State of the Energy Sector 2010 – 2016

The analysis of Pakistan’s primary energy supplies during the period 2010 to 2016 indicates that there has been a decrease in gas supplies which was compensated by increase in oil and, and to some extent, Re-gasified Liquified Natural Gas (RLNG) and coal (Table-1).  The total primary energy supplies (not including non-commercial energy) registered an CAGR of 2.6% between 2010 and 2016. A comparison of energy growth rate with the GDP growth rate – which was below 3% in 2010, above 3 % for the next three years and above 4% in the last two years – indicates a weak correlation although suppressed demand due to energy shortages can be attributed as one of the possible reasons.

From a comparison between 2010-2016, Pakistan witnessed oil and oil products increasing their share in the energy mix, whereas gas share in the total primary energy mix decreasing by 6.3% over the 6-year period (Annex-1). The decrease in share of gas in overall energy mix was marginally compensated due to increase in the share of Liquified Petroleum Gas (LPG), which went up from 0.42% to 0.79%, and to some extent RLNG which constituted 2.10% increase. Share of hydropower as a percent of total energy supplies was 8.26% in 2010 but went down to 7.23% in 2016. The contribution of nuclear based energy, which contributed at an increasing rate, went up from less than 1% in 2010 to more than 7% in 2016.

Supply shortfall of natural gas (which contributes about 50% of the commercial energy supplies) has ranged between 10% and 15% of demand in recent years. The gas consumption by the power sector in Pakistan has increased over the years and resulted in a shortfall of 1,623 mmcfd in FY 2013, rising to 3,541 mmcfd in FY 2017. The gap between supply and demand of gas has been recently bridged after the commissioning of two LNG terminals and signing of LNG import agreements

Energy intensity, which is a measure of the efficiency of energy use, decreased by a nominal 0.5% during the last 7 years. The industrial sector responded to depleting gas and uncertain electricity supplies by increased reliance on coal, mainly imported coal. Transport sector also registered a decrease in LPG and CNG consumption and compensated by increase in oil consumption. Residential sector registered an increase in oil, gas and electricity consumption. The self-reliance objective is not being met as the imports as percent of total energy registered an increase due to higher oil and coal imports. The efficiency target was also not met as losses in the gas and power sector increased at an average rate of 3.6% and losses in the gas and oil sector registered a growth of 5.6%.  Even when Industry and transport were denied gas supplies the residential customers registered an increase of 4.7% over the period.  Gas supplies to residential customers continued to increase despite the depleting domestic gas supplies.

Distribution area is the most underperforming area of the power sector. NEPRA performance evaluation report of ex-WAPDA distribution companies (DISCOs) and KE for 2015-16 makes a comparison of their performance during 4 (four) succeeding years starting 2011-12 through 2014-15.  The report states that there was no major improvement in the performance of DISCOs and KE under the Performance Standards (Distribution) Rules (PSDR) 2005. Under the said rules, each distribution company is required to submit an Annual Performance Report (APR) in the prescribed format to NEPRA. The regulator also noted that DISCOs and KE caused a loss of around PKR 49 billion and PKR 83 billion, respectively, to the national exchequer in 2015-16 due to their inefficiency with respect to transmission and dispatch (T&D) losses and recovery targets. High losses and low recoveries are also a contributing factor to the growing circular debt.

The recommendations in the past have been presented in a setting when the energy sector was beset with crippling issues, mainly electricity and gas shortages.  Electricity shortages which were about 6000 MWs and 10 hours a day in 2010 now stand nearly eliminated.  The investments which are already in place will ensure that by 2018 there will be, at worst, only nominal load shedding. Capacity has been added or is in the process of being added, however, hydel-based capacity additions are not at the desired level that would improve the indigenous element of total capacity. On the other hand, the overall power generation fuel mix is being rationalized and, especially, coal, RLNG, nuclear and renewable have started contributing a greater share in the power mix. Generation Companies (GENCOs) continue to underperform as both their efficiency and availability are low and they have failed to perform to acceptable standards. The expansion of primary transmission, secondary transmission and distribution networks has also been at a low rate and there are some critical bottlenecks in the system due to reduced capacity of transmission system.