Energy sector transformation hinges on privatization, indigenization of energy sector

November 22, 2022 (MLN): Pakistan’s energy sector woes can be solved through deregulating the sector, rationalization of energy prices, indigenization of energy procurement, electrification of energy usage and encouraging private sector to participate in the energy chain, said Optimus Capital Chief Executive Officer Asif Ali Qureshi in his report titled “Pakistan Energy Sector: Challenges and Way Forward.”

Qureshi said that the country’s energy sector in its current state is a major drag on the country’s financial with the inefficiencies, poor regulatory environment, and reliance on imports to meet energy requirements have led to major challenges on the fiscal and external sectors. 

He said that the country was suffering at least Rs400 billion due to inefficiencies of distribution companies (Discos) which could only be curtailed by privatizing the Discos to financially sound investors supported by strong operators can help increase operational efficiencies and bring in requisite investment to upgrade the T&D network. 

The author argues that the share of imports in primary energy supplied has increased from 30% in FY04 to around 48% in FY21 majority of which comes in the form of imports of crude oil and petroleum products. He also added that the lack of indigenization is a major challenge for the country due to lack of exploration activities. 

Pakistan’s gas production has fallen from its peak at around 4,250mmcfd to 3,800mmcfd. Meanwhile, the domestic oil production has fallen from ~92,000bpd to below ~75,000bpd. He said that this has led to increased reliance on imports. He recommended enabling production from existing non-producing gas fields on bilaterally negotiated prices. Furthermore, he asked the government to encourage upstream activities and their expansion into underexplored regions by addressing the key roadblocks including inadequate security, complex approval processes and wellhead pricing.

He also recommended the government to increase its focus on hydroelectricity. “The country has thus far harnessed less than 25% of its hydroelectric potential of over 40,000–50,000 MW,” he said. 

Meanwhile, Gharo-Ketibandar corridor has power generation potential of more than 60,000 MW whereas Chaghi in Balochistan possesses excellent wind and solar potential as well.

He also recommended electrification of energy use. He said that the “conventional fuel boundaries in meeting specific energy needs are getting blurred. He said the government can learn from the electrification of public transport at Shenzhen, China which has converted 100% public transport (buses and taxis) to electric vehicles. 

Meanwhile, he also recommended solarization of tube wells to decrease the usage of diesel used to fuel wells.

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