x Abu Dhabi, UAEMonday 24 July 2017

Pakistan tempted by energy but must focus on priorities

Pakistan is suffering a deepening energy crisis. But it must not look away from other priorities.

Pakistan's gas infrastructure is impressive, but demand from consumers outstrips supply. Akhtar Soomro / Reuters
Pakistan's gas infrastructure is impressive, but demand from consumers outstrips supply. Akhtar Soomro / Reuters

One day in January five years ago, a small provincial airport in Pakistan's Sindh province was wreathed in fog.

The statuesque Ghinwa Bhutto, the sister-in-law of Benazir, was arriving for a political campaign, greeted with showers of flower petals from supporters. Lorries taking sugar cane to market crowded the roads.

The sign to the well site had been stolen but an old, bearded man in the faded uniform of the North-west Frontier Force was guarding the well itself. The burnt ground showed gas had been found there. Around there, and up into the rugged hills of Balochistan, is the heart of Pakistan's gas industry.

For a low-income country, Pakistan's gas infrastructure is impressive - Sindhi mud-brick houses have connections and many cars run on compressed natural gas. But with demand outrunning supply, the country is now looking to costly and geopolitically complicated options for energy. Through this crowded farming land is now meant to snake a large pipeline from Iran.

Pakistan is suffering a deepening energy crisis. Electricity supply is as much as 40 per cent below demand and summer power cuts can last for 20 hours. Almost US$1 billion (Dh3.67bn) of "circular debt" rotates from fuel companies to power generators to government and back again. Electricity companies are under pressure from unpaid bills, high oil prices and shortages of gas.

A pipeline from Iran was first proposed in the mid-1950s and has been discussed seriously since 1989. It was originally intended to continue to India but security concerns and American pressure on New Delhi put paid to that. The pipeline within Iran has now reached close to the border; if construction of the Pakistani leg commences this year, gas could be flowing by December 2016.

Iran's sometimes cool relationship with Islamabad improved when Pakistan helped it capture the head of the militant group Jundullah. Abdolmalek Rigi, who had led numerous attacks within Iran's part of Balochistan, was alleged to be supported by the CIA.

Both Iran and Russia have offered to finance the $1.6bn Pakistani section. China, despite political links with Islamabad, withdrew its interest in March. Russia wants to divert Iranian gas from competing with it in Europe; it would also like to block the Turkmenistan pipeline to keep the country dependent on Moscow's pipelines.

But the pipeline still faces many problems. Negotiations were interminable and the final price, although cheaper than oil, still seems expensive. Iranian gas supplies to Turkey have proved unreliable, often cut off during winter. Pakistani pipelines have been repeatedly blown up in the ongoing insurgency in Balochistan.

The United States is, of course, strongly opposed. While trying to strangle Tehran with sanctions, it has no wish for its adversary to earn revenues and build geopolitical influence. It has tried to promote the chimera of a pipeline from secretive Turkmenistan through mountainous, war-torn Afghanistan.

Pakistan has ample other energy options but indecision, political wrangling and corruption have prevented much real progress. A good plan would be to continue expanding wind power in the excellent conditions along the southern coast and to make progress on long-delayed liquefied natural gas import terminals. As well as expensive imported gas, Pakistan should make more use of its own resources in Sindh and Balochistan - but smaller fields and gas in coal and shale beds require higher prices.

Under happier geopolitical circumstances, an Iran-Pakistan-India pipeline could be a key energy artery for South Asia. As it is, the pipeline is a useful card to play against the US and in negotiations with other energy suppliers. But it is no panacea - instead, Pakistan's politicians need to serve their constituents by tackling the entrenched issues of non-payment, debt, subsidies and project paralysis.

Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis and Capturing Carbon

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