, but it encourages efficient usage and reduces wasteful consumption habits often seen when energy is heavily subsidized.
In short, RLNG-based connections are intended to balance supply and demand, minimize shortages, and align energy pricing with international realities.
Economic Implications
While this move may ease pressure on domestic gas reserves, the economic impact is multifaceted.
- Higher costs for consumers: RLNG is significantly more expensive than locally produced natural gas. New residential and industrial users will bear higher utility bills.
- Industrial competitiveness: Industries relying on cheaper gas in the past may struggle to remain competitive in global markets if they are forced to use expensive RLNG. This could impact exports, particularly in energy-intensive sectors like textiles and fertilizer.
- Foreign exchange burden: Pakistan’s imports of LNG require substantial foreign reserves. With a volatile currency and ongoing balance of payment issues, reliance on imports may deepen economic stress.
- Revenue for the government: RLNG-based connections may generate more revenue for gas companies and the government, especially if tariffs reflect true import costs.
Social Impact
The policy will also have noticeable effects on ordinary citizens.
- Urban vs. rural divide: Urban households applying for new gas connections will have no choice but to rely on RLNG, while rural areas may remain underserved, forcing them to depend on LPG or biomass.
- Middle-class pressure: Rising energy bills will hit the middle class hardest, as they are neither subsidized like low-income groups nor equipped with alternatives like solar panels or private generators.
- Energy accessibility: RLNG ensures that new consumers at least have access to gas, rather than facing outright shortages or denial of connections.
Environmental Considerations
RLNG, while a fossil fuel, is relatively cleaner compared to coal or oil. Its broader use could reduce reliance on more polluting fuels. However, Pakistan’s continued dependence on imported hydrocarbons delays the transition toward renewable energy sources.
- Cleaner than coal: RLNG emits fewer greenhouse gases than coal or furnace oil, which means better air quality and reduced environmental impact.
- Lock-in effect: Heavy investment in RLNG infrastructure could lock Pakistan into a longer dependence on imported fossil fuels, delaying the shift toward solar, wind, and hydropower.
Policy Challenges
Implementing this decision is not without challenges:
- Public resistance: Consumers may oppose higher bills, particularly in a period of inflation and rising costs of living.
- Infrastructure needs: Expanding LNG terminals, pipelines, and storage facilities will require billions of dollars in investment.
- Global price volatility: The LNG market is highly volatile, influenced by global demand-supply dynamics, geopolitics, and weather conditions. Prices can spike suddenly, creating affordability issues for Pakistan.
- Transparency concerns: Past LNG deals have faced criticism for lack of transparency, and there is fear that new contracts could be controversial.
The Way Forward
To make this policy sustainable, Pakistan must adopt complementary strategies:
- Encourage energy conservation: Campaigns to reduce wastage in households and industries are essential.
- Diversify energy sources: Expanding renewable energy sources like solar, wind, and hydropower can reduce import dependence.
- Revamp pricing mechanisms: Tariffs should reflect true costs while protecting low-income consumers through targeted subsidies.
- Invest in exploration: Domestic exploration of gas and other natural resources must continue alongside imports.
- Regional cooperation: Energy partnerships with countries like Qatar and Turkmenistan can ensure reliable supply at negotiated prices.
Conclusion
Pakistan’s decision to base new gas connections on imported RLNG is both a response to the country’s depleting natural gas reserves and a step toward aligning with global energy practices. While the move addresses short-term supply issues, it brings long-term challenges such as higher consumer costs, industrial competitiveness concerns, and exposure to global market risks.
The policy underscores the urgent need for Pakistan to diversify its energy mix, invest in renewables, and adopt sustainable practices. Ultimately, balancing affordability, accessibility, and energy security will define whether this decision strengthens or weakens Pakistan’s energy landscape.
