Pakistan’s gas sector is experiencing a structural decline, leading to challenges in industrial competitiveness, investment in exploration, increased reliance on LNG, and a weakened long-term energy security, as highlighted in a report by Karachi’s Business Recorder. The country is witnessing a decrease in indigenous gas production, costly RLNG imports, reduced industrial throughput, and financial strain across the energy chain. Despite these issues, there has been minimal change in the institutional framework, resulting in a decline in throughput.
Industrial consumers in Pakistan are gradually moving away from pipeline gas due to unaffordable and unpredictable tariffs. This shift is driving businesses towards alternative energy sources like solar, coal, biomass, and self-generation, as pipeline gas is no longer considered commercially reliable. The imposition of an ill-calculated levy on captive power plants has further deterred industrial users from the gas system, impacting industrial throughput and export competitiveness negatively.
The fixed costs of Pakistan’s gas infrastructure, including pipelines, maintenance, and debt servicing, remain high even as gas volumes decrease. This situation has led to a utility death spiral, where lower throughput results in higher tariffs, further reducing demand and escalating tariffs. The recovery of fixed costs from a shrinking customer base is intensifying the problem, affecting service quality, industrial competitiveness, and supply reliability.
The diversion of imported LNG from industry to domestic consumption has exacerbated the crisis in Pakistan’s gas sector. Originally intended to support industrial growth and efficient power generation, LNG imports are now being redirected towards subsidized domestic use, causing significant financial implications. The country is facing challenges in maintaining service quality, industrial competitiveness, and supply reliability amid rising tariffs.
