Energy Trade Pakistan

Gulf and Chinese cash will not solve Pakistan's oil and gas crisis as domestic demand continues to rise a long-running Pakistan energy (electricity) crisis has helped to throttle its economy, with Islamabad turning to China first for support in 2015 and, more recently, Saudi Arabia and the UAE. Saudi Arabia has pledged $20bn, including a $10bn investment for a new Pakistan oil refinery in the south-western city of Gwadar. Last year, the UAE and Saudi Arabia promised $6.2bn in aid, including deferred payments for oil and petroleum products. Gwadar is part of the China-Pakistan Economic Corridor (CPEC) infrastructure programme which involves Beijing stumping up $60bn in loans for development and new power stations, mostly coal-fired.But Saudi and Chinese largesse may not be enough to prevent Pakistan from being forced to seek its 12th bailout from the IMF since 1988. Crushed under an enormous weight of external debt, the country's prime minster Imran Khan knows he must tackle the energy crisis if he wants to usher in stability. According to the World Bank, Pakistan faces an acute balance of payments crisis brought about by a high current account deficit amounting to 5.8pc of GDP ($18.1bn) in 2018. Exports, after contracting for three consecutive fiscal years, grew by 12.6pc, but stronger import growth of 14.7pc (a large chunk made up of oil) has resulted in a higher trade deficit. "Pakistan's dependence on oil imports, poor current account deficit, and declining foreign reserves are signs of a deep worry," the Bank says. A growing, fast-urbanising population has made the country thirsty for oil, with 85pc of its energy needs met by imported crude and petroleum products from the Middle East. In the past couple of years, Pakistan has also begun to bring in foreign LNG to meet rising demand. But the bill for crude and LNG is denominated in dollars—against which the rupee lost about 20pc of its value in 2018. Meanwhile, Pakistan's indigenous gas production has been stagnating, one reason why there is a power capacity deficit variously put at between 6GW and 8GW.Blackouts continue With three additional gas-fired power stations scheduled to be brought on line early this year, as well as swelling LNG imports, load shedding is less chronic than it was just 12 months ago, and supply is more closely aligned with demand than a few years back. But many areas still experience daily blackouts. The problems are manifold. Inadequate electricity transmission infrastructure means that, even when there is enough supply, it does not reach users. Corruption and electricity theft in Pakistan are all too common, as well as leakages and other inefficiencies And, despite recent measures, too often bills remain unpaid. People "are not paying for the electricity they are consuming", which is the biggest problem, says Aftab Awan, a Karachi-based analyst at brokerage Sherman Securities. "For every dollar of electricity generated and supplied, [the suppliers] are receiving 60 cents for it. The other 40 cents are not accounted for."A revealing World Bank report says energy reforms could save Pakistan's economy $8.4bn in business losses and increase total household incomes by at least $4.5bn a year. In one World Bank survey, 66.7pc of businesses in Pakistan cited electricity shortages as a more significant obstacle to business than corruption (a mere 11.7pc).The government is taking action to upgrade infrastructure and solve the circular debt problem. .