Pakistan is an agrarian economy, which places great emphasis on national food security and self-sufficiency in grain production. With fast rising population, it has become increasingly important to improve crop yields through improved farm economics and production efficiencies.
Although fertilizer input is only one of the many factors that influences crop yields and food prices, it is still an important one. Other factors of equal, if not more, importance are seed quality, farming practices, water availability and weather conditions. Nevertheless, synthetic fertilizer has a very prominent role in feeding and sustaining the world’s 7.7 billion people. Synthetic fertilizers, especially Urea, DAP, NP, NPK, CAN etc. are produced by converting a fossil fuel based feedstock into ammonia using the Haber Process. The main feedstock used to produce fertilizer in Pakistan is natural gas.
Every year, approximately 8-9 million metric tons of fertilizer is consumed by Pakistan’s farmers, out of which 7.5 million metric tons is produced indigenously. The fertilizer sector consumes approximately 250,000 MMSCF natural gas every year (17% of total natural gas consumption). Therefore, making natural gas effectively a lifeline to sustain the country’s economy as well as feed its growing population. 80% of this feedstock is coming from one natural gas field (not on network), which is continuously depleting. Addition of natural gas consumers (non-fertilizer) has resulted in further accelerating the fast depletion of this reservoir. As the reservoir approaches its end of life, great uncertainty awaits the food and agriculture sector in Pakistan.
Network based fertilizer plants not only face seasonal outages due to lack of supply, but some plants also require heavy subsidies against the expensive imported RLNG to compete in the local fertilizer market. After the government’s recent decision to reduce the GIDC at a token value – yet to be notified, indigenous feed gas would be available at about 0.7-2.0USD/MMBTU. It is expected that if fertilizer manufacturing is entirely shifted to RLNG, which is available at about 10-11USD /MMBTU, fertilizer prices would sky-rocket and Pakistan’s self-sufficiency in even grain production would be gravely threatened.
In the past 02 decades, industrial and transport natural gas consumption has increased significantly, driving Pakistan’s economy upwards. Unfortunately, addition of new reserves and E&P efforts have lagged behind, threatening not only the food sector but industrial and transport sectors as well. Exploration for new natural gas reserves, development of alternative resources of energy and general diversification of energy portfolio is the need of the hour.
As a first step in ensuring the energy and food security of the country, it is important to increase hydrocarbon production in the country. Engaging foreign investors and incentivizing exploration is necessary to drive the upstream sector forward. With the advent of fracking and horizontal drilling, natural gas sector also has a special opportunity in exploring Pakistan’s shale reserves.
The US Energy Information Administration (EIA) estimates that Pakistan has about 105 Tcf of shale gas reserves. This is large compared to the 60 Tcf original recoverable reserves of our conventional fields, out of which less than 35% remains unexhausted (HDIP, Pakistan Energy Yearbook, 2018).
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Although there is also a need to accelerate development on relatively cheaper natural gas imports from Iran and Central Asia through the IP and TAPI pipelines, for industrial consumption, especially fertilizer industry, primary focus should remain on exploring indigenous resources.
Pakistan faced a crippling power crisis at the beginning of the 21st century, which hindered industrial development; therefore, it was essential for the government to diversify the country’s power sector. Although, the energy mix has improved slightly in recent years, most of the power generation still relies on fossil fuels (natural has: 30%, oil: 22.5%, coal: 8.3% – HDIP, Pakistan Energy Yearbook, 2018). Not only is renewable energy from hydel, wind and solar cleaner in terms of the environment but can be produced indigenously, without relying heavily on expensive energy imports. Worldwide, it is now accepted that renewable power generation is also the cheapest source of electricity (James Ellsmoor, Forbes, 2019). Therefore, favorable government policies, improvement in grid connectivity and tax incentives on plant equipment will enable further increase in renewable power generation.
Freeing up of indigenous fossil fuel allocation (especially natural gas) for power generation will strengthen the local fertilizer and chemical industry that utilizes fossil fuel as feedstock. It will also reduce Pakistan’s carbon footprint and drive it towards a more sustainable future.
Where the fuel resource for power sector has been diversified, the same is yet to be achieved in the local fertilizer industry. Among the commercially available technology is coal gasification for ammonia production. Pakistan has large lignite reserves in Thar region (approx. 175 billion metric tons – HDIP, Pakistan Energy Yearbook, 2018), which can be used for fertilizer production. However, in order to shift local fertilizer industry on this resource, it is essential that a favorable coal utilization policy is formulated. Additionally, water availability in the Thar region is scarce, which has currently become the single most important hindrance in making coal to chemical feasible in the region. Developing Thar as a coal centered industrial zone in Pakistan will not only recharge Pakistan’s economy, but also provide employment in the region and uplift the local Thar community.
There is a dire need to rethink Pakistan’s energy sector in order to make a more sustainable and secure future for the country including alleviation of poverty and hunger. Energy resources need to be allocated to sectors, which not only need them the most but also generate the greatest value in society. Local industry not only caters to the needs of the community, but also provides employment to the people. Therefore, government support in providing infrastructure and meeting industry’s energy needs is necessary to drive Pakistan’s economy forward.