Syed Marwan Shah

Pakistan spends billions of dollars annually on import of petroleum products. In order to relieve pressure on the external sector, the government should find alternatives to reduce reliance on large-scale oil and gasoline imports, said CEO of Fair Edge Securities Muhammad Safdar Kazi while talking to WealthPK.

The enormous devaluation of Pakistani rupee has made oil more expensive, creating pressure on the external sector and worsening the country's trade imbalance, but the increase in oil imports is primarily due to higher oil prices on the world market, he added.

According to the State Bank of Pakistan (SBP), Pakistan imported petroleum and related goods worth $18.7 billion in FY22. Additionally, $6.079 million was spent on petroleum imports for the first three months of FY23 (July-September), up from $3.97 million during the same period in the previous year.

According to the SDPI’s recently released state of renewable energy report, “Transition towards a 100 percent renewable energy system in Pakistan is not only fully possible, but also a low-cost option. It will help decrease the energy system costs, reduce dependence on the imported fossil fuels, and increase energy security”.

Talking to WealthPK, Syed Mujahid Shah, an energy consultant and expert at the National Engineering Services Pakistan, said Pakistan should lessen reliance on imported fuels because it had created a situation of energy insecurity with price swings, supply disruptions, and sustained high energy prices.

Mujahid said 86 percent of Pakistan's principal commercial energy needs were met by coal, liquefied natural gas, and residual fuel oil, which together accounted for the majority of the country's energy consumption. The cost of gasoline imports into Pakistan for FY22 rose to $18.7 billion, a 93 percent rise over the previous fiscal year.

Pakistan has also ignored energy conservation and efficiency for many years. Despite the fact that the demand-side initiatives are significantly more cost-effective and may provide benefits right away, the government has traditionally placed more emphasis on increasing generation capacity than on reducing energy use, he continued. According to a recent economic survey, due to low domestic capacity, the energy sector was heavily dependent on imported fuels, including oil and LNG.

It is likely that the sector will continue to be heavily dependent on imported fuel. Due to the high oil prices on the global market as well as depreciation of the Pakistani rupee, imports of oil have become more expensive. This has created pressure on the external sector and widened the country's trade deficit. The surge in oil import bills is attributed to increases in value as well as the quantity demanded.

Pakistan’s electricity generation from fossil fuels is 21,122MW, which is 20.9 percent of the total installed capacity. Liquefied natural gas contributes 9,884MW and residual fuel oil 5,958MW. In contrast, the energy from the coal is 5,280MW – 1,320MW from the local coal-based power plant, while the imported coal contribution to electricity generation is 3,960MW, which is around 75 percent of the total electricity generation from coal in the country, the economic survey stated.

Credit : Independent News Pakistan-WealthPk