Editor-in-Chief
Advisor Energy/Water, SDPI
The natural gas shortage is hitting Pakistan’s export industry, putting tremendous stress on an economy already struggling with accelerating inflation and a weakening currency, but the worst impact is political unrest during this winter season. One of the reasons for the crisis is an unprecedented expansion of gas transmission networks in rural areas, a ploy that successive governments deployed as a political bribes to their voter bank.
Consequently, the distribution networks for domestic consumers expanded dramatically in the rural areas of Multan, Gujjar Khan, and the constituencies of former prime ministers. On the other hand, successive governments continue providing gas connections as political bribes, mostly hiding behind so-called socio-economic responsibility.
This expansion of the gas distribution network in rural areas gave birth to a bigger elephant in the room; the Unaccounted for Gas (UFG) in the natural gas system.
Let us examine the elephant in the room; as of Fiscal Year 2020, the country boasted a massive transmission pipeline network of 13,452 kilometers with a 177,029 kilometers distribution pipeline network. This represents a cumulative distribution capacity of nearly four billion cubic feet of natural and Liquefied Natural Gas (LNG) gas per day. The responsibility for gas transmission and distribution rests with the partially government-owned utilities i.e. Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL). But as the demands rise, Pakistan’s indigenous gas production has been fast declining for the last few years, precipitating the country’s energy crisis that is hitting the industry as well as people at large in smaller cities. During the previous PML-N government, the growing supply gap was counterbalanced by LNG.
Diminishing supplies have forced the government to import expensive LNG. It is also taking little fruitful anti-theft measures but completely overlooks the Unaccounted-for Gas (UFG).
UFG is the most unattended component of the natural gas system. It results from various technical factors when gas flows from fields to end consumers. The main causes of UFG include deteriorating pipelines, eroding cathodic protection, under-size network designing, lack of advanced metering that can measure the calorific value of gas, and detecting theft. Illegal suction pumps at residences or CNG stations account for such leakages.
Globally, countries with larger gas distribution and transmission networks, have managed the UFG issue with robust distribution networks. UFG benchmarks in Canada, Germany, Ukraine, and New Zealand range between 2.16% to 2.65%. The PML-N government, instead of seriously looking into the issue, accepted this benchmark through the Economic Coordination Committee (ECC) in May 2014.
Pakistan Oil and Gas Regulatory Authority (OGRA), on the contrary, fixed the UFG benchmark for FY 2019-20 at 6.98 % of the total supply. OGRA also calculated 12.32 % UFG for SNGPL against the claimed percentage of 12.20 %. In the same financial year, OGRA calculated 18.28 % UFG for SNGPL against the claimed percentage of 17.11%.
This endorsement indeed amounted to the regulation of a crime at an immense cost to the end-consumer. The Pakistan LNG Limited (PLL) in November 2021 received LNG at the rate of $30 per million British thermal units (MMBtu). The annual UGG, calculated for the FY 2019-20 was around 126 Billion Cubic Feet annually. It means that the economic value of UFG is almost 4 Billion dollars or 710 Billion Rupees per annum. The high value of UFG is creating more dangerous gas circular debt instead of getting rid of the power sector circular debt.
The PTI government made some efforts to control theft but the status quo within the system undercut this initiative, and the UFG of SNGPL reached around 11.9 percent and 16 percent of SSGC in the financial year 2020-21 against the permissible limit of seven percent.
The dilapidated gas distribution network carries an environmental hazard too with direct risks to the lives of tens of millions of people, i.e., methane, which is a 90% component of natural gas. Coupled with approximately one BCF (Billion Cubic Feet) daily gas seepage from the Khyber Pakhtunkhwa province alone, Pakistan, at present, is one of the biggest methane emitters. Methane is the second most abundant anthropogenic GHG after carbon dioxide (CO2), accounting for about 20 percent of global emissions, and is 25 times more potent than CO2 at trapping heat in the atmosphere. Though Pakistan was listed as the eighth most vulnerable country to climate change, it never looked at its contribution toward this environmental crime.
Even the International Monetary Fund (IMF) has now alluded to the negative impacts of climate change on Pakistan. The latest IMF staff report following the approval of the sixth review stressed an increase in gas prices for the cost’s recovery.
We strongly disagree with IMF mitigation policies based on increasing carbon taxes and reducing fuel subsidies and would like to remind the IMF of the new global commitments to the United Nations Climate Change Conference in November 2021. The biggest takeaway of the summit was to cut 30% of methane emissions by 2030. Pakistan also joined a global pledge to cut emissions of methane gas to slow the warming of the planet. Led by Prime Minister’s Special Advisor on Climate Change Malik Amin Aslam, has now committed to tackling methane from livestock and flare gas capture but the minister, and ignored the Methane emission from UFG and gas seepage. The country has yet to come up with a clearly defined roadmap to cut methane emission by the gas sector, which is possible in one year.
It is a hard and bitter reality that the UN, World Bank, and other international agencies poured billions of dollars into climate change but sycophant experts botched up quantification of the causes of climate change in Pakistan.
Now 220 million Pakistanis expect the IMF to help plug the methane emission in Pakistan by releasing a grant of 500 million dollars to arrest UFG losses in the gas system and by connecting gas seepage with the distribution network. This grant will accelerate the exports in Pakistan, ostensibly one of the IMF’s goals.
Bottom-line: The percentage of UFG has been increasing each year dangerously and the consumers have to make payment for insufficiencies and corrupt practices of the entire gas system. The lives of tens of millions are at risk through leakages, which constitute the largest amount of network losses. The IMF can eliminate this hazard to lives by plugging UFG in Pakistan. Cutting methane emissions in Pakistan in line with the global mission of a green and clean environment could be a flagship initiative of the IMF and earn it the still missing popular respect.
