In a recent statement, Pakistan’s Minister for Energy, Muhammad Ali, addressed key issues concerning the country’s energy sector. The minister emphasized that the ongoing problem of circular debt in the gas sector is on its way to a lasting resolution. He highlighted that many companies were leaving the country due to financial losses and the mounting circular debt.
In a joint press conference with Minister for Information and Broadcasting, Murtaza Solangi, Minister Muhammad Ali discussed the recent increase in gas tariffs. He pointed out that this increase would not affect 57 percent of consumers across the country. Instead, it is expected to play a pivotal role in managing and eventually eradicating the ever-increasing circular debt in the petroleum sector.
The minister asserted that this increase in gas prices had received approval from the Economic Coordination Committee (ECC) and would soon be presented for final ratification in a federal cabinet meeting. Notably, this increase in gas prices is slated to be effective from November 1, 2023, as opposed to the initially proposed date of October 1, 2023, according to the Petroleum Division’s recommendation.
Minister Muhammad Ali further explained that out of approximately 10 million consumers, gas prices for 5.7 million consumers remained unchanged, safeguarding the interests of a significant portion of the population.
Regarding energy and oil procurement, the minister disclosed that a commercial oil purchase agreement with Russia had been reached. This agreement entails the annual import of 9 million metric tons of oil, expected to be notably more affordable, potentially saving between $10 to $15 per barrel compared to other sources.
The issue of circular debt, which has been a persistent concern in Pakistan’s energy sector, is currently estimated at 400 billion rupees. Minister Ali emphasized that the recent increase in gas prices would benefit exploration companies and is a necessary step to address the circular debt issue.
The minister clarified that new gas connections would not be installed, and existing domestic connections would need to transition to LPG within the next one to two years. In the future, gas will primarily be supplied to powerhouses, aligning with global practices where gas is predominantly used for power generation rather than residential purposes.
While addressing the perception that the affluent have benefited from the increase in gas prices, Minister Ali stated that gas availability is limited in many rural areas, with only 30% of the population having access. The remaining 70% rely on alternatives such as LPG and wood for fuel.
He further explained that a uniform gas tariff had been established for both old and new industrial gas connections, reducing the price difference between the North and South regions in the industrial sector. However, gas rates were increased for non-export industries.
In response to questions, the minister stated that there were no plans to lift the ban on new gas connections due to the diminishing availability of natural gas. He also stressed the necessity of shifting to LPG due to the declining natural gas reserves, depleting at a rate of around 9% annually.
Minister Muhammad Ali expressed optimism that the recent increase in gas tariffs could attract international investment in oil and gas exploration activities in Pakistan, highlighting the need for an exploration policy framework. Additionally, he noted that the government is collaborating with the Oil and Gas Regulatory Authority (OGRA) to address the issue of LPG price control.
Regarding gas supply during the peak winter season, the minister assured that domestic consumers would have access to gas for eight hours, as in previous years.
In conclusion, the minister underlined the critical role that resolving circular debt and stabilizing energy prices play in retaining businesses and improving Pakistan’s energy sector. He emphasized the broader positive impact on various sectors and the country’s energy self-sufficiency.
