Pakistan’s economy faces $194m setback due to local gas production cuts

ISLAMABAD: Pakistan’s economy has incurred a loss of $194 million (approximately Rs53.3 billion) over the last four months due to a decline in local gas production, which has decreased by 329 million cubic feet per day (mmcfd).

This has translated to a monthly financial setback of $48 million (around Rs13.3 billion). When the curtailed local gas output is compared with the cost of regasified liquefied natural gas (RLNG), the total value is estimated at $500 million (about Rs139 billion).

This reduction in production has also led to losses in crude oil output amounting to Rs5 billion, alongside a hit of Rs20 billion to the national treasury in terms of lost tax revenue. This information, revealed in recent statistics, sheds light on the government’s choice to shut down local oil and gas wells to justify the importation of spot LNG.

Despite previous discussions about importing LNG at a cost of $15 per MMBTU, a ministerial meeting led by Deputy Prime Minister Ishaq Dar on December 16, 2024, opted against purchasing spot LNG for January. Members of the National Assembly expressed their dissatisfaction with the government’s decision to favour expensive LNG imports over utilizing more economical local gas sources.

Energy companies such as MOL Group, OGDCL, and Pakistan Petroleum Limited (PPL) have voiced their frustration regarding the enforced gas curtailments.

MOL Group noted a reduction of 110 mmcfd in its Tal Block output, raising concerns about the potential risks to the reservoir’s integrity and productivity, while OGDCL reported an $8 million revenue loss over the past two months, attributing this to the curtailed production of 1,461 mmcfd of gas, 26,394 barrels of oil, and 1,391 metric tons of LPG.

According to PPL, the detrimental effects of reduced production on field development plans, operational sustainability, and investor confidence. Continuous gas curtailments, coupled with a lack of clear solutions, are eroding trust among stakeholders and threatening investments in Pakistan’s energy sector.