Pakistan can enhance local production of LPG from existing 1,000 tons per day to 2,200 tons daily, which would save valuable foreign exchange on the LPG import besides resulting in reduction of commodities' prices. An analysis of the current local LPG production and existing reservoirs in the country shows that Pakistan could meet its local demand through indigenous resources if serious steps are taken for making few gas fields operational.
According to official data, local LPG production during the past five years has declined from 1,800 tons per day to 1,000 due to negligence of the relevant authorities. In 2006, Pakistan's total LPG import was 24,779 tons, which was 4.3 percent of the total (582,850 tons) LPG used in the country and in 2011 the country imported 60,143 tons of LPG ie 13 percent of the total LPG demand. During the last five years, LPG usage in the country has declined to 474,143 tons due to high prices and inconsistent policies of the government.
Local LPG production cost is estimated at Rs 75,000 per ton, while imported LPG costs Rs 123,000 per ton. In the market, domestic cylinder (12 kg) costs Rs 1,550, which indicates that dealers and marketing companies are selling gas to the consumers at imported rates.
A LPG local dealer, when asked as to why they were selling the gas at imported prices instead of an average price, he replied that there was no pricing mechanism operational in the country. He added that the Petroleum Ministry and other relevant departments had to take serious steps in this direction. LPG price is at an all time high in the country at Rs 160-175 per kg partly due to heavy taxation, which includes 16 percent General Sales Tax (GST) and Gas Infrastructure Development Surcharge (GIDS).
In 2006, average LPG consumer price was Rs 51,500 per ton, which at present has reached Rs 112,700, showing two-fold increase. Local producers including Oil and Gas Development Company (OGDCL), Pak Arab Refinery (PARCO), Pakistan Petroleum Limited and Pakistan Refinery Limited (PRL) are producing 643 tons of LPG per day at Rs 69,340 per ton. While private producers including Jamshoro Joint Venture Limited (JJVL), Attock Group and Byco are producing 360 ton of LPG daily. JJVL was leading LPG producer up to 2010-11 with 480 tons per day production, which currently has declined to 150 tons per day.
Public sector LPG producers at present are producing over 60 percent of the total LPG. Another factor which played a leading role in declining local LPG production, is circular debt, which paralysed all the refineries and delayed payments by the Pakistan State Oil (PSO) to refineries has forced oil refineries to operate below capacity. If oil refineries start operating at full capacity it could produce sufficient LPG to meet the local demand.
Federal Minister for Petroleum and Natural Resources Dr Asim Hussain recently announced the injection of 8,00 million cubic feet per day (MMCFD) gas into the system. As per plan of the Ministry, following gas fields with a combined capacity of over 1,000 ton of LPG daily would be made operational within next few moths: Kunnar-Pasaki, Uch gas field, Sinjhoro, Rehman gas field, Mehr gas field, Makori, Jhal Magsi, Sajawal, Kandkot, Qadirpur, Koh Safid gas field and others.
Only Kunnar-Pasaki and Sinjero gas fields' projected LPG output is over 620 tons per day of which Kunnar-Pasaki is estimated to produce 400 tons per day and Sinjero 224 tons per day. According to Ministry officials, through PL on LPG the government would generate an estimated amount of Rs 3.5 billion per annum but at the same time public sector LPG producers would lose nearly Rs 2.3 billion for selling their produce below market price. The country can have additional 100 tons of LPG if the government settles price dispute with Dewan Petroleum and Austrian company OMV.
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