The Western mantra to get rid of fossil oil is getting louder. There are suggestions that countries have to take extra measures to contain carbon emissions and select an alternative fuel. In this race, the developed countries, particularly the United States and its allies are promoting cleaner energy i.e. solar, wind and gas. In the meantime the pressure is mounting on the less-developed countries, currently using fossil oil and coal, to switch over to natural gas and Pakistan is no exception.
Pakistan’s economy is heavily dependent on fossil oil, especially for power generation. Pressure is mounting to quit the use of high-sulfur furnace oil and switch over to gas. This is resulting in two contentious issues: 1) the growing import bill of gas, also eroding paltry foreign exchange reserves of the country, and 2) local oil refineries facing imminent closure. Paltry foreign exchange reserves neither allow the country to run thermal power plants on optimum capacity utilization nor add solar and wind power generation facilities. As a result, daily load shedding spell stretches beyond 15 hours in some of the areas.
The entire energy chain comprising exploration and production companies, refineries, oil and gas marketing companies, electricity generation, and distribution companies face bleak outlooks, mainly because of mounting circular debt. Most of the sector experts are of the consensus that circular debt is nothing but the outcome of massive theft of electricity and gas, added to this is poor recovery.
Many of the wiz kids recommend an increase in electricity and gas tariffs to improve the profit of companies belonging to the energy chain. However, they tend to forget that every hike in tariff offers an incentive for the pilferage of electricity and gas.
It is necessary to mention that K-Electric attracts criticism because its annual accounts are published regularly. As against this, hardly any data is available about state-owned GENCOS and DISCOS. Some of analysts say state-owned distribution companies (DISCOS) are the worst-performing companies. They even go to the extent of saying that pilferage in these companies ranges from 30 to 60 percent.
Another group of experts is of the opinion that the Government of Pakistan (GoP) should facilitate running power plants on coal and furnace oil to bring down the cost of generation. While the GOP may keep on facilitating the creation of solar and wind power generation, wherever possible power plants should be run on indigenous coal and furnace oil.
It may not be wrong to say that at present Pakistan has surplus thermal power generation capacity. The load shedding is the outcome of a ‘highly mismanaged power distribution system’. Experts go to the extent of saying that the average recovery is less than 50 percent. Transmission and distribution losses are nearly 25 percent and the remaining goes to circular debt. Therefore, running power plants on imported RLNG is an economic crime.
The share of hydel power in total generation is persistently on the decline. Till the late eighties share of hydel generation in the total generation was nearly 70 percent, which has reduced to less than 30 percent at present. It is because successive governments have failed in constructing mega-size dams, but indiscriminately added on thermal power plants.
The share of nuclear power generation is also paltry. Pakistan remains in a disadvantageous position because it has not been able to construct nuclear power plants as well as due to the lack of nuclear enrichment facilities. It must be kept in mind that the country has not gone into a nuclear enrichment process.
Gas export by United States
The ongoing energy disruptions in the wake of the hostilities in the Ukraine have had a dramatic impact on export of LNG from the United States.
In the newly released edition of the Natural Gas Monthly, published by the Energy Information Agency (EIA), part of the US Department of Energy, the changing dynamics of the US export trades are described in detail.
In the publication, the EIA notes, “During the first four months of 2022, the United States exported 74 per cent of its liquefied natural gas (LNG) to Europe, as compared to an average of 34 percent a year ago.” Â It adds, “In 2020 and 2021, Asia had been the main destination for US LNG exports, accounting for almost half of the total exports.” Overall, US LNG exports saw an 18% increase as compared to 2021.
Exports have averaged 11.5 billion cubic feet per day (Bcf/d) during the first four months of 2022, aided by the opening of new export facilities. The increase in US LNG exports was driven by additional export capacity at Sabine Pass (Train 6) and at nearby Calcasieu Pass, with a facility that came online in early March. The Sabine Pass terminal loaded nearly 110 LNG cargoes during Q1 2022. Venture Global’s Calcasieu terminal, Louisiana began exporting in March, when five cargoes were loaded — four to Europe and one to Japan.
The move towards European destinations had already begun before the late February invasion of Ukraine, with the huge inventory draw downs underway in advance of the winter season. The EIA said, “The United States became the largest LNG supplier to the European Union and the United Kingdom in 2021. They said that LNG imports from the United States to the EU and the UK more than tripled during January to April, 2022, as compared to 2021, averaging 7.3 Bcf/d.”
The EIA pointed out, “During the first four months of 2022, US LNG exports to Asia declined by 51 per cent to 2.3 Bcf/d as compared to 4.6 Bcf/d in 2021.”
Its analysts also alluded to a drop-off in moves to China due to the extremely high Asian LNG prices and pandemic-related lockdowns. China received only six LNG cargoes from the United States in January–April 2022 or just 0.2 Bcf/d as compared to 1.2 Bcf/d in 2021. Japan and South Korea also saw declines.