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Last Updated: August 2016

Overview


Map of Pakistan
Map of Pakistan
  • Over the past few years, Pakistan has experienced a major energy crisis as a result of expensive fuel sources, chronic natural gas and electricity shortages, circular debt, and insufficient transmission and distribution systems. According to the Asian Development Bank, prolonged power shortages cut GDP by 2-3% in 2013.
  • Pakistan's government has recently prioritized resolving the energy crisis by proposing to boost domestic hydrocarbon production, increase natural gas imports, diversify the installed capacity portfolio of electricity generation, improve domestic energy efficiency standards, phase out natural gas subsidies, and resolve the circular debt issue in the energy industry. According to the International Monetary Fund (IMF), lower international oil prices and the recent government reforms have helped mitigate power blackouts and reduce circular debt.
  • More than one-third of Pakistan's primary energy consumption is from biomass and waste since much of the population lacks access to reliable electricity and relies on traditional sources of energy in the residential sector. Roughly 58% of Pakistan's population uses biomass for cooking (about 105 million people) because of inadequate electricity and gas supply. Natural gas accounted for an estimated 30% of Pakistan's primary energy consumption in 2013, followed by petroleum and other liquids (26%), according to the International Energy Agency.

Oil

  • Pakistan is a net importer of crude oil and refined products. Crude oil imports grew an annual 12% from 2014 to 2015, according to FACTS Global Energy.
  • In 2015, the country produced 95,000 barrels per day (b/d) of total petroleum and other liquids, up from below 70,000 b/d before 2011. Most of the increase in oil production stems from additional discoveries and production of condensates from the Tal block. Oil exploration projects are ongoing and are expected to sustain production levels in the short term.
  • Oil consumption has grown over time and averaged 431,000 b/d in 2015, far outpacing domestic production. Lower oil prices and natural gas shortages have contributed to increased oil consumption, particularly in the transportation and power sectors.
  • Pakistan currently has six oil refineries, running mostly on imported crude oil, and a total crude oil distillation capacity of 390,000 b/d.
  • Pakistan State Oil Company has announced its intention to build a new refinery that will process 200,000 to 250,000 b/d of crude oil. No timeline for completion has been given, as the project is still in its initial stage.

Natural gas

  • The Oil and Gas Development Company Limited (OGDCL) dominates Pakistan's oil and natural gas industry. The Pakistani government owns a majority share in OGDCL, with the remainder owned by the public. BP and Eni are the leading foreign oil and gas firms operating in Pakistan. The leading gas distributors are Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines (SNGP).
  • Pakistan's natural gas production rose substantially in the early 2000s and reached a peak of 4.2 billion cubic feet (Bcf) per day in 2012. Since then, production has declined because of regulatory challenges, security concerns, and insufficient investment. According to a report by the Pakistani government, Pakistan faced a natural gas shortfall of roughly 730 Bcf/y, or one-third of its constrained gas demand, in 2015. Natural gas shortages have forced citizens to use firewood for heat, leading to vast deforestation issues.
  • Pakistan holds sizeable shale gas reserves of 105 trillion cubic feet (Tcf), according to the EIA's Technically Recoverable Shale Oil and Shale Gas Resources report published in 2013, and the Pakistani government has provided investment incentives for shale gas development. However, companies face many challenges to develop such resources because of complex geography, environmental constraints, and low natural gas prices in Pakistan. Despite its substantial shale gas reserves, Pakistan's conventional natural gas reserves have declined over the past several years. Recent small natural gas discoveries have not been able to offset production declines.
  • Several natural gas fields have been discovered in Pakistan since mid-2015 and are being further examined for viability, with no production timeline scheduled yet.
  • Pakistan has historically lacked the infrastructure to import substantial amounts of natural gas, but the government plans to alleviate the natural gas shortage in the short term through gas imports. Pakistan commissioned its first regasification terminal, the Engro Elengy floating, storage, and regasification unit (FSRU), at Port Qasim, in 2015. In February 2016, Pakistan signed a 15-year deal to purchase 180 Bcf/y of natural gas from Qatar to supply the Engro Elengy terminal.
  • A second LNG terminal at Port Qasim was approved in July 2016, with plans to supply an additional 220 Bcf/y by mid-2017. Additionally, Global Energy Infrastructure Limited (GEIL) proposed a third offshore terminal to come online by 2018. The company signed an agreement with Qatargas in 2016 to supply over 63 Bcf/y exclusively to Pakistan's private sector. There are proposals to develop two LNG terminals at Sonmiani Bay and at Gwadar, with the government aiming for completion in the next few years. However, the pace of development for these projects depends on the government resolving the power sector financial issues, addressing regulatory challenges, reducing gas theft and high levels of unaccounted for gas, and raising gas tariffs to alleviate financial losses by distribution companies.
  • Pakistan is also involved in pipeline projects to import natural gas from neighboring countries. In December 2015, construction began on the Turkmen portion of the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline, which would have an annual capacity of 1.2 Tcf/y. However, this pipeline is fraught with security risks and technical challenges.
  • China has agreed to fund and build a portion of the natural gas pipeline that is intended to connect Iran to Pakistan. Iran has announced completion of its side of the pipeline, and the Pakistani side is scheduled for completion by 2018. Russia has also entered into an agreement with Pakistan to construct a pipeline that will connect LNG terminals in Lahore to those in Karachi. The first phase of the project is expected to be finished by the end of 2017.

Electricity

  • Gross electricity generation in Pakistan increased gradually over the past decade from 90 billion kilowatthours (kWh) in 2005 to 110 billion kWh in 2015. Key sources of power production in 2015 were oil (35%), natural gas (29%), and hydroelectricity (30%), according to the Pakistani government. Nuclear generation made up 5%, and wind and imported electricity from Iran accounted for 1%. Natural gas supply shortages over the past several years have led to an increased share of oil use in power generation.
  • Installed capacity reached 25 gigawatts (GW), increasing by about 5% from 2014 to 2015, primarily because of fossil fuel power plants additions. Despite the increase in total installed capacity, power plants have faced low utilization rates, mostly because of fuel shortages. As a result, according to the latest International Energy Agency estimates, less than 75% of the Pakistani population had access to electricity in 2013, with 50 million people without access to electricity.
  • The electricity industry faces several problems including power generation theft, insufficient collection rates, line losses, high natural gas subsidies, the high cost of furnace oil used in place of natural gas, insufficient natural gas supply, and an older transmission network. These problems have resulted in the poor financial position of generation companies and infrastructure bottlenecks, leading to widespread power shortages. However, according to Pakistan's Ministry of Water and Power, unscheduled power outages, along with transmission and distribution losses, decreased considerably in 2015, while lower oil prices helped reduce financial losses.
  • High subsidies of electricity prices have also kept the Pakistani government trapped in a system of circular debt. However, according to the IMF, the Pakistani government has made progress towards reducing subsidies and circular debt over the past year.
  • In 2015, Pakistan and China entered into the China-Pakistan Economic Corridor (CPEC) agreement, which could help Pakistan decrease costs of electricity generation and alleviate electricity shortages by 2020. The agreement includes $34 billion of investment from China to be used for developing energy infrastructure, including more than 10,400 MW of power plant capacity from coal and renewable energy.
  • The Pakistani government intends to add new coal power plants to diversify its fuel mix for electricity generation over the next few years. Current proposals include over 7 GW of new coal-fired capacity.