When having too much still isn't enough

Business Recorder

28-05-2025

Pakistan's energy planning is entering a surreal phase. A country that once chased gas cargoes across oceans and rationed fuel to industry now finds itself unable to utilize what it already has. In a turn of events that defies economic logic and exposes deep flaws in governance, Pakistan is now facing a surplus, not of problems, but of gas.
Yet the electricity remains expensive with little reduction in tariff, efficient plants stay idle, and energy bills continue to spiral. This is not a crisis of resources; it is a crisis of coordination.
The government's recent decision to impose a levy on captive power use aimed to bring industrial consumers back to the grid. In principle, this was a step forward, correcting years of inefficient parallel generation. But the equation is not complete, and leads to the question what to do with the Cheap Spare Indigenous Gas that Captive is not going to consume?
This move caused a sharp drop in gas off-take from captive users, estimated at nearly 200 mmcfd on the SSGC network alone. Of this, at least 100 mmcfd is now stranded, with no alternative demand in sight. Total indigenous gas surplus is estimated to have reached approximately 300 mmcfd across the country. Stranded gas is not just a lost opportunity, it is a liability. Gas that cannot be sold to industry or power producers will either be pushed into households at highly subsidized tariffs (further inflating the circular debt), or worse, left unused. Rising linepack pressures in the transmission system have already forced gas producers to shut off wells, even as Pakistan continues to service long-term RLNG contracts and diverting RLNG shipments. Sometime Indigenous Gas wells are shut off to make way for imported RLNG.
It is important to note that RLNG and Indigenous-Pipeline Quality Gas molecules are the same, and molecules do not carry a price tag once inserted in the pipeline. Pricing is done in SSGC or SNGPL Accounting Softwares.
Economic absurdity is shutting local wells while importing gas from abroad. Meanwhile, the RLNG that is available is being poorly utilized. Efficient RLNG-fired plants like Balloki, Bhikki, and Haveli Bahadur Shah, each over 1,200 MW and capable of running in high-efficiency combined cycle mode, are underused or being operated in single-cycle mode due to distorted merit order decisions and the high standalone price of RLNG (Rs 3,500/mmbtu). These plants are consuming close to 0.19 to 0.20 cubic meters of gas per kWh instead of their design-efficient 0.15, pushing the fuel cost up to Rs24 to 26 per unit, making them uncompetitive.
The tragedy is that a solution exists and is already practiced in other sectors. Blending of RLNG and indigenous gas is already done for industrial and captive users through accounting, not physical mixing. The same can and must be extended to power producers. For example, blending 60 percent indigenous gas at Rs 1,050/mmbtu with 40 percent RLNG at Rs 3,500/mmbtu results in a weighted average fuel cost of Rs 2,030/mmbtu. When this is applied to efficient CCGTs operating at 8,000 Btu/kWh (about 0.0053 mmbtu/kWh), the fuel cost becomes just Rs 10.76/kWh, significantly lower than RLNG-only generation and even below imported coal (Rs 14 to 16/kWh) and furnace oil (Rs 30+/kWh).
The Pricing of Gas by OGRA is distorted, the mechanism of Pricing Gas is 40 years old, world has shifted to real-time pricing of energy and we continue to price gas twice a year with a slow, tortoise speed and red-taped mechanism.
Balloki, for instance, if run at 85 percent plant load factor using blended gas, could generate over 9,100 GWh annually. The cost savings just on fuel, Rs 11.24/kWh versus RLNG-only, would amount to over Rs 102 billion per year for one plant alone. Apply this logic to the full fleet of RLNG plants (about 3,600 MW) and the annual savings cross Rs 300 billion. Add in the reduction of coal imports, improved gas field economics, and improved circular debt recovery, and the benefit climbs even higher.
Instead of using these surplus resources intelligently, Pakistan continues to sabotage itself. Rooftop solar installations under generous net metering policies are shaving off daytime demand, right when RLNG plants on Blended Tariff are needed to run optimally. Net metering allows unit-for-unit net-off and full retail buyback rates, creating perverse incentives. The government attempted to revise this policy, including lowering the buyback rate and adjusting the net-off window, but was forced to roll back reforms due to public backlash. At the same time, utility-scale solar projects, cleaner, cheaper, and easier to dispatch, have been excluded from the IGCEP 2024 to 2035.
The result is policy incoherence. Off-grid rooftop systems are rewarded while grid-connected solar is ignored, and the system becomes more unstable. Solar-driven demand suppression, coupled with inefficient fuel dispatch, is a key reason RLNG remains surplus. It is not surplus because Pakistan has too much. It is surplus because we refuse to use it smartly.
Blending gas for power producers does not require physical mixing. It requires accounting adjustments, coordination between SNGPL, SSGC, the Petroleum Division, and the Power Division, and a regulator that understands that efficient dispatch is not a theoretical construct but a fiscal necessity. If this coordination is enabled, surplus gas can be blended on paper and allocated to CCGTs. These plants then move up the merit order, displacing inefficient generation, lowering average cost of electricity, and stabilizing the grid. Larger fallacy lies in the incomplete treatment of captive power.
The Solution is simple, Blend Gas+ RLNG by accounting as already being done for other categories of consumers of gas) and supply it to the Most Efficient CCGTs, make them move up in the merit order and get maximum output, this will not only produce cheaper electricity but the issue of Rising CD what has been a headache for our government can also be solved with additional benefit of Stranded RLNG Consumption.
Shifting industry to the grid is not a complete solution. If the gas they once used remains unutilized or misdirected, the circular benefit is broken. True reform requires that the released gas be rerouted to efficient turbines via blends, something no one in government or even the IMF has understood. They treat captive reform as the endpoint. It is only the beginning. Without closing this loop, the government has merely shifted consumption, not optimized it. Pakistan doesn't lack gas. It lacks coherence. The solution isn't new generation capacity, more subsidies or financing the already inflated Circular Debt; it is simply to use what we already have, with logic and discipline. Until that happens, we will remain trapped in the same paradox, gas-rich, power-poor, and economically exhausted.
(The writer is a power sector expert and a leading industrialist. He can be reached at: [email protected])
Copyright Business Recorder, 2025