Gas supply to power sector may double as LNG shortage strains summer demand

ISLAMABAD: The government is considering a sharp increase in domestic natural gas supply to the power sector by the end of April or early May as it seeks to contain electricity tariff increases and reduce load management amid a shortage of imported liquefied natural gas (LNG) and rising summer demand.

According to a report by Dawn, gas supply to power generation is expected to rise to around 160-170 million cubic feet per day (mmcfd), up from the current 85-90mmcfd. The plan also includes the possibility of diverting an additional 20-25mmcfd from the compressed natural gas (CNG) sector if the government is able to withstand political pressure.

Sources said gas supplies to the fertiliser sector would be protected as much as possible, while authorities would keep a close watch on stocks because of the large price difference between locally produced urea, priced at Rs4,500 per bag, and imported urea, which costs Rs15,000 per bag. The gap, they said, creates room for smuggling. Even so, fertiliser plants may not continue to receive uninterrupted gas and could instead be run on an alternating basis to meet demand for the current and upcoming seasons.

Power division warning

Sources said Power Minister Awais Ahmad Khan Leghari told a recent meeting of the special cabinet committee on petroleum prices and supplies that unless more gas was shifted to the power sector to replace LNG, electricity fuel costs could rise steeply or the country could face extensive loadshedding.

His ministry proposed diverting gas from residential consumers, CNG stations or the fertiliser sector. Some ministers, however, pointed out that cutting domestic gas supplies could trigger a political reaction because more than seven million users would be affected. "It is a choice between the uproar of 7m gas consumers or 30m power consumers," an official quoted the power minister telling the cabinet committee.

The only substitute fuel available for domestic use, especially for cooking, is liquefied petroleum gas (LPG). Sources said LPG prices have climbed to more than twice the rates fixed by the Oil and Gas Regulatory Authority (Ogra) because of weak enforcement.

The power division also informed the meeting that the fuel cost adjustment (FCA) for February was Rs1.42 per unit and could have been around Rs2 per unit without the use of furnace oil and re-gasified LNG, given subdued demand. It warned that the FCA for April could be slightly above March levels, but in May it could more than double if furnace oil is used heavily unless excessive loadshedding is imposed. Furnace oil prices, according to the sources, have more than doubled between February and early April.

Supply constraints and summer outlook

The issue has now been taken up by the National Coordination and Management Council headed by General Zafar Iqbal, which is working on electricity shortages and ensuring maximum supply to economic sectors at affordable rates.

Without RLNG, around 5,000MW of efficient power plants in Punjab either become unusable or costly to operate on diesel. Sources said the fuel cost difference between RLNG and high-speed diesel ranges from Rs20-21 to Rs50-54 per unit, while generation based on furnace oil costs about Rs35-45 per unit.

Additional gas has become available after the completion of a pipeline that allows flows from the Bettani gas field in Lakki Marwat, Khyber Pakhtunkhwa, to Punjab, along with other system improvements, the sources said.

The government has already implemented at least two hours of loadshedding in recent days, and this is expected to rise, particularly during the night when solar generation falls and demand on the national grid increases. As part of hybrid load management, authorities have also ordered early market closures for conservation.

Despite better water availability, hydropower output will depend on Wapda’s handling of Tarbela, where delays in tunnels 4 and 5 continue. The 969MW Neelum-Jhelum plant also remains out of service.

Furnace oil remains the main replacement fuel during peak summer demand. Current stocks are said to be above 500,000 tonnes, enough for more than 35 days of full requirement, although the cost difference remains very high.

Summer peak demand usually rises to 27,000-28,000MW, compared to less than 14,000MW currently during peak hours, partly because of greater reliance on solar power. Given these limitations, the government is expected to enforce average daily loadshedding of two to three hours along with conservation measures.