Is Cheap LNG from Baku Really Cheap?
Azerbaijan is set to begin supplying LNG to Pakistan next month, claiming it will be at a “cheap” price. However, the term “cheap” may be misleading. As a result of reduced domestic natural gas production, policymakers in Pakistan are turning to LNG to meet the nation’s energy needs.
Despite its reputation as a “bridge fuel” to cleaner and more affordable energy sources, LNG has inadvertently pushed Pakistan to rely on dirtier and more polluting fuels when natural gas prices spike. For instance, during price surges, cement factories in Pakistan have resorted to purchasing coal from Afghanistan, exacerbating pollution levels (Bloomberg, Pakistan’s Energy Crunch Spurs ‘Barter’ Trade for Afghani Coal, March 28, 2022).
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The growing dependence on LNG is not only increasing the fuel bill but also straining the country’s foreign currency reserves. Prior to importing LNG, the balance sheets of gas distribution companies were manageable. However, the increased use of LNG, which is not only expensive but also leads to significant line losses, results in a substantial financial burden due to unaccounted for gas (UFG).
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To address these challenges, Pakistan should prioritize domestic gas generation rather than relying on imported LNG at supposedly “cheap” rates. The core issue lies in production, and importing an expensive alternative will only further strain the balance sheet, rendering the energy sector unsustainable.
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Is it possible to reduce the over-dependency on LNG? Yes, with a combination of measures. First, explore alternative sources of energy generation, such as hydrogen and bio-gas. Second, analyze the energy demand and determine the appropriate supply mix for different sectors. Use LNG in transmission lines that are least susceptible to line losses. Third, reform distribution systems to minimize losses. The entire system requires an upgrade to achieve these goals.
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Yasmeen Aftab Ali is a lawyer, academic, and political analyst. She is the author of the book ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ For inquiries, contact her at yasmeenali62@gmail.com, and follow her on Twitter at @yasmeen_9.
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Appreciate the clarity on setting the priorities right👍 Way forward surely is to explore, develop and extract indigenous energy resources!